Group Modelo, a subsidiary of the world’ largest brewer AB InBev, will sell its Obregón brewery for a sum of $600 million to the third-largest beer supplier in the U.S., Constellation Brands (CB). Since the majority of Obregon’s production capacity is dedicated to supplying the interim agreement with CB and it is foreseeable that after commissioning of CB’s new plant in Mexicali most of the production would have been transferred, it makes sense for Grupo Modelo to dispose of this brewery.
The transaction, which is subject to approval by the U.S. Department of Justice and Mexican authorities, enables the buyer to become now fully independent from this interim supply agreement with Grupo Modelo. At the same time, CB’s expansion of its new Mexicali brewery to 10 million hectoliters, with its first 5 million hectoliters to become operational by the end of 2019, will be phased to align with future growth.
In June 2013, AB InBev sold Grupo Modelo’s U.S. distribution rights for Corona and other Mexican beer brands in a $5.3 billion deal to CB to gain U.S. antitrust approval of its $20.1 billion merger with Grupo Modelo, which had closed earlier that month. CB’s deal with AB InBev also included the brewery Compañía Cervecera de Coahuila in Piedras Negras/Nava in Mexico which is said to be the largest brewing site in the world.
"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," was Rob Sands, president and chief executive officer, Constellation Brands, quoted in a company’s statement.