Constellation Brands is to invest US$1.5bn to grow its production capacity in the Mexican state of Sonora.
The Modelo brand owner wants to increase its annual production from 8.5m hectolitres to more than 11m, with a medium-term goal of being able to produce up to 17m hectolitres per year.
The expansion is the group’s second in the space of four years at the site in Obregon, Sonora, having made a US$900m investment in 2018 to more than double capacity from 3.5m hectolitres a year.
Constellation agreed to buy the Obregon Brewery from Anheuser-Busch InBev subsidiary Grupo Modelo in 2016. It was the second Mexico brewery Constellation 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.
The plans are part of a wider capex drive from Constellation across Mexico; the group expects to spend a total of $5-5.5bn between fiscal 2023-26 on expansion in the country.
“The company plans to invest in the next increment of capacity in Mexico that will provide the long-term flexibility needed to support the expected future growth of its high-end Mexican beer portfolio,” Constellation said following its Q2 results in October.
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The investments are expected to add 30m hectolitres of capacity in total, and include the construction of a new brewery in Southeast Mexico in the state of Veracruz. The Corona brewer proceeded with that project after having plans for a similar site in Mexico’s Baja California state cancelled, following a local referendum in which most residents in the state voted against the plant’s construction.
Constellation Brands’ Mexican beer stable has been key to the group’s growth in recent years. However, analysts have warned it needs to reduce its reliance on the category due to the fickle nature of US beer trends.
Analysts at AllianceBernstein pointed to the dwindling popularity of light beer in the US as an example of how consumer trends can change, stating the Pacifico brewer needed to diversify its offer.
“Constellation’s beer business largely comprises two brand families that cannot expand outside the US and, as the cycles of alcohol consumption in the US have shown us for decades, at one point Mexican imports will drop out of favour,” they said.