It’s not all bad news in the sluggish U.S. beer market.
Sure, consumers are drinking less brew, increasingly swapping out mainstream brands like Coors Light and Bud Light for wine, bourbon, tequila or hard seltzer. Even the craft beer craze has slowed. But while many drinkers shift away from lager and ale, two brands are bucking the trend: Michelob Ultra and Modelo Especial.
A key factor is that both labels are slightly more expensive than the market-leading light beers. That enables them to benefit from the shift toward premium products that’s driving growth across the food-and-beverage landscape, from coffee and chocolate to cheese and whiskey.
“People are drinking less, but they’re drinking better,’’ said Ken Shea, an analyst at Bloomberg Intelligence. “It’s quality over quantity.”
Michelob Ultra, which has less than 100 calories in a 12-ounce bottle, is also getting a boost from the health-and-wellness trend, while Modelo, a pilsner-style Mexican lager, benefits from the cachet associated with imported beer and a recent expansion of its U.S. distribution.
Here’s a look at what’s driving growth for the two brands:
The low-calorie, low-carbohydrate beer has become one of the top-selling brands in the U.S., with sales surging more than 80% since 2014 to finish last year at $4.68 billion, according to Euromonitor. That’s come mostly as the expense of the mass-market light beers (Coors Light, Miller Lite, Bud Light) that have long dominated the U.S. market.Made by Anheuser-Busch InBev, Michelob Ultra has positioned itself as a brand for drinkers leading active lifestyles who also like to unwind with friends. The brand is more popular with women than competing beers, and its sponsorship of events like the New York City Marathon have resonated with increasingly health-conscious U.S. consumers.
“It’s a product that reaches people who are looking for balance in their lives, the combination of active and social,” said Azania Andrews, vice president of market for Michelob Ultra.
It might sound a bit counterintuitive, but Michelob Ultra is riding the same health-and-wellness trend that’s propelled gluten-free and organic food products. It’s hard to argue that beer is good for you, but Michelob Ultra benefits from being healthier than the competition. The brand hit shelves in 2002 and was originally pitched at “active boomers”--older drinkers trying to cut down on calories. That came as the Atkins Diet was pushing U.S. consumers away from carb-heavy products like bread, pasta and beer.
Then the wellness trend took off as a generation of foodies started obsessing over ingredient labels. Nearly 20 years later, Michelob Ultra’s biggest selling point is still found in its nutrition facts: 95 calories and 2.6 grams of carbohydrates. A standard Budweiser, or “Bud Heavy,” has 145 calories and more than 10 grams of carbs.
Earlier this year, Anheuser-Busch launched Michelob Ultra “Pure Gold,” which is made with organic grains and packs just 85 calories and 2.5 grams of carbohydrates. The new product will surpass $100 million in sales this year, Andrews said, and is also overperforming with women. That’s a key stat as the beer giant tries to boost overall consumption in the U.S., which has basically been flat since 2012.
Produced by Constellation Brands Inc., Modelo has one key thing in common with Michelob Ultra: It’s more expensive than the mainstream market leaders. On average, Modelo costs about 25% more than Bud Light or Coors Light, and that’s appealing to customers who want to trade up, according to Jim Sabia, chief marketing officer at Constellation.
Modelo’s sales have more than doubled since Constellation, which has distributed the label in the U.S. for years, took ownership in 2013. They hit $5.22 billion last year, including the darker Negra Modelo, according to Euromonitor. That comes as Constellation has tripled the marketing budget for the brand, pushing it beyond its core Hispanic base to a national audience, including with advertisements during National Football League games. About 50% of Modelo’s growth in recent years has come from increased distribution, according to Sabia. Especial has posted double-digit growth each year since arriving in the U.S., according to the company.
When President Donald Trump was elected, in part on this promise to cut down on illegal immigration from Mexico, there was concern about a consumer backlash against Mexican brands. That hasn’t materialized for Modelo, which saw sales jump more than 20% last year. The company is getting a boost from demographic trends, as the Hispanic population, which drinks about 70% of the Modelo consumed in the U.S., continues to grow.While the company has been advertising on Spanish-language television for about a decade, it only started running English ads in the past three years. Like Michelob Ultra, Modelo has been taking share from the market-leading brands as it reaches more consumers beyond its traditional core Hispanic customer.
“That’s why we’re so bullish on the brand,” said Greg Gallagher, Modelo’s vice president of brand marketing.