By Walt Hickey

Welcome to the Numlock Sunday edition.

This week I spoke to Kate Bernot, who wrote Everybody Else — Outside of Mexican Beer, Imports Are a Jumble of Mixed Trends for Good Beer Hunting. Here's what I wrote about it:

Mexican beers account for fully 80 percent of the volume of beer imported into the United States, the rare bright spot in the overall declining beer business. Mexican beers were just seven in 10 imports as recently as three years ago. The nearest runner up is the Netherlands, which exports Heineken, but their exports are just 11 percent of the Mexican volume. Total beer sales are down 1.2 percent from May to August of this year, while sales of Corona Extra are up 10 percent over the past 12 weeks, Pacifico is up 40 percent, and Modelo Especial is up 17 percent.

I loved this because it takes a prevailing story — imported beer is doing great! — and peers just beneath the surface to find out that actually, it’s really just Mexican beer, and even further, it’s pretty much just one single company.

We spoke about what’s going on in the import market, how Japanese beer companies are looking to the U.S. to save their business, and the ongoing carbon dioxide crisis.

Kate can be found on Twitter and at Good Beer Hunting.

This interview has been condensed and edited.

You had a really fascinating story all about beer imports. I thought that this was really interesting, especially because it turns out that beer imports from the world are not really all about beer imports from the world. They are mostly about beer imports from Mexico. Can you talk a little bit about what you found?

I wrote this story because I think a lot of beer publications have been touting the real success for imports as a category, which is not untrue. It's just not the full story. I didn't want readers to think that all imports across the board are experiencing the same boom that the top line numbers suggest, because the top line numbers are reflecting the fact that 80 percent of imported beer to the U.S. comes from Mexico. Your Coronas, Modelos, Pacificos, Victoria — not only are most of the most popular beer imports from one country, they're actually all owned by one company, which is Constellation Brands.

So this is really a story about the success of Constellation, even more so than it's just a story about Mexican beer and even more so than it's any kind of story about imported beer across the board. Because other countries’ imports are a mixed bag, which I get into in the piece. But yeah, the rising tide is not lifting all ships necessarily when it comes to imports.

It was just really shocking how stratified it got. Because again, the top two countries, one of which is Mexico and the other of which is the Netherlands, they're like 90 percent of all imports. And then everybody else in the entire world is just a fraction of it. And I had no idea that was the case.

We should mention that the reason that Netherlands is number two is Heineken. I think it's natural for some drinkers, and maybe even especially craft drinkers, to assume that beer is from Germany and from other European countries, Italy, Japan, even, if we're thinking outside of Europe, that they have a larger presence here than they do. Those beers from England and Japan and Germany are so formative to the experience of “learning about craft beer,” or at least they used to be very formative, even for me.

Ten years ago, when I was really starting to cover beer more seriously, I was like, "I have to go find specific Belgian brands because I've never had a Belgian quad," or something like that. I don't know if younger beer drinkers these days are doing that, and if they are, they can find U.S.-made versions of those styles. You don't have to buy a Pilsner from Germany, because U.S. breweries make German-style Pilsners now. I think there's an outsized legacy for those brands in the minds of certain drinkers that isn't actually matched by sales data.

You've also seen beers that were European literally become American. You wrote about Stella Artois.

Stella is made in the U.S. as of last year, so it lost its “import status” in U.S. government data, which is where I'm drawing a lot of this data from. That does feel like a sea change, especially because Stella was associated with refinement and a better-tasting lager; that was how it was marketed here in the U.S. That is not its reputation abroad.

Expand on that.

It is considered kind of swill in other countries. It was known for a very long time in Britain derogatorily as wifebeater beer. That was literally what it was called, because it was associated with overconsumption and low class and domestic violence. It's horrible, but the fact that a brand has such a wildly different perception in two countries is fascinating. But I digress. For the U.S. market, at least, it's no longer brewed in Belgium. So yeah, it's just another Anheuser-Busch brand that looks like it vaguely studied abroad.

You have a bit in here about Japanese beers, which I thought was really interesting because the yearly input volume is up considerably, it seemed, but also there's more going on there specifically with some of the larger companies in Japan that are actually kind of eyeing overseas expansions. Do you want to talk a little bit about that scene?

Japanese beers here in the U.S. — and I believe in Japan, although I'm certainly no expert; if anyone wants to send me to Japan to drink a bunch of beer and eat sushi, please let me know, I will fall on that sword — but certainly here in the U.S., we think of rice lagers. Sapporo, Kirin, Asahi Dry. These brands — that are delicious by the way, rice lagers are great — but Japan and Japanese beer makers really need to figure out a global strategy, because consumption of alcohol has been rapidly declining in Japan, dramatically: 7.8 percent of Japanese people in their twenties regularly drank alcohol today, and that's down from 20 percent in 1999.

So this is falling off a cliff, right? These Japanese beer companies are like, "If people here aren't going to drink it, who else might?" and that's the U.S.

But it's not just about shipping those beers here, although that's definitely happening. These companies are also becoming players in the U.S. craft beer space. Sapporo acquired Stone Brewing, Kirin through its subsidiary, Little Lion owns New Belgium and then more recently Bells Brewing, and Asahi has signaled interest in a full-scale push into North American markets. It's not clear what form that would take, whether that would be through acquisitions and purchasing of existing brands, but I feel like these Japanese companies are just diversifying what they offer in the U.S. market. It's traditional products, but also they're going to play a little bit in the craft space, and just hedging, that's both of those.

