Beer, Wine & Spirits

Crown taps a new market, moving Corona beyond the bottle

Corona beer may be known as much for its "find your beach" tagline as it is for its iconic clear glass bottle, served with a wedge of lime.

Now the brand is branching out beyond the bottle, looking to boost its presence on draft in bars and restaurants.

After a limited test run, Crown Imports, a division of Constellation Brands, is making its Corona Light brand available on draft in an additional 35 U.S. markets, including New York, Chicago, Los Angeles and Dallas, starting in March.

The timing allows the brand to boost its draft presence in advance of the Cinco de Mayo holiday and the crucial summer selling season.

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"We've actually seen in all the markets where we do have draft, our business increases about 12 percent overall versus markets where we don't have draft," said Jim Sabia, chief marketing officer at Crown Imports. "So we're excited for what Corona Light draft does to our overall business in building our consumer franchise."

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During its limited rollout, Crown watched carefully to make sure the Corona Light draft option didn't hurt bottle sales. What the company found was a halo effect, which carried over from draft on-premise at bars and restaurants to off-premise stores.

"We're seeing a very traditional beer experience with consumers going into the bar, sampling the product on draft, and then seeing it off-premise and making a purchase," said Sabia.

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While the off-premise boost is important, the real opportunity lies in growing the draft presence of the Crown Imports portfolio, which in addition to the Corona brand, includes the Modelo, Pacifico and Victoria brands, among others.

According to company officials, draft sales currently account for less than 2 percent of the Crown portfolio's overall sales, versus the industry average of 10 percent.

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Constellation Brands has been on a tear since completing its acquisition of Crown Imports this past summer. Constellation shares are up nearly 50 percent in the past six months, and Crown Imports is coming off a strong third quarter, with overall sales growth of 21 percent and total draft sales increasing more than 30 percent.

The hopes are highest for Corona Light draft, with Constellation CFO Bob Ryder saying on the company's most recent earnings call in January that Corona Light is expected to become its biggest draft brand, a position currently held by Pacifico.

While the struggles of the light beer category have been well-documented, it still remains the largest segment of the U.S. beer market, and Bud Light and Coors Light are the top-selling beer brands.

Crown sees an opportunity in the numbers, provided it can convince consumers to trade up from their domestic premium light beer to an imported premium light beer.

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Part of the pitch in getting beer drinkers to trade up will be taste. Corona Light draft will be featured in two television commercials during its March rollout and again in the summer selling season with a marketing campaign that portrays Corona Light as the beer for "when you're ready for a light beer that tastes like a beer."

"Corona Light has 18 IBUs (International Bitterness Units), a lot of the other premium light beers have 8, 9, 10 IBUs," said Sabia. "We believe the consumer's palette is beginning to change and it's getting more sophisticated. They want more flavor and taste."

While Corona Light is going national, Crown will begin testing the flagship Corona Extra brand on tap for the first time in the United States. Given the brand's well-known association with its bottle, Crown is proceeding cautiously with Corona Extra, limiting the test to three markets.

Crown officials said they will be watching closely to understand the impact on the marketplace.

"The last thing we want to do is switch a Corona Extra bottle drinker to draft," said Sabia. "We don't want to cannibalize our bottle sales because the Corona Extra bottle is such an iconic part of our brand."

So where does the equally iconic lime fit into all this? Fear not, lime lovers.

"Every Corona Light and Corona Extra served on draft will come with a lime right on the glass," Sabia said.

—By CNBC's Tom Rotunno. Follow him on Twitter @TomRotunno.