How America’s New Favorite Beer Hammered the Competition

There were two reasons Baer wanted to stop the brewer of Bud Light from a merger in 2013 that would have made the world’s biggest beer maker even bigger. The first was in his professional capacity as the assistant attorney general in charge of the Justice Department’s antitrust division, where his team of regulators feared that consolidation would stifle competition. The second reason was more personal but no less crucial to his decision-making.

“I really like beer," Baer said.

I called Baer when Bud Light was recently dethroned as the king of American beers after a two-decade reign because, as it turns out, this antitrust lawyer helped anoint the beverage currently wearing the crown.

It’s not Budweiser. It’s also not Coors Light, Miller Lite or Michelob Ultra. It’s not even brewed in the United States. The most popular American beer right now is the Mexican import Modelo Especial.

This might sound a bit like hosting a Fourth of July barbecue in January. But the coronation of Modelo happens to be a deeply American story of cultural assimilation and economic competition.

The country’s No. 1 beer was outside the top 10 in sales when Baer’s team intervened in Anheuser-Busch InBev’s plans to acquire Grupo Modelo. To appease the DOJ’s antitrust squad and rescue the deal, AB InBev agreed to a settlement that shifted control of Modelo’s U.S. business to Constellation Brands. This small wine-and-spirits company based in upstate New York would nurture Modelo Especial into Bud Light’s most formidable rival over the next decade.

“By overreaching in proposing this transaction," Baer told me, “they accelerated Modelo’s success in the U.S."

The other accelerant in the improbable ascent of Modelo was the spectacular demise of Bud Light. When the brand enlisted a transgender influencer for a social-media campaign this spring, the backlash was so unexpectedly intense that AB InBev’s bestselling beer still hasn’t recovered.

But the odds are that Bud Light would have surrendered its title to Modelo Especial even without this brouhaha. In fact, it was beginning to feel inevitable long before the culture wars came for beer. Last year, a beer analyst named Bryan Roth crunched the numbers and called his shot: Modelo Especial would be within spitting distance of Bud Light by 2025 and could be America’s new favorite beer by 2026.

“What’s happened over the past few months has just expedited it," said Roth, an analyst for Feel Goods Company, a beverage consulting firm, and editor of its newsletter.

Every ounce of data suggests that Modelo’s lead in the beer market is built to last, given the shifting American demographics and consumer habits working in the brand’s favor, as my colleague Jennifer Maloney has written. The economic power of the nation’s Hispanic population keeps growing, but Constellation also says that 45% of Modelo’s customer base in the U.S. is non-Hispanic, as craft beers and Mexican imports are increasingly popular across the country. The momentum was on Modelo’s side. It was only a matter of time before the squat bottle with snazzy gold foil was everywhere.

But the circumstances that were essential to Modelo Especial’s success were made possible not a few weeks ago or a few years ago but a full decade ago.

That’s when Bill Baer’s team of antitrust officials began looking into beer.

They became curious after AB InBev struck a deal to buy Grupo Modelo in 2012, a takeover meant to provide the world’s most valuable brewing company with access to Mexico and other emerging markets. Grupo Modelo had an import agreement with Constellation at the time, but AB InBev agreed to sell Modelo’s stake in the joint venture to Constellation in the hopes of closing the deal, a $1.85 billion nod to potential antitrust issues. The catch was that AB InBev would have retained the option to buy the U.S. rights back from Constellation after 10 years.

The shareholders of both companies were pleased. The regulators inside the DOJ’s antitrust division were not.

Even before Baer was confirmed to his position in late 2012, investigators had been scrutinizing the deal for months, concerned that the merger threatened competition in a business that was already concentrated. The antitrust officials felt that Modelo played a vital role in the American beer economy. The brewer of Corona, Pacifico and Modelo Especial wasn’t the biggest or the second-biggest player—AB InBev and Molson Coors controlled about 75% of the market—but Modelo’s influence was bigger than its market share implied. The government argued that the pricing pressure applied by this Mexican company made it a “particularly important competitor" in a U.S. industry.

So it was only natural that Baer ended his first month on the job by suing to block the deal.

I asked him last week if he was hesitant to build his initial case as the nation’s antitrust enforcer around beer.

“Of course not," Baer told me. “I’m from Milwaukee."

He believed AB InBev was so thirsty for Modelo’s international business that it would be willing to swallow a divestiture from the Mexican brewer’s U.S. operations. His goal was to force a sale to a third player in the beer market that would have every incentive to “promote the hell out of it." AB InBev was furious, Baer said, but he remained firm. The only way the deal would pass regulatory muster was through a remedy that enhanced Modelo’s competitive presence in the U.S. “That is nonnegotiable," he said.

He thought the DOJ would prevail in court, but he bet that AB InBev wouldn’t take the case to trial and risk blowing up the deal. He was right.

The company didn’t have to look far to find the solution that satisfied Baer’s team. The settlement produced a revised deal in which AB InBev essentially agreed to unload the U.S. business of Modelo, handing Constellation the perpetual, exclusive licensing rights to beers like Modelo Especial and ownership of its most advanced brewery for another $2.9 billion.

Nobody would have blamed Constellation’s executives for popping Champagne. The day that AB InBev floated the reworked terms, Constellation’s stock price hopped 37%, the best one-day performance in the company’s history. One analyst said the new side deal was like going from renting a cabana to buying the whole beach.

Modelo Especial itself wasn’t especially huge in the U.S., but that would change as Constellation, whose other brands include Robert Mondavi wines and Casa Noble tequila, poured more resources into this beer. It launched the clever “Fighting Spirit" marketing blitz to boost awareness and tapped distributors to increase availability. Nowhere did it see tastier results than California: Constellation says Modelo is bigger there now than Bud Light, Coors Light, Miller Lite and Budweiser combined.

Those investments have paid off and transformed the entire company. Constellation sold more wine and spirits than beer in the 2013 fiscal year. In the 2023 fiscal year, beer generated nearly 80% of its revenue.

It wasn’t a coincidence that Modelo Especial was the beer positioned to displace Bud Light. It was a deliberate business strategy.

It was also exactly what Baer had in mind when he decided to protect Modelo’s independence. Not everybody loves antitrust regulation, but it has been a government responsibility since the 19th century—and the most successful beer in the U.S. these days is a reflection of Baer’s own success in his job.

He left the DOJ in 2017 and returned to private practice, but he recently experienced for himself the freedom of choice that his antitrust case preserved. When he needed to stock up on beer for a family reunion in Montana—Baerapalooza, he calls it—he went to the nearest grocery store and pulled some local brews from the refrigerator.

Then he did something that so many other Americans will do this summer.

He grabbed a six-pack of Modelo.