Constellation to expand Nava
Capacity to be increased from 20 to 25mhl
Constellation Brands has announced a five million hectolitre expansion of its Nava Brewery in Piedras Negras, Mexico.
This expansion will increase Nava’s production capacity to 25 million hectolitres when work is completed by the end of 2017. The estimated cost of the expansion is $450 to $500 million.
Constellation has also agreed, in a 50:50 partnership with Owens-Illinois, to acquire Anheuser-Busch InBev’s (ABI) glass plant and warehouse in Nava for approximately $300m, subject to US and Mexican regulatory approvals. O-I, which has contributed $100m to the purchase, will have operational responsibility for the glass plant. The bottles produced at the plant will be used exclusively for Constellation’s Nava Brewery.
Constellation has also signed a long-term agreement with Mexican glass manufacturer Vitro to supply 25% to 30% of the company’s beer glass over the next seven years.
Constellation plans to upscale the plant’s one existing glass furnace to four furnaces over the next four years at a cost of approximately $300m to $400m, and when fully operational the facility is expected to supply more than 50% of the glass for its US beer business.
Once the expansion is complete, the plant is expected to employ approximately 800 staff. The company will also invest approximately $175m to $225m on expanding the plant’s warehouse and upgrading its rail infrastructure.
Rob Sands, president and CEO of Constellation Brands, said: “We are pleased that we have been able to finalise our long-term glass strategy under favourable terms with key industry players.”
Constellation acquired Modelo’s 10m hectolitre brewery in Piedras Negras and the perpetual rights to the Corona and Modelo brand portfolio in the US from ABI for $2.9bn in June 2013. This marks the second expansion to the original 10mhl brewery in recent months.
The company also this week announced net sales for its beer segment increased 9% in the second quarter of 2014, driven by strong consumer demand.
Sands commented, “Our beer business continued to significantly outperform the industry during the second quarter driven by Modelo Especial, Corona Extra, the roll-out of Modelo Especial Chelada, and market expansion for Victoria.
“We are also pleased with the progress made in increasing our draft format presence in the on-premise channel. These efforts are being led by the Corona Light draft, which expanded to 35 new markets earlier this year.”
This was despite the recall in August of two million case shipments of Corona Extra worth approximately $37m in net sales because of glass bottle defects.
The affected bottles came from a glass plant operated by a third-party manufacturer which supplies the Nava Brewery.
Constellation told Brewers’ Guardian that less than one percent of the bottles that came from that manufacturer were affected, adding it had no confirmed reports of injuries from consumers.