just On Call - Constellation Brands eyes "self-sufficiency" over beer supply - CEO
Constellation Brands released its full-year results today
The increase to 20m hectolitres a year at the Piedras Negras brewery in Mexico will make Constellation “100% self-sufficient” in its US beer supply, president & CEO Rob Sands told analysts yesterday (10 April). The company will continue to siphon capacity from Anheuser-Busch InBev breweries until the expansion is complete, Sands said.
Sands described the northern Mexico brewery, which will fall into Constellation's hands once A-B InBev completes its US$20bn Modelo takeover, as “the crown jewel of production for Modelo”. It sits 13 miles from the Texan border and has scalable capacity of up to 30m hectolitres a year, Sands said.
Constellation CFO Bob Ryder said the brewery will provide independence of supply in the US for five to seven years. “As we build out the Piedras Negras capacity, the manufacturing will shift from InBev facilities to our own Piedras Negras facility,” Ryder said. The expansion plans are expected to cost between US$500m to $600m, Ryder said.
“The Piedras Negras facility is very efficient so it will be able to produce beer at a lower cost than we are buying from InBev for.”
Sands also said warned against believing media reports that this year's global grape harvest will come in low.
“There's plenty of wine and juice around,” he said. “You can't read the papers and get too excited about these things because they tend to exaggerate the oversupply and the undersupply. What I can say, though, is we don't see anything happening that will impact our operating results.”
Constellation yesterday posted a single-digit full-year sales increases over last year, however increased cost of goods dragged down net profits.
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