CORONA BREWS WAY TO TOP OF IMPORTED BEERS IN U.S.

Byline: Rick Wills The New York Times

At Key Food in the Astoria, Queens, neighborhood of New York City, a six-pack of Corona Extra costs $6.99 plus tax. For the same beer, supermarkets here charge less than $2.50.

For Mexicans who regard Corona as a humble, even low-rent beer, it is something of a mystery why drinkers in the United States are eager to pay so much for the mild-tasting brew of Corona. But last year Corona soared past Heineken to become the No. 1 imported beer in the United States.

In less than a decade, Corona's manufacturer, Grupo Modelo SA de CV, has transformed a once-obscure Mexican beer into a global brand whose name recognition - if not its sales - approaches that of Coca-Cola and Marlboro cigarettes.

Corona's triumph is a testimony to the power of clever marketing. Some industry analysts credit its clear bottle, painted white-and-blue label, even its taste. But the key seems to be Modelo's shrewd tactics in appealing to a core group of Mexicans living in the United States while giving Corona a special cachet among American college students and twentysomethings.

``You just have to have it,'' said Theresa Endres, manager of J. Paul's, a popular singles bar and restaurant in Washington's Georgetown neighborhood.

``The marketing of Corona has been brilliant, whereas the marketing of Heineken has become schizophrenic,'' said Philip Van Munching, the author of ``Beer Blast,'' which chronicles the past 20 years in the American beer market. ``Corona's association with the tropics and being drunk with a lime are indelible images that work,'' said Van Munching, whose family imported Heineken from 1933 to 1993.

Corona is now the 10th best-selling beer in the United States, according to the latest annual beer study by Impact, a beverage industry monthly publication that forecasts that Corona will be among the country's top five beers by 2010.

``We do not see a change in this brand's momentum,'' said Frank Walters, research director at Impact. ``This is not a fad.''

For the past two years, Modelo has been headed by Carlos Fernandez Gonzalez, only 32, who started at the company as an office boy at age 11. The nephew of Modelo's board chairman and great-nephew of the company's founder, Fernandez continued to work part time at the company while studying industrial engineering at Anahuac University, a private institution in Mexico City. Before being named chief executive, he had worked in nearly every department at Modelo.

Modelo's management is dominated by families whose involvement dates from early in the century. Two vice chairmen, Juan Sanchez Navarro, who is 86, and Nemesio Diez Riega, who is 80, have each been with Modelo for more than 50 years.

``I'm very young but lucky to have lots of age and experience around me,'' said Fernandez, who sometimes goes around unshaven, looking a bit like a perpetual graduate student. But he is careful about his image and has proved to be a quick study in his relatively new role as the top executive of one of Mexico's most prominent companies.

``We're breaking the rules,'' Fernandez said in an interview at Modelo's headquarters here. ``When most people think of beer, Europe springs to mind more than Mexico, but this is changing.''

Modelo's 74-year history parallels the consolidation of Mexico's beer industry. A century ago, few Mexicans drank beer. Peasants and workers preferred pulque, a rank-smelling drink made with the fermented juice of the maguey cactus. But beer became more popular as the country industrialized.

By 1925, when a young bakery owner named Pablo Diez Fernandez, who had immigrated to Mexico from Spain, founded Modelo in Mexico City, the country was dotted with local breweries.

Diez headed Modelo for the next 46 years and worked not only to distribute Corona nationally but also concentrated on acquiring regional competitors, among them the breweries that produce the Victoria, Pacifico and Leon brands. Over the decades, Modelo outpaced rivals to become Mexico's largest brewer.

One key to Modelo's growth has been the company's consistent refusal to take on debt, Fernandez said. Instead, the company has financed its own expansion by reinvesting profits. As a result, Modelo has avoided the financial turmoil that has plagued many companies here during Mexico's frequent financial crises and currency devaluations.

In the late 1970s, Antonino Fernandez Rodriguez, then Modelo's chief executive, steered the company on a new course, deciding to concentrate on exports to the United States. He pitted Corona against Heineken, Beck's and other European beers that dominated the slice of the American beer-drinking market that went to imports.

For several years, Corona's American sales were sluggish. But during the mid-1980s, one of Modelo's two American distributors, the Chicago-based Barton Beers Ltd., struck on a clever marketing strategy: pitching Corona to young American beer drinkers, many of them veterans of spring break at Cancun or Cabo San Lucas.

Barton devised television ads featuring attractive young people in tropical surroundings - under palm trees on sun-drenched beaches. The ads appealed to the same group of young consumers willing to pay premium prices for clothing from Abercrombie & Fitch.

Separately, Barton and Corona's other importer, the San Antonio-based Gambrinus Co., targeted another burgeoning market: the millions of Mexicans living in the United States. Spanish-language ads play a piece of classical music instantly recognizable to Mexicans, Jose Moncayo's vigorous Huapango suite, as images of Mexico's pastel-color colonial cities and pre-Colombian ruins flash across the screen.

Modelo set Corona's American prices above domestic beers but slightly lower than Heineken and many other imports. That added to Corona's appeal.

Sales fell in the late 1980s and early 1990s when Modelo and its distributors faced unfounded rumors, possibly started by a competitor, that Corona contained urine.

But they took off again as the popularity of foreign beers has boomed. Corona has been perhaps the biggest beneficiary of the rise of a group of more selective drinkers who are not particularly interested in developing a substantial beer belly.

``People figure that if they drink less, they may as well drink better,'' said Bill Hackett, Barton's president.

The success of Modelo's exports has helped drive up the value of the company's shares, which even rose during the severe recession in 1995 and in the midst of the financial rout last year in Mexico and other emerging markets after Russia defaulted on its debts.

Modelo's shares rose 23.9 percent in 1998, even as the Mexican stock exchange plunged 24.3 percent. The shares are up more than 19 percent this year.

``Modelo has made the sale of its products - something that at first was a fad in the U.S. - into an investment with incredible returns,'' said Carlos LaBoy, a Latin American equity researcher with Bear Stearns in New York.

While Modelo is focused on the American market, company officials do not want their reach to end at California beaches or New York bars. The company is now pushing Corona in Europe, where some of the strongest sales gains last year were in Bavaria, home of the traditional German Oktoberfest. The company's annual report also highlights rising sales in Israel, Russia and Japan.

Curiously, the same spring-break images that have worked so well in the United States are at the heart of the European advertising campaign, where the ritual is practically unknown.

To keep Corona exports flowing, the company is building what executives say will be Latin America's largest brewery, in the state of Zacatecas.

The world's growing appetite for Mexican beer has not gone unnoticed by other brewers, particularly Mexico's largest maker of all types of alcoholic beverages, Femsa SA de CV, which exports the popular Dos Equis, a darker beer, and Tecate. Femsa hopes to do with Sol, its own light lager brew, what Modelo has done with Corona.

CAPTION(S):

2 Photos

PHOTO (1--Color) A worker puts a destination label on a pallet of Corona beer at the Modelo brewery in Mexico City.

(2) Thirty-two-year-old Carlos Fernandez Gonzalez is chief executive officer of Grupo Modelo SA de CV, the maker of Corona beer.

Keith Dannemiller/The New York Times