The Mexican beer portfolio of Constellation Brands (NYSE:STZ) and the American beer portfolio of Boston Beer (NYSE:SAM) are both seeing rapid growth due to expansion of their popular product lines and their clever marketing campaigns. However, Constellation Brands seems to have a leg up in regard to convincing you to sip its brews.
Constellation's results point north
On April 9, Constellation Brands reported its fiscal fourth-quarter results. Its beer segment saw its sales pop 13%. Rob Sands, CEO of Constellation Brands, credited the gains to strong consumer demand, competent wholesalers who were able to handle the uptick in volume, and "creative, new marketing and advertising programs."
Modelo Especial, said Sands, is the fastest-growing major beer brand. Constellation Brands is so confident that its beer sales will expand even further that it is investing between $900 million and $1.1 billion into its Nava, Mexico brewery expansion.
On the conference call, Sands pointed out that Corona Extra is the best-selling imported beer in the United States. It is now selling at the rate of 100 million cases per year. No other import can even come close to touching that and the number two sells about half of that.
It's now the fifth best-selling beer overall. Sands credits Corona's success to "designed marketing campaigns and leveraging its brand equity." Apparently its "Find Your Beach" campaign, which screams "refreshing," is working.
Compare that to the results from the largest craft brewer, Boston Beer. Last year, Boston Beer's portfolio of Sam Adams beers sold 3.4 million barrels for a 24% increase from the 2012 figure. At around 13.6 cases per barrel, Boston Beer sold around 46 million cases last year. This means that its more than 50 brand extensions didn't even equal half of the volume of just Corona Extra alone.
Meanwhile, Corona Light is now the best-selling imported light beer at 13.5 million cases. Corona Light dollars now make up 50% of imported light beer dollars. Sands once again pointed out that this resulted from "creative advertising that is driving consumers to trade up from domestic lights."
Light not just on calories
What's really baffling about these numbers is the fact that Corona, and much more so Corona Light, consistently fail in beer taste tests. For example, Consumer Reports taste-tested and ranked a number of beers and it referred to Corona Light as "a bitter brew with traces of tinny and sulfury off-notes was the worst."
I report on this as a both a big Corona light fan and a Sam Adams fan. Maybe I drink Corona Light for the same reason I light coconut candles: It mentally takes me away to the beach.
Nothing looks more refreshing than that clear bottle which shows a bright green lime floating in liquid gold bubbles. The marketing is just genius. I know deep down that the flavor is mostly in the lime itself. Not only do Corona and Corona Light typically fail taste tests, they tend to be much more expensive than similarly popular domestic beers Budweiser and Coors Light.
Meanwhile, Boston Beer's Sam Adams consistently ranks high in taste tests. Once again it is not surprising to me. You could pour me a Sam Adams into any mug. However, for some reason if you pour a Corona out of its bottle it seems to lose some of its magic. Keep it in there.
Get ready for another hot summer
Boston Beer has been kicking up its advertising spend. Last year it shelled out around $221 million on advertising, promotional, and selling expenses, up 26% from 2012. For the fourth quarter alone, this category was up 39%. Boston Beer plans an additional increase of between $34 million-$42 million for 2014, or 15%-19%.
Constellation Brands will be busy with taking you to the beach all summer with its "120 Days of Summer" Corona campaign. Each week the company will have a different theme. Constellation Brands and Corona have a goal of "owning the summer."
On this end its Corona Light will have a flood of 15-second TV spots for "high profile sports programs that position the brand as a light beer with taste." Smart move. The beer with no taste (say the tests) is continually convincing everybody that it is the brand with taste. How ironic.
Can Constellation Brands continue to lean and thrive on marketing or will Boston Beer's superior flavor eventually pull it over the top? For now they have both won my heart, and my mouth, even if for different reasons.
Nickey Friedman has no position in any stocks mentioned. The Motley Fool recommends Boston Beer. The Motley Fool owns shares of Boston Beer. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.