How Modelo is using Mexican-flavored experiments in a push to become America’s No. 1 beer

It may surprise you to know that only Bud Light sells more beer in the U.S. than Modelo Especial, according to the most recent numbers from IRI, a Chicago-based market research firm. The Mexican beer brand has never had a Super Bowl ad, but it’s been growing by double digits every year for the last 11 years. In the Los Angeles beer market—the biggest in the country—it sells more than Bud Light, Miller Lite, and Coors Light combined.

This week, the brand is taking a significant step in its push to continue that growth pattern, with the goal to become America’s top-selling beer. Modelo is launching new test products across a variety of different markets, all aimed at expanding beyond an incredibly strong Hispanic consumer base.

“The time is right when we’re strong to start to plant some seeds for the future,” says Greg Gallagher, vice president of beer brand marketing at parent company Constellation. “We’d rather prepare ourselves for a few years down the road, rather than be in a place where we have to do something. When you have to do something, that’s when you make bad decisions.”

Back in 2017, Modelo introduced a canned take on the classic chelada (or michelada) Mexican beer cocktail that mixes beer, tomato juice, lime juice, salt, and spices. Since then, it has added a handful of other flavors, on the way to tripling sales. Now, it’s rolling out a Ranch Water in Texas and New Mexico, a low-calorie, low-carb beer called Modelo Oro is testing in Charlotte, Fresno, and Houston, and in Arizona, Atlanta, and San Diego, the company is testing a beer inspired by the Mexican cantarito cocktail that combines a light lager with splashes of real grapefruit, orange, and lime juice.

You’ll notice none of these has the words “hard seltzer” in it. While the hard seltzer category exploded over the past few years, quickly becoming a $4 billion business, with sibling brand Corona jumping on the bandwagon, Modelo abstained. “We’re always watching what other brands are doing, what our other in-house brands are doing, but we can’t chase something just because it’s there,” says Gallagher. “When seltzer blew up, a lot of brands rushed in. We even did it with Corona, internally, but there wasn’t an authentic way in for Modelo.”

https://twitter.com/ModeloUSA/status/1450926488795103233

Modelo only started nationwide advertising about six years ago, more recently using familiar marketing trends like a streetwear collection, and pro athlete partnership (with NBA star Damian Lillard). And despite ranking so high in national beer sales, Modelo still has a lot of room to grow as a brand. According to the company, unaided brand awareness is 7%, compared to that of Corona, which is at about 35%. Gallagher sees product and flavor experiments like these latest products as a significant move in future growth.

The key to that growth, according to Gallagher, is to develop and launch popular new products in a way that not only doesn’t cannibalize its flagship’s Modelo Especial customers, but also doesn’t alienate the foundation that pushed it to where it is today. “Growth is going to come from non-Hispanics, but as we do that, we can’t attract them in any way that’s going to turn off our core Hispanic drinkers,” says Gallagher. “If we lose them, we’ll never be able to replace them.”