- Corona beer brewer Grupo Modelo, owned by AB InBev, announced it will temporarily stop production following an order from the Mexican government which declared its business activities non-essential, according to FoodBev Media.
- The order suspends all non-essential businesses in an attempt to curb the spread of coronavirus until April 30. Agriculture and food production are considered essential activities.
- Grupo Modelo said it has a plan in place to recommence production if the Mexican government deems beer as an agro-industrial product, reported Reuters. AB InBev owns the Corona brand, but Constellation Brands has U.S. distribution rights.
Despite an uncannily similar name to coronavirus and the announcement that there is a temporary cessation of production in Mexico, Corona beer is doing well in the United States. And it appears that this trend will continue.
In a call with analysts, CEO Bill Newlands said the company is continuing to operate its two Mexican breweries and that beer supply in the U.S. will not be affected. Newlands said the decision does not go against governmental regulations, according to Reuters.
Constellation Brands released its quarterly earnings report on April 3, the day after the Mexican government announced the stop order for non-essential operations, and Corona beer showed strong performance. In the report, the Corona brand grew nearly 5% during the fourth quarter, lead by the launch of Corona Refresca and double-digit growth in Corona Premier.
Even if the government prevents Constellation Brands from manufacturing Corona in Mexico, it would still take a significant period for the American beer supply to dry up as Constellation Brands has production facilities in the U.S., Italy and New Zealand.
Mexican beer has done well in the United States in recent years due in large part to the country’s changing demographics. According to Constellation Brands, approximately 36 million Hispanics of legal drinking age lived in the U.S. in 2016. That number is expected to grow to 46 million by 2025. Constellation Brands has been a beneficiary of this trend as evidenced by the company’s growth even as the rest of the beer industry’s sales suffer as consumers turn to spirits, craft beers or ready-to-drink products like hard seltzer.
Analysts speaking at the Beverage Forum in 2018 applauded the job Constellation Brands has done marketing its Mexican brands — including Corona and Modelo Especial — to stand out from its competitors and give people a reason to pay up for the products.
“If you look at the marketing job that Constellation has done, it has really been phenomenal in terms of differentiating their brands and getting people to buy those particular beers that tend to be lagers," Robert Ottenstein, senior managing director at Evercore ISI, said at the conference Wednesday. "This is really great marketing, and I don’t think we should sell short marketing with these companies.”
Corona beer has been particularly popular in the Constellation portfolio and a major driver of the company’s profits. To that end, it is crucial that Constellation Brands works to not only keep the brand available on the market but combats any misinformation that conflates the beer with the virus.
The Wall Street Journal reported that the ad agency 5WPR conducted a survey in mid-February showing that 16% of beer drinkers were confused about the relationship between Corona beer and the coronavirus. Nevertheless, the Journal reported U.S. retail sales of Corona beer for the four weeks ended Feb. 16 were ahead of where the brand’s sales were trending for the past 52 weeks. Fourth quarter results from Constellation confirmed that Corona sales have held strong.