Anheuser-Busch InBev's Mexican unit, Grupo Modelo, is building a $755 million brewery and bottling plant about 55 miles northeast of Mexico City. According to The Wall Street Journal, the plant will open in March 2019 and be capable of producing about 320 million gallons of beer annually, or 9 million bottles daily.
The new facility — Grupo Modelo's eighth in Mexico — is expected to have 1,200 employees and will be constructed so that it can double capacity if needed. Mexico is the fourth-largest beer producer in the world following China, the U.S. and Brazil. It turns out about 11 billion liters a year.
The location in Hidalgo was chosen because of the availability of water and energy and proximity to major roads and railways, the Wall Street Journal reported. Hidalgo also is Mexico’s second-largest producer of malt barley used to make beer and one of the country’s safest states.
Grupo Modelo's decision to expand its footprint in Mexico comes as the country's products remain a popular choice for beer drinkers.
The company — which does not export its product to the U.S. since Constellation Brands holds the license to ship Corona, Modelo Especial and Pacifico, among other Mexican brands — held a 57% share of the Mexican market in 2016. Corona enjoyed double-digit growth last year in its domestic market, even more than AB InBev's Stella Artois and Budweiser global brands, the Mexico News Daily reported.
With strong popularity around the world for its brews, it's easy to see why the company is building another plant in Mexico. The new brewery is expected to be the second largest in the world, Forbes Mexico reported, with the largest being another Grupo Modelo facility in Zacatecas. Mexican consumers generally prefer beer over other alcoholic beverages, according to a report from The Brewers Association.
Americans also have taken a liking to Mexican beer. Constellation’s portfolio of Mexican beers continue to grow margins and market share. Its most recent quarter was the ninth straight one in which Constellation brands beat Wall Street’s profit estimates. One major reason is that approximately 36 million Hispanics of legal drinking age currently reside in the U.S., and that number is expected to grow to 46 million by 2025.
Constellation recently announced it is extending its joint venture with glass packager Owens-Illinois in Mexico. The beer maker’s expanded agreement signifies they expect sales to continue to remain strong and to grow enough to warrant investing in an additional glass furnace.
Mexican producers aren't immune to the kind of competition from upstart craft beer companies that has bedeviled major U.S. producers and eaten into their market share. According to the Mexican Brewers Association, the craft beer market south of the border has expanded at a 50% annual growth rate in the past 10 years. However, since Mexican consumers are more traditional in their preferences, the brands aren't as creative and colorful as U.S. craft brewers, the association report noted.
Due to its market dominance in the Mexican beer industry and the international popularity of its brands, Grupo Modelo has little to worry about from competition and can more safely invest in additional production capacity.It also doesn't hurt that the company is bringing an estimated 1,200 permanent and 5,000 indirect jobs to the economically depressed state of Hildalgo when construction begins there at the end of this year. For now, Mexican beer remains popular, but given fickle consumer tastes, it's never certain whether the good times will continue.