By ALEXIA ELEJALDE-RUIZ
SEP 04, 2019
After years as a stronghold for Miller Lite, Chicago has become increasingly thirsty for a feisty challenger: Modelo Especial, which this year marked a major local milestone when it surpassed Miller Lite in dollar sales.
The Mexican lager, owned in the U.S. by Constellation Brands, has been growing rapidly as consumers eschew mass-market domestic brews for higher-end alternatives and as the nation’s Hispanic population swells.
Miller Lite still sells by far the most cases of beer in the Chicago area, but it has been losing ground while Modelo gains.
And Modelo Especial, which is priced higher, is the top beer in Chicago in terms of dollar sales, which is considered by some industry experts to be a better indicator of a brand’s success because it shows where people are willing to spend their money.
Modelo Especial’s sales in Chicago were $70.5 million over the 52 weeks that ended Aug. 11, besting Miller Lite’s $67.6 million and Bud Light’s $41.28 million, according to data from market research company IRI and provided by Constellation.
That’s a leap from 2016, when Modelo Especial’s annual revenues in Chicago trailed those of Miller Lite by more than $20 million.
Modelo’s sales have been particularly strong over the past couple of years, when the brand broadened its target beyond its core Hispanic customer base and started marketing, in English, to a general audience.
“We are not just a Hispanic brand anymore,” said Greg Gallagher, head of brand marketing for Casa Modelo at Constellation, whose beer business is based in Chicago. “We still have a ton of loyalty and we stay very true to our Hispanic origins and our core, but we are seeing that crossover happen into the general market … And that is what is going to propel us into the future.”
Grant Foreman, 27, is the type of customer Modelo is attracting more often. Foreman, who is not of Hispanic descent, isn’t loyal to one brand. He drinks Corona, Lagunitas, and Revolution, but has started drinking Modelo Especial over the last couple of years as he aimed for better quality beer post-college and “just learned about it more.”
“At some point it got mentally moved into the same category as Corona,” said Foreman, of Logan Square.
Chicago is the fifth market where Modelo Especial is No. 1 in dollar sales, after Los Angeles, San Francisco, San Diego, and, as of this year, Las Vegas. Gallagher, who monitored the sales growth on a 52-week rolling basis to ensure it wasn’t a fluke, says it hit the milestone in the Chicago market – which includes Cook, DuPage, Kane, Will, McHenry, Lake counties plus Lake and Porter counties in Indiana – in June.
Modelo has long been dominant in California, but the beer’s rise in Chicago signals its ability to sell well in markets outside of the West, Gallagher said. The brand is No. 2 in dollar sales and gaining in Austin, Houston, Dallas and Raleigh, N.C.
To be sure, despite Modelo’s growth, it still sells fewer cases of beer in the Chicago area than Miller Lite and Bud Light. Miller Lite sold 4.2 million cases last year compared with 2.5 million cases by Bud Light and 2.2 million for Modelo Especial.
“Miller Lite is Chicago’s favorite beer, hands down,” Chicago-based MillerCoors spokesman Marty Maloney said in a statement. Miller Lite, long the leader in Chicago, is No. 3 nationally by volume, behind juggernaut Bud Light and Coors Light, and has been “growing segment share the last 19 consecutive quarters and gaining share of industry this year,” Maloney said.
But sales of Modelo cases grew 70% between 2014 and 2018. Miller Lite’s case sales fell 9% during the same period.
Modelo’s trajectory, if it continues, suggests it could be a threat to the top players. So far this year in Chicago, Modelo Especial has surpassed Bud Light in retail volume sales, according to IRI data provided by Constellation. It is the fastest-growing draft beer brand at Chicago bars, the company said, citing Nielsen.
Nationally, Modelo Especial’s volume sales grew 13.6% last year while Miller Lite’s dropped 3.8%, and year to date, their dollar sales are neck and neck, said Benji Steinman, president and editor of Beer Marketer’s Insights, an industry publication.
“It has become a power brand,” Steinman said. “It has reached a level where it has considerable momentum behind it and that feeds on itself to some extent.” Dollar sales matter more than volume because “that’s what you take to the bank,” he said.
Founded in Tacuba, Mex., in 1925, by a group of Spaniards who wanted to brew a “model” European-style lager, hence the name, Modelo Especial has been available in the U.S. since the 1980s.
A pilsner-style lager, it is is benefitting from a trend among beer drinkers to trade up for pricier brews, such as imports and crafts, which is also behind the strong growth of Michelob Ultra. Growth in higher-end beers like Modelo is keeping the overall industry from decline. At some retailers, Modelo sells for roughly $27 for a case of 24 cans, double the price of domestic light beers.
