Interview, Part One: Constellation Brands Beer Division President Paul HetterichNovember 30, 2016
Paul Hetterich, a 30-year veteran with Constellation Brands, was named president of the company’s beer division earlier this year. The Chicago-based unit—which imports Corona Extra, Modelo Especial and Negra Modelo from Mexico—is the third-largest beer marketer in the U.S. The division continues to drive strong earnings for the parent company, posting a 20% increase in net sales in the second quarter of fiscal 2017. SND contributing editor Terri Allan met recently with Hetterich to discuss the beer division’s remarkable growth trends.
SND: Constellation Brands continues to turn in the best performance of all the leading beer marketers, with solid gains in volume and market share. What are the year-to-date trends?
Hetterich: We’re driving 35%-40% of the entire beer category’s growth. Because our entire portfolio is at the high end, we’re perfectly suited for the trend toward premiumization.
SND: How is Corona Extra performing, in light of the increased emphasis on cans and the recent testing of draft in southern California?
Hetterich: The repositioning of the can has gone well. Cans have moved from 2.5% of our mix to 6.5%, which is still very low compared to the industry norm. Most of Corona Extra’s growth has been from bottles, but we still have a lot of distribution potential for cans. As for draft, Corona is now the “official cerveza” of the Los Angeles Rams, and we needed draft as a part of our stadium strategy. So the draft effort for Corona Extra is still in its early days, but Corona Light is now available on draft nationally. For consumers, that’s been a great trade-up opportunity from domestic light beer.
SND: Modelo Especial’s growth remains remarkable. This year it’s being supported with mainstream advertising. What are you seeing year-to-date? And is the brand making inroads with mainstream consumers?
Hetterich: Modelo Especial has experienced three decades of double-digit growth. Now it’s working off a far bigger base, so it’s that much more noticeable. It just became the No.-1 beer brand in Los Angeles—the biggest beer market in the country. We’ve taken a very focused, disciplined approach to building Modelo Especial. There are great demographics and market trends aligned with the brand. And the advertising piece has gone extremely well, attracting new consumers.
SND: Constellation recently launched its “Casa Modelo” marketing initiative for the Modelo brands, which is aimed at spurring innovation. Why did you make this move?
Hetterich: Negra Modelo didn’t have the same look or feel as Modelo Especial from a packaging standpoint, while Chelada had more of Modelo Especial’s brand attributes. Our advertising approach for Modelo Especial, which is a full-flavored beer, is similar to that for a craft beer: it’s all about the legacy. Longer term, we think we can tie the brands together, thereby making the brand name more extendable through new beer styles and packaging extensions.
SND: What new styles are you considering?
Hetterich: They’re still in development. And we still have tremendous opportunity for distribution growth with Modelo Especial, Chelada and what’s now Modelo Negra. Both Corona and Modelo Especial could be among the top five brands in every major market.