Constellation Brands to Buy Mexican Brewery For 600 Million dolars
US-based drinks group Constellation Brands is to acquire a brewery operation from Grupo Modelo, a subsidiary of Anheuser-Busch InBev, for 600 million dolars. The brewery, located in Obregon, Mexico, is expected to have four million hectolitres of production capacity with minimal investment and optimization by Constellation after closing.
The acquisition of the Obregon brewery will allow Constellation to immediately obtain functioning brewery capacity to support its fast-growing, high-end Mexican beer portfolio and provides flexibility for future innovation initiatives. It also enables the company to become fully independent from the interim supply agreement with Grupo Modelo. As a result, Constellation will phase the build-out of 10 million hectolitres at Mexicali, with the first 5 million hectolitres of production capacity expected to become operational by December 2019, and subsequent capacity planned to align with future growth.
“We believe this is the right strategy to provide near-term capacity and greater flexibility to support our growth and innovation plans, while allowing for the build-out of our Mexicali brewery over an extended time period,” says Rob Sands, president and chief executive officer of Constellation Brands. “We look forward to welcoming Obregon’s talented employees to our Constellation family and working together to continue to capture the ongoing growth opportunities we see in the high-end segment of the US beer market.”
The Obregon brewery is located on Mexico’s west coast in the state of Sonora, and will help service Constellation’s largest beer markets in the western US. The majority of Obregon’s production is currently satisfying the interim supply agreement, so it is expected to be a smooth transition during the continued expansion of the Nava brewery and the build-out of the Mexicali brewery.
“The magnitude of our long-term investments in Mexico largely remain the same. The revisions to our operating plans essentially represent an initial shift in spend to Obregon from Mexicali. This will result in an increase in our free cash flow estimate for fiscal 2017 to a range of $575 – $675 million,” explains David Klein, executive vice president and chief financial officer, Constellation Brands. “As originally outlined, Mexicali is scalable to 20 million hectoliters to support the future growth of our beer business, which continues to significantly outperform the U.S. beer market.”
Constellation is the third biggest beer company in the US with high-end, iconic imported brands such as Corona Extra, Corona Light, Modelo Especial, Modelo Negra and Pacifico. The company’s beer portfolio also includes Ballast Point, one of the most awarded craft brewers in the US. In addition, Constellation is the world’s leader in premium wine, selling brands including Robert Mondavi, Clos du Bois, Kim Crawford, Meiomi, Mark West, Franciscan Estate, Ruffino and Jackson-Triggs. The company’s premium spirits brands include SVEDKA Vodka and Casa Noble Tequila.