Chicago’s growing Hispanic population, which constitutes about a third of the city’s residents, is also a factor driving Modelo’s rise. About 70% of Modelo Especial sales nationally are to Latinos, who represent just over half of the brand’s customer base, Gallagher said.
Historically, its core drinkers were first-generation Latino immigrants or those closely tied to their countries of origin, but the brand is growing fastest now among bicultural households and Hispanic households that have assimilated into American society.
“As we have started to invest in English-language communication, we are now reaching some of the consumers with our messaging who we weren’t reaching before,” he said.
Those ads are reaching non-Hispanics as well. Since launching English-language ads in 2016, Modelo Especial has seen its awareness among non-Hispanic households rise by 50 percent.
Gallagher attributes Modelo’s broadening appeal to the emotional connection people make with the brand, whose “brewed with a fighting spirit” marketing campaign includes the tag line: “It doesn’t matter where you came from, it matters what you’re made of.”
Gallagher said the line rings particularly relevant at a time immigrants feel under attack, but the message is “a universal insight, that’s something anybody from any walk of life can relate to.”
Its ads feature real people: a smoke jumper who parachutes out of airplanes to battle forest fighters and the first Mexican-American female fighter pilot. The company initially focused on people of Hispanic descent but has recently broadened its scope to include the likes of Melissa Stockwell, a Chicago-based Army veteran who lost a leg in Iraq and later became a competitive triathlete in the Paralympics.
“It’s something our brand has stood for over time and so consumers make that more emotional connection, because we represent something that’s meaningful to their own lives,” Gallagher said.
Modelo also recently became an official sponsor of the White Sox, boosting its exposure to a general audience.
The spreading popularity of Modelo Especial is evident at Tony’s Fresh Market, where the brand has been growing for several years and has overtaken Corona as the No. 1 seller, said Vince Gambino, vice president of sales and marketing at the 15-store grocery chain. Miller Lite is No. 3 at the chain.
Though much of the growth has been at its stores in mostly Hispanic communities -the Berwyn store sells the most Modelo – Gambino said he is seeing similar increases in other stores as well, such as in Niles, Plainfield, Countryside and Bridgeview. The chain has given Modelo more prominent placement and shelf space as a result.
“Recently it has gone to the mainstream,” said Gambino, who attributes the shift to growing interest in ethnic food and drink generally. “A lot of people are looking for something different to drink.”
Shopping the beer aisle at Tony’s Fresh Market in Logan Square last week, Danny Rodriguez said he and his wife buy a 12-pack of Modelo Especial every weekend, and it is the preferred beer among his friends.
“It’s got a great taste, it doesn’t fill you up,” said Rodriguez, 41. “In the states a lot of beers are watered down unless you have the IPAs, or some of the newer stuff.”
Rodriquez, who is Puerto Rican, said he always buys Mexican beer because of the taste, and with Modelo “you know it’s Mexican.”
“It’s good with some lime, a little bit of salt,” he said.
Constellation Brands in 2013 acquired the full U.S. rights to import and market it and several other Mexican beers, including the maltier Modelo Negra and the Corona brand family, and is now the largest beer import company in the U.S. The New York-based company, which also imports wine and liquor, employs 9,700 people globally, including 4,200 in Mexico where it brews and bottles its beer. Of its 4,900 U.S. employees, 390 are at Constellation’s beer headquarters in Chicago’s Loop.
While the traditional Modelo Especial has been a big winner, the company plans to launch different product lines from the brand to capitalize on other drinking trends. For example, its platform of canned Modelo Especial cheladas – including the classic recipe that pairs beer with tomato juice and lime, the spicy tamarindo picante and the new limon y sal (lime and salt) – is “on fire,” Gallagher said.
“You will see more from us in the chelada business because we think there’s a lot of growth potential there,” he said.
The biggest barrier to growth, Gallagher said, is shelf space. The explosion of craft beer has crowded shelves and some retailers continue to give prime real estate to the traditionally dominant players even when they’re not selling as much, he said.
Another challenge is pursuing new Modelo customers without alienating the core. The company spends a lot of time talking to consumers to ensure it understands what is important to them so that the brand doesn’t veer from the values that have made it a staple in many refrigerators.
“There are ways to attract customers, but if the core sees it and says it’s not for me, that’s for someone else, that will start to erode our loyalty, and that would be a huge problem for us,” Gallagher said.
“That’s the delicate balance we have to strike, to go after these consumer opportunities but do so in a way that stays really, really true to who we are, and to ensure we do that we have to constantly be talking to our customers and making sure that they are giving us permission to go the places we think we can go,” he said.