THE GIST
Having conquered the imported beer category, the juggernaut that is the Modelo family of brands has set its sights on dominating two of the fastest-growing segments of the industry: flavored beers and malt beverages.
Building off the successful playbook established by a line of cheladas, Modelo in March launched a line of hard aguas frescas—spiked versions of non-alcoholic fruit juices traditionally sold in Mexico and in Mexican-American communities. Early returns for Modelo Aguas Frescas in its trial market of Las Vegas look promising, and the brand expects to launch the flavored malt beverage (FMB) nationally next year. After just one month of sales in that single Nevada market, the Modelo Aguas Frescas variety pack and a pineapple-only version have sold roughly as much volume as Maine Beer's Peeper Ale, Boulevard's Bourbon Barrel Quad, or Harpoon's Mix Pack in all the chain stores that track their sales via market research company Circana.
With Modelo already the frontrunner for Constellation and its aligned Reyes wholesaler network, the brand anchors not only one of the most dominant beer companies in the country, but the largest beer distributor in the nation. Modelo Especial and its chelada line continue to steamroll the competition; its next forays into flavor are intended to deliver the knockout punch that cements Modelo as the most important beer brand family for the foreseeable future.
WHY IT MATTERS
The growing strength of Modelo’s cheladas and aguas frescas point to a likely second act for a beer brand that, if current trends continue, is set to unseat Bud Light as the U.S.’s top-selling beer in chain retail (by dollars) by 2030. With flavored beer and FMB segments showing the most opportunity in chain retail, dominance of these spaces would strengthen the fortunes of a brand family that has been seemingly unstoppable over the past five years:
Since 2018, Modelo Especial jumped from being the U.S.’s seventh best-selling brand by volume to its fourth.
Modelo’s cheladas account for 48.5% of the overall chelada market in the U.S. by volume.
The top-selling chelada brand from Bud Light declined -5.7% in the most recent 52-week sales period that ended April 23, while Modelo Especial Chelada grew +16.2% and has more than halved the amount of volume that stands between the two brands.
Year to date, and in line with historic trends, the Modelo Especial family makes up more than half of the total volume sales of Constellation Brands, whose portfolio also includes Corona, Victoria, and Pacifico. Constellation and Reyes will continue to prioritize this as the top brand in the portfolio.
Combined with the national launch of Modelo Oro—a “light cerveza” with 90 calories and 3 carbs meant to be a direct competitor to Michelob Ultra—the expansions of cheladas and aguas frescas are intended to build Modelo into a full beer-and-beyond family, says Modelo’s vice president of brand marketing Greg Gallagher.
“We’re really trying to build a master brand, and we looked at that flavor space that we don’t currently play in,” Gallagher says.
The expansion of Modelo beyond Lager would see one of the most important beer brands of the past five years add to its growing empire. It would also prove that the brand can do something its rival, Bud Light, has struggled to accomplish: Create a full brand family whose name resonates beyond strictly beer products. Since a weak debut, the zero carb Bud Light Next has been phased out of many American markets while Bud Light Seltzer’s volume sales have cratered, dropping -38.2% in the most recent 52-week period, twice the losses of seltzer overall (-16.5%).
Building on Modelo’s name recognition and its Mexican heritage while extending its reach into new flavors has worked for its chelada line. Over the past three years, Modelo has grown its chelada portfolio from a lone flavor and a lone package (24oz cans of a standard tomato-flavored Modelo Especial Chelada) to several flavors, including Limon Y Sal and Piña Picante, as well as a variety pack and a 12-pack of the original flavor.
This level of success has provided a playbook Modelo hopes to repeat with its spiked aguas frescas.
“How do we go after this macro trend around flavor? The way for us to do it, which links back to chelada, is that Modelo is a brand all about our Mexican authenticity,” Gallagher says. “What if we make a spiked version of this thing that already exists and that is really authentically Mexican? … That gives us a differentiated way to play in this really hot and growing flavor space.”
Flavored beverages, whether beer or FMBs, are indeed a growing segment of the beer market. A Sightlines+ analysis shows that flavored versions of beer styles like Wheat Ale, Kölsch, and Mexican Lager are increasing their share of those categories in chain retail sales.
In 2018, flavor-focused Mexican Lagers represented less than 10% of craft Mexican Lagers overall.
In 2022, their share approached 60%, led by Stone’s Buenaveza Salt & Lime Lager.
Flavor is increasingly important across not just beer but all types of alcohol. At co-packing facility Octopi Brewing in Waunakee, Wisconsin, owner Isaac Showacki says that FMBs have typically represented 15-20% of his company’s annual business, and the growth rate for those products is up double digits this year. Seeing broader trends toward flavored products, he’s bullish on Modelo’s fortunes in cheladas and spiked aguas frescas.
“Modelo is on fire right now, and for this year it seems they can do no wrong. Whatever they launch, it will resonate with their consumer,” Showacki says. “The key will be to see if it sticks in the market or if it’s just a one-year trend.”
Cheladas have proven to have sticking power, and Gallagher is confident aguas frescas will, too. He says that in pre-launch consumer testing, Modelo’s aguas frecas have some of the most positive results the company has ever seen for a new product. “That’s why we think long-term it’s a really big idea,” he says.
As with cheladas, early adopters for aguas frescas have been Modelo’s core Latinx consumers, who Gallagher says are likely already familiar with traditional aguas frescas. But non-Latinx drinkers have also proven thirsty for cheladas and other Modelo products:
More non-Hispanic households (61%) purchase Modelo than Hispanic households (39%).
However, Hispanic drinkers consume more Modelo by volume (53%) than non-Hispanic drinkers (47%), according to the company.
Given aguas frescas’ positive early results and cheladas’ ongoing strength, Modelo thinks it has a broad mandate to be more than just an imported lager brand.
“We’ve got something on fire, driving tons of growth in the flavored beer space. We think this is a very similar playbook in the FMB space to what chelada did,” Gallagher says. “We expect similar, if not better, success.”
Words by Kate Bernot