Should Constellation Brands Worry About This New Cerveza From Bud?

Constellation Brands sits atop the imported Mexican beer market, but Anheuser-Busch has plans to unseat the brewer.

Jul 7, 2014 at 6:35PM

Images

As part of the agreement with the Justice Department allowing it to acquire Grupo Modelo, Anheuser-Busch InBev (NYSE:BUD) had to give up to Constellation Brands (NYSE:STZ) its perpetual rights to Grupo Modelo's brands in the U.S., particularly Corona, a portfolio of brews that left the brewer with a large hole to fill in the growing Mexican beer movement.

According to Euromonitor International, Mexican beers are dominating imports, with brands like Heineken's Dos Equis and Corona leading the way. Constellation's other Crown Imports brand, Modelo Especial, has grown by 63% in the U.S. market since 2010.

Higher sales of Corona powered Constellation's fiscal 2015 first-quarter earnings that were released last week, with brand depletions growing more than 3% and accounting for 10% of the U.S. beer category's dollar growth. According to the market researchers at IRI, Corona Extra was the only top-five U.S. beer brand in its channels that posted dollar-share growth during the quarter, becoming the fifth-largest beer brand in the U.S. overall by overtaking Anheuser-Busch's Natural Light. Corona Light remains the top imported light brand in the U.S., with IRI estimating it owns 55% dollare share of the import light market, increasing its dollar share by almost two points this past quarter.

That kind of growth could slake Bud's own thirst for expansion. In North America, Anheuser-Busch experienced a 1.7% decline in total volume in its fourth quarter and a 2% drop in organic growth, capping a year that saw 2.6% and 2.7% declines, respectively, for all of 2013. While it was helped globally by the integration of Grupo Modelo's beers into its portfolio, the lack of a similarly positioned brew in the U.S. was conspicuously felt.

That helps explain why last month it revealed to the Just-Drinks website that it was committed to introducing a new Mexican beer into the U.S. later this year.

Montejo has been brewed in Mexico since 1960 and was acquired by Modelo in the late 1970s. As part of the Modelo portfolio that includes local brews Barrilito, Estrella, Leon, Modelo, Pacifico, Tropical, and Victoria, Montejo is perhaps seen as the successor to Corona that can stand up as an authentic Mexican brew to capture the expanding preference for beers from south of the border.

Sitting atop the Mexican beer market, though, Constellation isn't particularly concerned about Bud's new beer, with the Beverage Daily website reporting the brewer told ISI analysts that despite having been made in Mexico for decades, "It's not an established brand in Mexico, it's not known to the Mexican or Hispanic consumer -- it's just another brand, basically."

Although dismissive of Anheuser-Busch's plans -- and from its perch it can afford to be -- Constellation is still not taking any chances and has previously announced plans to aggressively expand the Corona brand, taking many of its cues from the craft beer market. For example, it's planning to put Corona on tap, a novel addition to how consumers can order the beer, and with strong sales and wide recognition, an easier sell for the brewer than craft beers experience.

Anheuser-Busch will also have an easier time than most brewers in getting placement for Montejo because of its strong distribution network and its advertising prowess, but whether that can translate into sales remains to be seen. However, following its World Cup sponsorship and the heightened attention the games got at home, a new beer from down south might just be enough to make Montejo the new cerveza of choice for U.S. drinkers of Mexican beer.

Leaked: This coming device has every company salivating
The best investors consistently reap gigantic profits by recognizing true potential earlier and more accurately than anyone else. Let me cut right to the chase. There is a product in development that will revolutionize not just how we buy goods, but potentially how we interact with the companies we love on a daily basis. Analysts are already licking their chops at the sales potential. In order to outsmart Wall Street and realize multi-bagger returns, you will need The Motley Fool's new free report on the dream-team responsible for this game-changing blockbuster. CLICK HERE NOW.

Rich Duprey has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. 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.

1 Key Step to Get Rich

Our mission at The Motley Fool is to help the world invest better. Whether that’s helping people overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we can help.

Feb 1, 2016 at 4:54PM

To be perfectly clear, this is not a get-rich action that my Foolish colleagues and I came up with. But we wouldn't argue with the approach.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich" rated The Motley Fool as the #1 place online to get smarter about investing.

"The Motley Fool aims to build a strong investment community, which it does by providing a variety of resources: the website, books, a newspaper column, a radio [show], and [newsletters]," wrote (the clearly insightful and talented) money reporter Kathleen Elkins. "This site has something for every type of investor, from basic lessons for beginners to investing commentary on mutual funds, stock sectors, and value for the more advanced."

Our mission at The Motley Fool is to help the world invest better, so it's nice to receive that kind of recognition. It lets us know we're doing our job.

Whether that's helping the entirely uninitiated overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we want to provide our readers with a boost to the next step on their journey to financial independence.

Articles and beyond

As Business Insider wrote, there are a number of resources available from the Fool for investors of all levels and styles.

In addition to the dozens of free articles we publish every day on our website, I want to highlight two must-see spots in your tour of fool.com.

For the beginning investor

Investing can seem like a Big Deal to those who have yet to buy their first stock. Many investment professionals try to infuse the conversation with jargon in order to deter individual investors from tackling it on their own (and to justify their often sky-high fees).

But the individual investor can beat the market. The real secret to investing is that it doesn't take tons of money, endless hours, or super-secret formulas that only experts possess.

That's why we created a best-selling guide that walks investors-to-be through everything they need to know to get started. And because we're so dedicated to our mission, we've made that available for free.

If you're just starting out (or want to help out someone who is), go to www.fool.com/beginners, drop in your email address, and you'll be able to instantly access the quick-read guide ... for free.

For the listener

Whether it's on the stationary exercise bike or during my daily commute, I spend a lot of time going nowhere. But I've found a way to make that time benefit me.

The Motley Fool offers five podcasts that I refer to as "binge-worthy financial information."

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. It's also featured on several dozen radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable ... and I don't say that simply because the hosts all sit within a Nerf-gun shot of my desk. Rule Breaker Investing and Answers contain timeless advice, so you might want to go back to the beginning with those. The other three take their cues from the market, so you'll want to listen to the most recent first. All are available at www.fool.com/podcasts.

But wait, there's more

The book and the podcasts – both free ... both awesome – also come with an ongoing benefit. If you download the book, or if you enter your email address in the magical box at the podcasts page, you'll get ongoing market coverage sent straight to your inbox.

Investor Insights is valuable and enjoyable coverage of everything from macroeconomic events to investing strategies to our analyst's travels around the world to find the next big thing. Also free.

Get the book. Listen to a podcast. Sign up for Investor Insights. I'm not saying that any of those things will make you rich ... but Business Insider seems to think so.


Compare Brokers