Constellation Brands, which owns the Corona and Modelo brand rights in the U.S., today announced plans to purchase the Obregon, Mexico brewery from Grupo Modelo, an Anheuser-Busch InBev subsidiary, for $600 million.
In a press statement, the company said it would submit a proposal to the U.S. Department of Justice, and also noted that the brewery purchase would allow Constellation to “become fully independent from the interim supply agreement with Grupo Modelo.”
“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 buildout of our Mexicali brewery over an extended time period,” Constellation Brands CEO Rob Sands said via the release.
The Obregon brewery acquisition will allow Constellation to “immediately obtain functioning brewery capacity” to support the growth of its Mexican import brands — Corona, Modelo, Pacifico and Victoria — and provide “flexibility for future innovation initiatives,” the company said.
Located on Mexico’s west coast, the Obregon brewery can already produce 4 million hectoliters (3.4 million barrels) annually and is capable of being scaled to 5 million hectoliters (4.26 million barrels), Constellation added.
The purchase is subject to DOJ and Mexican regulatory approvals and a deal is expected to be finalized in December, according to Cowen and Company beverage analyst Vivien Azer.
“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 U.S. beer market,” Sands said via the release.
The Obregon purchase is the second major Mexican brewery announcement Constellation has made in 2016. Earlier this year, the company announced plans to build a $1.5 billion brewery in Mexicali, Mexico, initially capable of producing 10 million hectoliters (about 8.5 million barrels) of beer annually and being scaled to 20 million hectoliters (17 million barrels).
Construction on that facility is projected to take as long as five years.
Constellation also owns a brewery in Piedras Negras, Mexico, which it acquired in 2013 via the $4.75 billion purchase of Grupo Modelo’s U.S. beer business. The company has also promised to scale capacity at that facility to about 27.5 million hectoliters (23.4 million barrels) by early 2018.
At full scale, Constellation’s three breweries would be capable of producing a combined total of approximately 45 million barrels. The entire U.S. beer market, including imports, totaled 206 million barrels in 2015, according to the Beer Institute.
Earlier this month, Constellation reported net beer sales growth of 20 percent during the second quarter of its fiscal 2017.