Fascinating. Just backing out, why do you think Constellation in particular has had so much success in the States?

How much time you got?

Corona, the best-known Mexican brand for a lot of people in the U.S. — even though it is now not as hot a seller as Modelo — was the original Mexican import that began this wave of popularity. It did that by functioning as a lifestyle brand. Corona was a beer that I saw as my white, suburban New Jersey family at our backyard barbecues and stuff because it meant vacation and relaxing and life's a beach, right?

If I was going to be fast or furious simultaneously, I was going to get a Corona.

One hundred percent. It taught people to put limes in their beer.

Anyway, this is all Corona's doing and it opened the door for the popularity of these other imports, but Modelo has since really become the workhorse for Constellation. That's a mix of appealing not just to American drinkers generally, including non-Hispanic drinkers, but there's no way to talk about the success of Modelo without talking about the changing demographics of the U.S. and the increasing import importance of Hispanic drinkers. That is a huge demographic story within beer and other beverage alcohol and other consumer goods. Hispanic purchasing power is huge, and also younger Hispanic women in particular are more likely to drink now than they would've been in generations past. That comes from some research that I did on women drinkers a while back.

Plus, as they attain more college education as a category, college education is associated with lifetime alcohol consumption extremely strongly, more than many, many, many other demographic categories. If you go to college, you become used to drinking alcohol and seeing other people drink alcohol. It's hard to separate the rise of Mexican imports and the rise of Modelo from the rise in Hispanic Americans as consumers.

Which is not to say that white people aren't drinking or Black people aren't drinking Modelo and Corona, whatever, they definitely are. Everyone's drinking them, it's why they're popular. Constellation is extremely well positioned to capitalize on this because yes, they distribute these brands in the U.S. and Constellation has a massive, strong distribution network in California through its alignment with Reyes Beverage Group, which is the largest beer wholesaler in the country bar none. What Constellation is to import beers, Reyes is to distributors.

They're just huge. They're growing. They seemingly are buying up little guys left and right, every week, and they have an extremely strong presence in California. Huge Hispanic population, huge population in general; it's the country's largest beer market. As a bunch of popular and very, very well-run companies align, it turns out that's a good thing for everybody. That's the very long answer. Yes, Americans have a taste for these beers. Yes, demographic shifts are in that favor, are in favor of these brands as well. Seemingly Reyes is your distribution partner, they can't be stopped. And that just leads to lots of dollar signs for everybody.

I know we're about to wrap up, but while I have you, I wanted to ask you all about what on earth is going on with carbon dioxide. This has been one of the fascinating, subtle stories going on in a lot of different industries around the country right now.

Yeah. This is complicated, too. It's about supply chains, which are not sexy for anyone, but we've seen a lot of different types of weird supply chain issues over the last couple of years, and carbon dioxide is a big one.

Carbon dioxide is used to carbonate beer and it needs to be food grade or commercial grade. You can't just use any old CO2, and the suppliers that make this have lately been really unable to meet all of the demand from not just beer, but hard seltzer, soda and regular seltzer. We're just drinking a lot of carbonated beverages; we love bubbles, and there have also been some issues with where food-grade CO2 comes from. It's a byproduct of other types of manufacturing that have been checked out or slowed because of the pandemic. There have been contamination issues because of environmental stuff.

It's just leading to this place where breweries can't get enough CO2 and they're paying a ton of money for it. In a lot of cases, the price has gone up more than any other input that breweries use over the summer. In some cases they just can't get enough, they can't carbonate their beer. That means you can't make that beer, so it's bad. It's unlikely to get much better either in the short term or the long term. One of the ways that commercial-grade CO2 is made is as a byproduct of ethanol production for vehicles, which is super weird to think about, it makes it sound kind of gross. I'm not going to learn any more about that.

As I was talking to a brewery and manufacturing tech supplier today, who is saying, look, as electric vehicles increase their sales and as combustion engine vehicle sales decrease, there will be less ethanol production, and there will be less CO2 being made as a byproduct of that in the long term. This is probably a crunch that's going to be around for a while.

Oh wow. A critical ingredient for one industry is the byproduct of a much bigger one, and it's just weird that that's the case.

I mean, isn't it weird how even, not even just as reporters, but as consumers, we've learned all this weird stuff about supply chains in the last two or three years! Just the freight situation with the port of Los Angeles, man, you're having this conversation over happy hour with your friends, and why do I know this?

It's obscene that just reading any business news story is inherently becoming an episode of How It's Made.

Not in the charming way when like Mr. Rogers took you to a crayon factory. I'm here for that! But this is like, no, I'm learning about freight surcharges in China, and I'm like, I don't care to know this, but I guess I do now because I can't get my leggings I back-ordered or something. Why is this related?

It's always something like, "Well if pig demand in China is up, then soybeans are down, so fertilizer is more expensive, so CO2 is more expensive" — it's just like, why? Why does it work like this?

You can't carbonate your beer or get your leggings on time. Sorry!

Kate, thank you so much for talking to me. I really appreciate it. This is really fun. Where can folks find you and find your work?

People can find my work primarily at Good Beer Hunting in the Sightlines news section. Then I also write for Craft Beer and Brewing, The Brewing Industry Guide, and I freelance elsewhere. So yeah. Follow me on Twitter @kbernot.