THE GIST
If it weren’t for hard seltzer, Micheladas would likely be the beer world’s biggest growth story. While much of the industry’s attention has been focused on the continued rise of White Claw, Truly, and their ilk, ready-to-drink Micheladas—cans of Lager mixed with flavors like tomato, salt, and lime juice—have been on a quiet tear.
In 2018, eight major Michelada brands—from companies including Tecate, Modelo, and Anheuser-Busch InBev—sold a combined $380 million in IRI-tracked grocery, convenience, and other stores. The same brands increased dollar sales by 3% in 2019 to $390.5 million. An additional four, new brands from Estrella, Sol, Modelo, and Bud Light pushed the tally to around $440 million for the biggest Michelada brands. That’s just above what Keystone Light sold last year.
Constellation’s Modelo Chelada line grew 30% in dollar sales in 2019; the company plans to add a fourth flavor, Mango y Chile, to the line next month. Among brands that didn't exist during Super Bowl week 2019, Modelo Chelada Limón y Sal was one of the top sellers this year, earning $827,774 the week leading up to the NFL championship.
In 2019, Modelo’s three existing Michelada flavors—Especial, Tamarindo Picante, and Limón y Sal—sold 343,896 barrels across grocery, convenience, and other stores tracked by IRI, a market research firm. Bud Light Chelada sold roughly 7,500 fewer BBLs over the same year, the first time Bud Light’s Michelada sales have ever fallen behind Modelo’s. Those sales are equivalent to what the entire Leinenkugel’s lineup sold in 2019.
Molson Coors also launched a new flavor, Limón y Sal, in its Sol Chelada line last month, noting that the Michelada segment was key to the Sol brand’s expansion in 2019, a year in which it grew five times as fast as the Mexican import category overall. Sol Chelada launched in February 2019 and saw just under 26,000 BBLs in IRI-tracked sales in its first year.
Growth for the Michelada category has been driven by core Hispanic consumers, but they’re not the only drinkers who are thirsty for these ready-to-drink (RTD) options. Female and non-Hispanic shoppers are key to continued interest in the segment, which will welcome even more brands in 2020.
WHY IT MATTERS
The Michelada category, already a source of growth for beverage alcohol companies like Molson Coors and Constellation, is poised for another strong year. New flavors have the potential to gain volume, and Constellation has planned new advertising campaigns to expand its Michelada consumer base beyond its core Hispanic drinkers.
Modelo’s Micheladas especially are a glowing star in Constellation’s already-bright Modelo galaxy. Modelo Especial is the top-selling beer in California—the world’s thirteenth-largest beer market—and the Modelo Especial family has outpaced the Corona family in national IRI-tracked sales in 2020. This year will see the company introduce its new Michelada flavor and debut English-language advertising for its Chelada line for the first time. Greg Gallagher, vice president of brand marketing for Modelo, says Modelo Chelada’s consumer demographic is 60% Hispanic and 40% non-Hispanic, about the same ratio as consumers of Modelo Especial.
“The reason that’s interesting to us is that we’ve been advertising Modelo Especial on English-language TV for five years, so we’d assume that brand would be more developed to have more non-Hispanic drinkers,” Gallagher says. “The fact that Chelada has the same breakdown on non-Hispanic drinkers we see as an untapped opportunity for us.”
Constellation has thus far supported its Chelada line with Spanish-language TV ads, point-of-sale marketing, and product sampling; Gallagher says much of the push for that line is simply building awareness that the product exists at all. Though the company’s Chelada sales are sizable, Gallagher says there are still drinkers unfamiliar with canned versions of this drink.
Non-Hispanic consumers will be a new target this year, though he notes the brand continues to rely on a core Hispanic consumer base. That’s been part of Constellation’s decision to package its Chelada line solely in 24-ounce cans, which over-index among those Hispanic consumers and sell especially well in convenience stores, which pull in a racially diverse collection of shoppers.
The company has taken note of another interesting demographic feature of its consumers: 60% of Modelo Chelada drinkers are women, compared to 40% of beer drinkers overall, Gallagher says. Without marketing directed specifically to them, women consumers have nevertheless proven to be interested in the product line’s range of flavors. Similarly, Constellation has found its Cheladas are also popular among drinkers of flavored malt beverages (FMBs) like hard seltzer or Boston Beer Company’s Twisted Tea.
“Those are very flavor-driven categories that rely on constant innovation and delivering on-trend flavors,” Gallagher says. “We know Cheladas over-index in their interaction with FMBs, so they’ll be subject to that same flavor dynamic.”
Gallagher says that’s why releasing new flavor extensions—as well as introducing new drinkers to the original Modelo Especial Chelada—will be key to the line’s continued growth. Traditionally, the turnover rate of FMBs has had to remain fast, with new brands released annually to sustain consumer interest. On a recent trip to Los Angeles, Modelo and Modelo Chelada’s largest market, Gallagher and the Constellation team visited a number of dedicated Michelada bars with menus of 30 to 40 flavor combinations. These bars treat Micheladas the way others might treat Margaritas or Bloody Marys, with seasonal ingredients and elaborate garnishes. Los Angeles is even home to a dedicated, Michelada-slinging food truck called MichexGod.
“They’re doing things like watermelon, pineapple, and shrimp and seafood and spices. They’re awesome, and these places are jam-packed with people,” he says. “You’re also seeing more Micheladas on bar and restaurant menus. We’ll continue to see that translate to more competition in the space.”
While it’s still perhaps a niche beverage nationally, the Michelada is massively popular in a pivotal market. Women, Hispanic drinkers, and drinkers who also purchase FMBs over-index as Michelada consumers, representing a huge opportunity for beer companies. As flavored hard seltzer siphons some drinkers away from traditional light beer, FMB-adjacent Micheladas may be the product to help keep them in beer’s fold.
California will prove to be an important source of strength not only for Modelo’s Chelada line, but for Constellation overall. As more distributors of Constellation products consolidate under Reyes Beverage Group, one of America’s largest distributors, those Constellation-aligned houses now boast the top-selling imported beer in the U.S. and the top-selling Michelada brand.
But AB InBev, Molson Coors, and, to a lesser extent, packaged Michelada mixers still represent competition. As more players enter the field, it will be worth watching AB InBev to see whether it puts more marketing behind its Bud Light Chelada line, sales of which remained flat last year. The brand ceded the top spot in the category for the first time to Modelo Especial Chelada in 2019, and now it also faces two Sol Chelada products.
Like the fruit-forward explosion of hard seltzers, prepackaged Micheladas offer beverage alcohol companies almost unlimited runway for future flavor expansions—provided those spin-offs don’t cannibalize sales of existing products.
Words by Kate Bernot