Hispanic Population Growth Not the Sole Driver of Mexican Beer Imports in the US
Euromonitor International data show premium imported lager in the US experienced volume growth of 4% in 2013, reaching 3.3 billion litres sold, and a five year CAGR of 1%. This comes in contrast to beer’s struggling performance overall, which declined by 2% in 2013, and with a 2008-2013 CAGR of -1%. Companies with beer portfolios primarily composed of imported lager, as is the case with Constellation Brands, have reaped the benefits of the category’s exceptional performance. In its 2014 annual report, Constellation Brands attributed its astonishing 74% growth in net sales to its beer portfolio, which is almost entirely comprised of Mexican imports. In fact, driving the growth of the entire imported premium lager category are beers coming from south of the US border.
Well-established Mexican beer brand Corona Extra leads among all imported lagers, with a 28% share, and its 914 million litres of beer sold in the US in 2013 was twice the volume of the next largest brand, Heineken. While volume sales of Heineken were essentially flat in 2013, Corona Extra increased its sales by 6%. Corona Extra’s growth is certainly exciting, but the growth of less prominent Mexican beer brands has been truly astonishing. Of the top eight fastest growing imported lager brands in 2013, all but one (Stella Artois) was Mexican, and of the Mexican brands, five were in the list of top 8 brands by volume sales.
The growth of the Hispanic population in the US, which the US Census Bureau estimates increased from 33 million in 2000 to 54 million in 2013, has been the backbone of Mexican beer’s ongoing growth and deepening entrenchment in the US. Immigrants and their descendants have comfort in drinking a beer they’re familiar with, and connecting with their roots attracts Hispanic consumers to beers they very well may have consumed in their native countries. While roughly 65% of Hispanics in the US are of Mexican descent, Hispanics from neighbouring areas in Central America with cultural similarities have also found familiarity with Mexican beer brands and gravitated towards them.
Brands like Modelo Especial and Dos Equis have earned spectacular growth, with an increase in volume sales by 21% and 17% in 2013 respectively, for reasons entirely aside from Hispanic consumers. Backed by large scale advertising campaigns, many Mexican beer brands have seen growth driven by consumer trends very similar to those experienced by Pabst Blue Ribbon. Pabst, a domestic economy lager, attained widespread growth over the past decade when young beer drinkers turned to beers like Pabst in an attempt to differentiate themselves from their parents, who traditionally drank mass-produced domestic lager. While today’s young beer drinking generation, specifically millennials, have predominantly embraced local and craft beers, Mexican beers have been able to capitalise on the same trends that drove Pabst into prominence. Mexican beers elicit originality and are considered to be of higher-quality than the average domestic lager yet equally affordable and sessionable, much like Pabst Blue Ribbon.
Further driving the growth of Mexican beer among non-Hispanic consumers are the large quantities of Americans traveling to Mexico; Euromonitor International data suggest 20.6 million visitors in 2013. Mexico, with its beach resorts in Cancun, Cabo San Lucas, and Acapulco among others, is often perceived as a relaxing, paradisiacal tourist destination. Some consumers of Mexican lager are certain to purchase the products out of reminiscence and longing for the tranquil memories they accrued while there on vacation, a notion captured by Corona’s “Find your beach” commercials.
Mexican lager appears poised for sustained growth looking forward, as immigration from Mexico and Central America is expected to continue due to political and economic instability. As the Hispanic demographic in the US grows, it is expected that Mexican goods, including beer, will expand in distributive presence, increasing the variety of Mexican lager available to consumers. Euromonitor International forecasts that imported premium lager will experience a five year volume CAGR of 2%, far surpassing total US beer volume CAGR of -1%. However, the largest threat to Mexican lager comes from the US craft beer industry. Already gaining an indisputable presence in the US, craft beer has found strong traction with millennials and their demand for unique products. Craft brewers’ expansion of beer styles from ubiquitous IPAs to beers brewed to be, and labelled as, sessionable (consumed in high volumes during a drinking session), is expected to further cut into mass-produced domestic lager volume sales, and potentially the growth of Mexican imports.