Other Brews May Have Corona Singing Blues

Analysts Blame Import's First Decline in 16 Years on Growth of Rival Brands; Brand Execs Blame Price Increase

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CHICAGO (AdAge.com) -- Corona has long been miles away from the ordinary -- and the competition. But for the first time in 16 years, the seemingly unstoppable Mexican import is actually seeing sales decline. And while the brand's executives put the erosion off to a price increase, analysts and the ever-expanding list of challengers storming its beaches aren't so sure.
Crown Imports executives seem remarkably unperturbed by gains Corona's rivals are making.
Crown Imports executives seem remarkably unperturbed by gains Corona's rivals are making.

Wall Street analysts and some of Corona's rivals point to a frothing head of new or reinvigorated brands that appeal to traditional Mexican import drinkers -- including Dos Equis, Miller Chill, the forthcoming Bud Light Lime and even Corona's resurgent sibling Modelo Especial -- as creating a more difficult competitive environment than the No. 1 import has previously faced.

'Getting growth'
"We're getting growth from them," maintained Eduardo Casas, director-Mexican brands at Heineken USA, which markets Corona rivals Dos Equis and Tecate. "There is no question we're affecting their business."

Executives at Crown Imports, which markets the laid-back brand in the U.S., seem unperturbed by the situation. "There have been dozens of brands introduced by many competitors who have unsuccessfully tried to emulate the success of Corona," said a spokesman, "and we don't see why these attempts would be different."

He added: "Corona will continue with and evolve the iconic campaign that has made the brand a tremendous success. We plan to remain true to the brand's well-recognized image, which has helped drive success."

And one otherwise tight-lipped source at the brand's longtime ad agency, Cramer-Krasselt, laughed aloud when asked if the brand would alter its long-held "vacation in a bottle" strategy -- best known for endless variations of beer drinkers enjoying a Corona on a beach -- because of its new competitors, whom he dismissed as the latest in a long line of Tequiza-like beverages that failed to dent Corona.

Competitors better funded this time
But Tequiza and other past challengers to Corona were not as well-funded as the current crop, who are collectively spending more than $100 million. Last year, Miller launched its lime-and salt-flavored Miller Chill, spending $25 million on a national media campaign and perhaps twice that much this year, an amount that would almost equal the $53 million Corona spent on its base brand last year.

While the Miller Chill brand's flavor profile differs from Corona -- even one with a lime shoved in the bottle neck -- there's little question its Spanglish-tinged ad campaign lured some Corona drinkers away. Miller's internal research found that 15% of the brand's volume otherwise would have gone to Corona, according to two people who've seen the numbers.

Not to be outdone, Anheuser-Busch this year is launching Bud Light Lime -- on Corona stronghold holiday Cinco de Mayo, no less -- with a $35 million marketing budget that will compete directly with Chill and indirectly with Corona.

"We expect both Miller Chill and Bud Light Lime to gain share at the expense of Corona," UBS alcohol-industry analyst Kaumil Gajrawala wrote in a recent note to investors.

Shark attack
A-B last year also launched Landshark Lager, a niche brand that swiped Corona's longtime Jimmy Buffett tour sponsorship and nosed its way into Mr. Buffett's Margaritaville restaurant chain.

Older Mexican brews are also ramping up spending and picking up share. On the high end, Dos Equis launched its largest campaign last year, dropping $8.5 million on measured media, about 50% more than it spent the year before. The effort appealed to upscale import drinkers with advertisements featuring a Dos Equis-drinking character who claims to be the world's most interesting man.

On the low end, its sibling Tecate targeted Mexican immigrants with a $16.8 measured-media outlay, a 10% hike over the year before. Tecate also introduced a light version last year.

"Our brands are very specific to two different targets that their very broad brand cuts across," said Mr. Casas.

Last year's sales suggest he may be right. According to Beer Marketers Insights, Corona Extra shipments declined 1.7% to 8.3 million barrels, while the far smaller Modelo Especial was up 10.5%, to 1.6 million barrels; Tecate rose 8% to 1.4 million barrels and Dos Equis jumped 17% to 655,000 barrels.

Don't forget economy
Some of Corona's struggles can also be attributed to an economy that has been unusually rough on its key markets -- such as Southern California -- and may wind up tightening the budgets of higher-end drinkers who may be less willing to spring for more expensive beers.

"There's the economy, there's the increased competition, there may be some generational issues" because younger drinkers see mega-imports like Corona and Heineken as essentially mainstream brews, while their parents originally chose them as alternatives, said Benj Steinman, editor of Beer Marketers' Insights. "In the past, they've always bounced back. But the past isn't always a prologue."
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