It's been two years since Budweiser fell out of the top three largest beers by off-premise sales in the U.S. Now, it's suffered another ignominy: After yet another year of falling sales, the one-time King of Beers has seen one of the giants of the Mexican beer craze pass it up.

The industry analysts at IRI say that Anheuser-Busch InBev's (NYSE:BUD) Budweiser saw off-premise sales fall 4% in 2019, which even at $1.8 billion, doesn't qualify for a top-five ranking. It's enough to leave the brewer crying in its beer.

Four bottles of beer with limes in them

Image source: Getty Images.

Better-for-you beer

The past few years have been difficult for the beer industry with U.S. sales drying up because of changing consumer preferences. Instead of a blend of barley, malt, and hops, drinkers are turning in greater numbers to light, fruity beverages like hard seltzer and tea.

But don't bemoan the decline of the mega brewer's flagship beer segment, as Anheuser-Busch still owns the two biggest beers in the country, Bud Light and Michelob Ultra. Even though sales of the former suffered a 5% decline, it remains far and away the leader with over $5 billion in sales to U.S. off-premise retailers in 2019. Off-premise sales are those made at package goods stores and convenience stores, but not at bars and restaurants.

And in a testament to Anheuser-Busch's prowess and scale, when drinker tastes changed it pumped more marketing into Michelob Ultra, engineering a better-than-18% increase in sales. Long before seltzer was being touted as the drink for athletes, Michelob Ultra was seen as the beer to drink post workout. It sports just 95 calories and 2.6 carbs, with 4.5% alcohol by volume, and has capitalized on the trend called "healthier beer." 

While Michelob Ultra generated $2.3 billion in sales last year, according to IRI, that's not even the most surprising result of the beer wars. Rather, it's the meteoric rise of Mexican beer.

Mas cervezas!

Anyone watching Constellation Brands (NYSE:STZ) knows that it has virtually owned the beer market for the past few quarters as its Corona and Modelo family of beer have seen depletions soar. Depletions are sales to distributors and retailers, and are considered an industry proxy for consumer demand.

Last quarter, Constellation reported depletions for Corona jumped 7% from the year-ago period driven higher by gains made by Corona Extra and Corona Refresca, a flavored malt beverage the alcohol distributor introduced to blunt some of the impact of hard seltzers. It's since turned into a top-five market share gainer for the high-end beer segment in the U.S. even though it launched only in the first fiscal quarter of 2020.

Which is why Constellation will be introducing its own hard seltzer soon under the Corona banner. Noting the brand is the No. 1 beer for Hispanics, it believes that unlike Anheuser-Busch's Bon & Viv, Molson Coors (NYSE:TAP) Henry's brand from MillerCoors, and Boston Beer's (NYSE:SAM) Truly, it doesn't haven't to hide from its beer roots.

IRI says Corona Extra saw a 2.4% rise in sales in 2019, enough to give it $1.8 billion in revenue, and putting it in a virtual tie with Budweiser. But it's Constellation's other Mexican import, Modelo Especial, that's the real sleeper. It had 18.8% growth last year, causing sales to surge to $2.1 billion and making it the fourth biggest beer, ahead of even Miller Lite.

Beer Sales % Change
Bud Light $5 billion (5%)
Michelob Ultra $2.3 billion 18.2%
Coors Light $2.2 billion (1.5%)
Modelo Especial $2.1 billion 18.8%
Miller Light $2.0 billion 1.6%
Budweiser $1.8 billion (4%)
Corona Extra $1.8 billion 2.4%

Beer sales in U.S. off-premise retailers. Data source: IRI.

Constellation reported that Modelo Especial's depletions rocketed 15% higher in the third quarter, which followed a similar rise in the second when it generated the most growth for the entire U.S. beer category, and was on top of a 17% gain in the first quarter.

The future of U.S. beer looks Mexican

The U.S. beer market continues to undergo a dramatic evolution. Even with Bud Light's massive sales, mass produced beer is no longer in favor, and even craft beer sees only middling growth. Boston Beer now produces more seltzer than it does beer.

Mexican beer, though, remains as strong as ever, and ever since acquiring Corona and Modelo from Anheuser-Busch, Constellation has steadily grown the brands. There's still a long way to go to catch Bud Light, but it shouldn't be long before Modelo Especial hits the top three.