Interview, Part One: Constellation Brands Beer Division President Paul Hetterich

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.

New Scotch Whisky Releases From Terlato Distell Artisan Spirits

Terlato Distell Artisan Spirits, the spirits joint venture between Terlato Wines and South Africa’s Distell Group, has released four limited-edition Scotch whiskies in the U.S. market. Highlighting the group is Tobermory 42-year-old (47.7%-abv, $4,500-$5,000). Tobermory is one of Scotland’s oldest distilleries and the only one on the Isle of Mull. Only 222 bottles of Torbermory 42-year-old are available in the United States, from a global total of 650 bottles.

The new releases also include the 1996 Ledaig single malt (46.3%-abv, $159) from Tobermory distillery, a peated vintage malt whisky finished in Sherry casks. 1996 marks the first year the distillery began producing peated single malt whisky. Some 700 cases of 1996 Ledaig are being sold in the U.S. market.

Also being launched is the Bunnahabhain 13-year-old Marsala Finish (46.3%-abv, $85.99), aged in ex-Bourbon casks for 10 years and finished in Marsala wine casks for three years. This whisky was made exclusively for the U.S., with only 250 cases available.

The last of the four new releases is Deanston Organic 14-year-old (46%-abv, $89.99), the distillery’s first-ever organic expression. The whisky is made with Scottish ingredients and was aged in organic virgin oak casks. Some 1,000 cases of Deanston 14-year-old are in this year’s release.

News Briefs:

•As part of its ongoing Top 100 Wines of 2016 celebration, Wine Spectator has unveiled its number-eight and number-seven wines of the year. Number-eight is a Super-Tuscan icon, while number-seven is a Bordeaux blend from one of California’s most prestigious producers. Wine Spectator's Top 10 wines of 2016 are being revealed over the course of this week at http://top100.winespectator.com/ and the full Top 100 list will be released on Monday, December 5.

•Treasury Wine Estates is adding two new wines to its fast-growing 19 Crimes brand from Australia. Newcomers include The Banished Dark Red ($12), a blend of Shiraz with touches of Cabernet Sauvignon and Grenache; and The Warden ($25), also a Shiraz-based blend. Both are sourced from South Eastern Australia. 19 Crimes, which launched in 2013, crested a quarter-million cases in the U.S. last year, according to Impact Databank, earning “Hot Brand” honors.

•E.&J. Gallo’s Barefoot Bubbly has partnered with the Times Square Alliance and Countdown Entertainment to become the official bubbly of New Year’s Eve Times Square. The Gallo brand will toast with millions to herald the start of 2017 as the Times Square New Year’s Eve Ball drops at midnight. Barefoot Bubbly, retailing around $10 a bottle, grew 9% to 1.2 million cases in the U.S. market last year, according to Impact Databank. The Times Square Alliance is devoted to improving and promoting the celebrated crossroads at the heart of midtown Manhattan.

•Southern Glazer’s Wine & Spirits has announced a new structure and executive team for its U.S. control state business. Under the new alignment, Brad Waxman, Robinson Cooper and Kirt Clemens have all been named executive vice president-general manager of different control state territories. Waxman will oversee Pennsylvania; Cooper will helm Idaho, Iowa, Michigan, Montana, Ohio, Oregon, Utah and Wyoming; and Clemens will lead Alabama, Maine, Mississippi, New Hampshire, North Carolina, Vermont, Virginia and West Virginia. All three will report to Scott Oppenheimer, regional president, control states and Canada.

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