Saturday, June 15, 2024

Constellation Brands expected to announce new brewery in Veracruz

A United States company that brews Corona and other Mexican beers for sale in the U.S. will build a new brewery in Veracruz, according to Governor Cuitláhuac García.

Constellation Brands, whose $1.4 billion nearly-completed brewery project in Mexicali, Baja California, was halted by the federal government after a referendum in March 2020, is expected to announce the new brewery project with President López Obrador as soon as this week, said a person familiar with the plans.

The plant, estimated to cost $1.3 billion, will probably be built in the trans-isthmus trade corridor, a region in Oaxaca and Veracruz where infrastructure upgrades are under way to encourage industrial development, the Veracruz governor said.

Economy Minister Tatiana Clouthier recently told federal lawmakers that Constellation was planning a large investment in Veracruz, where it would be able to access the significant quantities of water required to make beer on an industrial scale.

Governor García said earlier this year that the company was looking at options near the port city of Coatzacoalcos. From there, the United States third largest beer producer could transport beer to U.S. Gulf of Mexico ports by ship.

The unfinished brewery in Mexicali.
The unfinished brewery in Mexicali.

The company’s decision to build a new brewery in Mexico is a big win for López Obrador, whose government has not attracted large new investments from foreign companies.

The plan would be especially pleasing for the president, a Tabasco native, given that he has pledged to spur economic development in what he describes as the long-neglected southeast and repeatedly said that the region would be ideal for a brewery, given the availability of water. Three of his signature infrastructure projects – the Maya Train, the Dos Bocas oil refinery and the Isthmus of Tehuantepec trade corridor – are being built in southern and southeastern states.

Constellation’s decision is the culmination of protracted negotiations between company executives, senior federal officials and local authorities, the Wall Street Journal said.

After last year’s referendum on the Mexicali project, in which just over three-quarters of participants voted against it mainly due to concerns it would threaten the local water supply, Constellation chose to negotiate with federal officials rather than take the case to an international arbitration panel, a government source said.

The unnamed person told the WSJ that locating the brewery in the tropical southeast will ensure that water supply is not a problem and guarantees the support of local residents because of López Obrador’s strong links to the region.

But operating so far from the Mexico-U.S. border will increase Constellation’s costs, the WSJ reported. In addition, Mexico’s southeast lacks sufficient road and transportation infrastructure, gas and energy supplies, the newspaper noted.

Constellation, which also brews beers such as Modelo Especial, Victoria and Pacífico, already operates a large, state-of-the-art brewery in Nava, Coahuila, located across the border from Eagle Pass, Texas.

The company bought Grupo Modelo’s U.S. beer business in 2013 and has invested $9 billion in it. Constellation has annual sales of over $8.5 billion, and its Mexican beer portfolio generates a significant portion of its revenue.

With reports from The Wall Street Journal 

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