Constellation Brands will pay US$600m for Anheuser-Busch InBevs Mexico brewery

Constellation Brands will pay US$600m for Anheuser-Busch InBev's Mexico brewery

Constellation Brands has agreed to purchase the Obregon Brewery from Anheuser-Busch InBev subsidiary Grupo Modelo. 

Constellation said today that the US$600m deal would see the company become "fully independent" from an interim supply agreement with AB InBev. Sands said earlier this year that the supply deal accounts for about 15% to 20% of his company's US beer volumes. 

 A spokesperson for the company told just-drinks that not all of the volume for the supply agreement comes from the Obregon brewery, though the "majority of the production volume at Obregon is dedicated to the agreement". 

The Obregon brewery is expected to have 4m hectolitres of production capacity with "minimal investment and optimisation by Constellation".

The firm, which acquired control of Grupo Modelo's beer brands in the US in 2012, said the deal would allow it to immediately obtain functioning brewery capacity to support its Mexican beer portfolio, as well as provide flexibility for future innovations. 

"As a result, Constellation will phase the build-out of 10m hectolitres at Mexicali, with the first 5m hectolitres of production capacity expected to become operational by December 2019, and subsequent capacity planned to align with future growth," the company said.

Constellation Brands needs its new brewery, and quick - Analysis

The Obregon brewery is located on Mexico's west coast in the state of Sonora. It will help service Constellation's largest beer markets in the western US.

It is the second Mexico brewery Constellation has acquired from AB InBev. The first, the Piedras Negras brewery in northern Mexico, was taken over as part of Constellation's deal to purchase AB InBev's US rights for the Grupo Modelo brands. Constellation is upgrading capacity at this site as well.

"The magnitude of our long-term investments in Mexico largely remain the same," David Klein, executive VP & CFO, Constellation Brands. "The revisions to our operating plans essentially represent an initial shift in spend to Obregon from Mexicali. As originally outlined, Mexicali is scalable to 20m hectolitres to support the future growth of our beer business, which continues to significantly outperform the US beer market."

Earlier this month, Constellation confirmed it is to offload its Canadian wine division for just over CAD1bn (US$761m) while buying a premium wine range from Charles Smith Wines for $120m.