The Hispanic Beer Equation

By Chris Furnari

“Los Latinos Tenemos Algo Extra.” Translated in English, it means “We Latinos Have Something Extra,” and it’s the tagline for Corona Extra’s new national marketing campaign targeted at Hispanic consumers. From Corona’s perspective, the Hispanic-American population does have something extra: an affinity for beer, especially import brands. And with a rapidly growing Hispanic population in the U.S., it’s not just Corona that’s focusing on this broad, ethnically diverse group: industry-wide, larger domestic and import companies are dedicating greater attention and marketing dollars toward selling Hispanic consumers Mexican and Latin American import brands.

That’s not to say that ethnic marketing is the only force behind the growth of Mexican and Latin American imports. Beers like Corona and Dos Equis have long since left their German and Canadian competition in the dust, a change attributable to clever marketing and changing taste patterns. But as the Hispanic population grows, marketers see even larger potential for these already popular brands.

Hispanics currently make up over 16 percent of the total U.S. population; current projections are that by 2050, that figure will swell to 30 percent. And according to Mintel, a global research firm, Hispanics drink more imported beer than any other ethnicity (34 percent versus 28 percent of total population). Hispanics also spend more money on import brands than do non-Hispanics: 25 percent of Hispanic beer expenditures are on import brands, compared to just 13 percent for non-Hispanics.

Crown Imports, which has revenues of more than $750 million in sales annually, is the top U.S. import vendor in Symphony IRI tracked food, drug and convenience channels. The company owns three of the top five import brands in the U.S. – Corona Extra, Modelo Especial and Corona Light – and sees the Hispanic market as a significant growth opportunity.

“There is a big opportunity to continue to grow our beer brands with this growing population base,” said John Alvarado, the Senior Director of Brand Marketing for Crown Imports. “Our portfolio has a strong position amongst the Hispanic consumer base and we think that is why others are getting in.”

It’s why Crown rolled out the “Los Latinos Tenemos Algo Extra” campaign, which is specifically aimed at Hispanics in the 21-34 demographic. It’s also why the company is spending more marketing dollars on reaching the entire Hispanic demographic.

“Our overall investment against the Hispanic demographic has grown over the last five years,” Alvarado said. “[And] when you look at the critical 21-34 [year-old] demographic, the percentage that Hispanics will make up of that segment is tremendous,” he said. “By 2020, Hispanics will comprise 20 percent of that 21-34 category.”

Crown isn’t the only company that recognizes the growth opportunities that lay in the Hispanic demographic. Anheuser-Busch InBev recently acquired the remaining 50 percent ownership in Grupo Modelo for $20 billion.

Anheuser-Busch’s VP of U.S. Marketing, Paul Chibe, said 2012 represents the company’s largest spend to-date on multicultural marketing.

“More and more, consumers are looking for brands to be inclusive and connect with them on a cultural level,” Chibe said. “This shift in mindset has made multicultural marketing invaluable to our success, particularly with Hispanic beer drinkers, the fastest growing segment within the category.”

Marketing Mix

While its purchase of Grupo Modelo indicates the values it places on import brands, AB has also reached out to the Hispanic population through internal product innovation of its domestic brands as well. That has led to renewed focus on offerings like Budweiser Chelada and Bud Light Chelada – a blend of beer and clamato juice which was developed using Hispanic consumer insights.

“Hispanic beer drinkers, specifically those of Mexican descent, have been mixing beer with Clamato for decades,” he said. “Budweiser Chelada and Bud Light Chelada honor that tradition in an authentic, relevant way.”

Still it’s the import business that is driving growth. According to Symphony IRI data, Mexican imports own 55.8 percent of total imports in the U.S. Food, Drug and Convenience channels. The category is up 2.7 percent from 2011 and closing in on $1 billion in sales in those channels. Now, newer offerings like Medalla Light from Puerto Rico and Heineken USA brand Indio have entered the space, launching in states with dense Hispanic concentrations like California, Texas and Florida.

Beer industry analyst and retail expert Bump Williams said it’s pretty clear why these new brands are earning placement. He points to three critical reasons – value, market share and population.

“Consumers can get a tremendous value with high-end import beer,” Williams said. “The Mexican import category owns the biggest share of total import beer sales and capitalizes on the highest growth segment in U.S. population.”

But these new product offerings will be faced with stiff competition from stalwart brands like Dos Equis. That brand’s Most Interesting Man in the World campaign is one of the category’s greatest marketing success stories.

“The Most Interesting Man is an icon,” said Williams. “Dos Equis has done an incredible job of differentiating themselves from every other brand and capturing nearly every consumer demographic with the campaign.”

The advertising campaign launched by Dos Equis in 2006 has helped boost sales for Dos Equis and brought serious attention to the entire category. In Symphony IRI tracked U.S. Food, Drug and Convenience channels, the Dos Equis XX Special Lager brand is now the sixth best-selling import brand with nearly $74 million in sales. Case sales in those channels are up nearly 42 percent over 2011.

Kelly McDonald, the President of McDonald Marketing, and one of the top Hispanic marketing experts in the U.S. explained why it’s working.

“Dos Equis has done a nice job of identifying their core consumer,” she said. “The Most Interesting Man is a self-assured person who doesn’t care what you think. They are playing to a subtle but very powerful chord.”

Competitive Mix

However, much like the craft beer category, limited shelf space for Hispanic-themed imports could potentially limit the success of new entrants to the U.S. market. Alvarado believes that retailers should consider providing additional shelf space for Hispanic beer offerings.

“Based on the changing demographic, there probably should be more shelf space,” Alvarado said. “Retailers make the final decision but if you look at Hispanic consumers as being a large growth opportunity, there should be more shelf space given to brands from Latin America.”

So what are some brands to keep an eye on?

Williams has a laundry list of newer brands he is paying attention to. He expects brands like Estrella Damm, Carte Blanca, Pacifico, and Kalik to continue making flavor and package innovations, taking a page out of the craft beer playbook.

But his top brand to watch is still the category leader, Corona.

“I expect some great growth coming from the Corona brands, which goes against what everyone else is saying,” he said. “Now that ABI owns the whole franchise, they will be investing money into logistics and supply chain management disciplines. There should be fewer problems with out of stocks and better execution getting brands across to retailers.”