Constellation Brands will double Grupo Modelo brewery output post $4.75bn deal


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Grupo Modelo's Piedras Negras brewery was only opened in 2010, and is valued at $2.9bn
Grupo Modelo's Piedras Negras brewery was only opened in 2010, and is valued at $2.9bn
Constellation Brands plans to double of the capacity of its new Piedras Negras brewery in Mexico to 20m hectolitres within three years, and says its ‘transformational’ deal with AB InBev will make it the No.3 US brewer.

Until now, Constellation has only marketed and sold Modelo brands in the US, but it will now acquire the brewery it describes as Grupo Modelo’s “crown jewel” ​(pictured), just 13 miles south of the Texas border, as a consequence of Anheuser-Busch InBev’s takeover of Grupo Modelo.

Discussing Constellation’s full-year results for fiscal 2013 – net sales up 5% to $2.6bn, operating income up 4% to $448m – CEO Robert Sands said he was excited by a deal with the US Department of Justice (DOJ) that allows AB InBev to take over Grupo Modelo.

‘Most transformational acquisition in our history’

As a consequence of this $20.1bn transaction – expected to close in Q1 2014 – Constellation will appease DOJ competition concerns by acquiring Modelo’s top brewery, and the other 50% of Crown Imports, a JV it co-owns with Modelo for US distribution of the latter’s brands.

This gives Constellation total control of distribution, marketing, pricing and promotion as new US brand owner, and a perpetual license to import and distribute the Modelo portfolio.

Constellation will also hold exclusive rights to the Modelo brands and the freedom to develop brand extensions and innovations for the US market.

Hailing the “most transformational acquisition in the history” ​of Constellation - $4.75bn in total, $2.9bn for the brewery and perpetual brand rights - Sands noted that Corona Extra was the top-selling imported beer in the US, Corona Light the leading imported light beer, and Modelo Especial the third-largest imported brand.

Third-largest US total beverage alcohol firm

Overall, the deal would almost double Constellation’s sales and boost earnings, Sands said, and re-establish Constellation’s status as the largest multi-category supplier of beer, wine and spirits.

“We will not only be the third-largest total beverage alcohol company in the US, but the Number 3 brewer and supplier of beer for the US market,” ​he added.

Discussing plans to expand Piedras Negras, Sands said the facility had a current capacity of around 10m hectolitres or 120m cases, with scalability up to 30m hectolitres.

“Our goal within the next three years is to expand Piedras Negras’ capacity from 10m hectolitres to 20m, which we project will be more than enough to supply 100% of the US market into the foreseeable future.”

During this three-year timeframe, Constellation and ABI will enter an interim supply agreement to ensure continuity, but Constellation will become self-sufficient thereafter.

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