Cravings for Mexican beer continue to grow at a fast pace in the U.S., while the taste for domestic beers lags. Sales of imports increased 8.4% last year, driven by Mexican beers, which represented about 70% of sales of imported beer, according to data from IRI Worldwide. Nine Mexican beer brands ranked in the U.S. Top 54 by sales.

Domestic premium beers like Bud, Coors, and Miller still dominate, with about 40% of sales in the U.S. market. But the premium brands saw sales in dollars erode by 2.9% in 2017, according to information from IRI.  

Craft beers and domestic ultra-premiums like Michelob Ultra are attracting consumers, with revenue up 5.6% and 11.3% respectively in 2017. But with IRI data showing craft beers holding 12% of the U.S. market and ultra-premiums 7%, it takes both to roughly equal the sales power of imports. 

Constellation Brands sells some of the top-selling Mexican beers in America and isn't content to simply ride the wave of popularity. The company continues to look for new ways to grow.

A metal bucket filled with ice and three open glass bottles of beer. The bucket sits on a wooden table scattered with pieces of lime.

SOURCE: GETTY IMAGES.

Constellation Brands' stellar Mexican beers

Constellation Brands (NYSE:STZ) held two of the top seven spots in last year's IRI ranking of beer sales with Corona Extra and Modelo Especial. In total, the company saw beer sales up 10% in the fiscal year that ended at the end of February, and first-quarter results were equally bright, with 11% growth. In the last fiscal year, the company attributed the jump in beer sales to the increasing popularity of its Mexican beers and increased pricing on Mexican beers in some markets.

Constellation Brands has the exclusive rights to import, market, and sell in the U.S. Corona Extra, Corona Light, Modelo Especial, Modelo Negra, Modelo Chelada, Pacifico, and Victoria. CEO Robert Sands said during the company's June conference call with analysts that the Mexican beer business is "performing very strongly." 

The popularity of Mexican beers isn't new. Corona's leadership position started 20 years ago when it took the No. 1 cases-sold spot from Heineken on the import list. It ranked as the top-selling import last year, too. Modelo Especial has enjoyed double-digit gains for 30 years, according to Constellation spokesman Mike McGrew, as quoted by the Chicago Tribune. How have the brands sustained their popularity and growth? It's not just the size of the Hispanic market in the U.S. Hispanics made up about 18% of the U.S. population in 2016 and according to Nielsen consumer behavior data, beer consumption among Hispanics is higher than the U.S. average. But the total U.S. Hispanic population increased just roughly 2% in 2017 (equal to the previous year's uptick), so the brand growth is a bigger story.

The popularity of Mexican beers in the U.S. is fueled by:

  • Great taste. Mexican beers have been characterized as refreshing, light, and drinkable. When paired with complex food flavors, especially Mexican food, the simpler flavors of Mexican beer are described as complementary to the meal instead of competing with it.
  • Brand stories. Constellation Brands has created distinct stories around each of its Mexican beer brands. Corona evokes thoughts of sunny, relaxing days at the beach. Modelo is about "fighting spirit," and Pacifico embraces adventure. With each of the brands owning a unique and interesting story, beer fans can connect with all of them depending on the occasion or their craving. 
  • Interest in ethnic flavors. Constellation Brands is benefiting from consumers' exploration of Mexican flavors, which include beers and regional drinks like cheladas and micheladas. The Modelo Chelada beer is flavored with tomato, salt, and lime. 

Constellation Brands is tapping growth areas in beer

While its core business benefits from good beer, favorable demographics, and great marketing, Constellation Brands is also focused on innovation, acquisition, and expansion.

  • Corona Premier, the first new Corona brand in almost 30 years, is targeting top-seller Michelob Ultra as a low-calorie, male-targeted premium option.
  • Corona's two-flavor line of Refresca malt beverages -- the company calls the guava-lime and passionfruit-lime drinks "premium spiked refresher[s]" -- is a lighter alternative aimed at women. The company is testing the new brand in a few markets. With a low sugar level and less alcohol delivering fewer calories, Refresca may help Constellation gain a share of an "alternative" alcoholic beverages segment that Constellation estimates at $3 billion.
  • The recent acquisition of Texas-based Four Corners Brewing helps Constellation Brands straddle the heritage of Mexican beer and the adventure of craft beers. Constellation referred to the company in a press release as a "high-performing, dynamic and bicultural (Hispanic and American) brand [that] produces beer that's refreshing, big on flavor and complements Constellation's existing portfolio."
  • To keep up with demand and its forecast sales growth of 9% to 11% in 2019, Constellation Brands is investing $900 million to boost capacity at its Ciudad Obregon, Mexico, breweries. 

Hitting growth and income goals will not be an easy layup for Constellation Brands this year as it faces challenges on the raw material, freight, and transportation fronts. But the company's stars align well with Mexican beer trends, putting it in a better position than many competitors.

Lisa Jackson has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Anheuser-Busch InBev NV. The Motley Fool owns shares of Molson Coors Brewing. The Motley Fool has a disclosure policy.