Constellation Brands has reached an agreement with the Mexican government to construct a brewery in southeastern Mexico, according to the Wall Street Journal.
The news comes six months after President Andrés Manuel López Obrador announced that both parties had agreed on the region as the home for a new brewery to produce Constellation’s portfolio of Corona, Modelo and Pacifico offerings for the U.S. market. The president and the company are expected to make an official announcement this week, according to the Journal.
In May 2020, Constellation was forced to halt construction on the brewery it was building in Mexicali, a city that borders eastern California. The $1.4 billion project was rejected by voters after farmers and activists argued it prioritized beer for Americans over limited water resources for the region, according to Mexico Now.
Following the Mexicali construction shut down, Constellation said it would “be unable to use or repurpose this site for future use,” and recorded an impairment charge between $650 million to $680 million in its first quarter 2022 earnings report.
The new brewery in the southeast, where water is plentiful, is expected to be announced this week and will require a $1.3 billion investment, the Journal reported, citing an unnamed source. López Obrado hails from Mexico’s southeast region, which the Journal described as “impoverished” and noted is “a stronghold of the ruling Morena party.”
Details about the new brewery’s exact location were not disclosed, but Mexico’s Economy Minister Tatiana Clouthier told lawmakers Constellation was planning on investing in Veracruz, a state on the Gulf of Mexico, according to the Journal. The state’s governor, Cuitláhuac García, told the media earlier this year that Constellation was exploring possibilities near the port of Coatzacoalcos.
A port location would permit Constellation to bring its products to the U.S. by sea rather than on land, which would make a brewery located in the south — rather than along the border where the thwarted Mexicali facility had been located — an easier pill to swallow.
In addition to the proposed brewery, Constellation operates a brewery and bottle plant in Nava, near the border of Texas.
Year-to-date through October 31, dollar sales of Constellation Brands’ portfolio have increased 7%, to $5.67 billion at off-premise retailers tracked by market research firm IRI. It is the third largest supplier in the beer category, behind Anheuser-Busch InBev and Molson Coors.
“Over the past several months, based on the request of the Mexican government, we’ve been working with federal and state government officials on plans to meet our long-term brewery capacity needs in the southeastern part of the country where there is ample water supply and a capable workforce,” a Constellation spokesperson told Brewbound. “Discussions have been productive and remain ongoing.”
Editor’s note: this story was updated at 10:50 a.m. on Wednesday, December 8 to include Constellation’s response.