November 27, 2017: AB InBev to Build Brewery

Tequila or cerveza , Señor?

With the craft brewery scene still feeling explosive, the major players are looking to untapped markets for new demand.

Tequila or cerveza, Señor?

With the craft brewery scene still feeling explosive, the major players are looking to untapped markets for new demand.

Mexico is one such market.

Did you know that Mexico displaced Holland in 2003 as the top global exporter in beer sales? The major reason is the US!

Also, earlier this year, Mexico passed Germany as the 4th-largest producer of beer. China is #1, America is number 2, and Brazil is #3.

However, Mexican beer drinkers themselves don’t really enjoy light beer.

AB InBev’s subsidiary in Mexico is Group Modelo and owns 57% of the beer market share there. This new plant is expected to open in March 2019, meaning AB InBev will be sourcing 2018/19 malt barley (or new crop) for it.

The plant is supposed to produce 320 million gallons of beer per year. Assuming it’s all barley-based, this would suggest a need of nearly 300,000 metric tonnes of malt barley.

Now…where will AB InBev / Groupo Modelo get it from?

 

AB InBev to Build Brewery

 

MEXICO CITY –  Grupo Modelo, the Mexican unit of Anheuser-Busch InBev and brewer of Corona Extra and other export brands, plans to invest 14 billion Mexican pesos ($753 million) in the construction of a major brewery in central Mexico.

The brewery in the state of Hidalgo is expected to start operating in March of 2019 with annual capacity to produce about 320 million gallons of beer a year, or about 9 million bottles of beer a day, Grupo Modelo Chief Executive Mauricio Leyva said Monday.

The brewery, Modelo’s eighth in the country, will employ 1,200 people and is designed to be able to double capacity in the future.

The location has a number of advantages, including availability of water, barley and energy, and proximity to major roads and railways. Hidalgo is Mexico’s second-biggest producer of malt barley used to make beer, and is also one of Mexico’s safest states.

José Luis Romo, secretary of economic development for Hidalgo state, said the project will bring investment in the state this year to $1.6 billion, compared with an annual average of just $170 million a year over the past six years.

The brewery is a key development for the state, which saw its economic output decline for three consecutive quarters, including a double-digit drop in industrial activity in the second quarter of this year. The brewery is the largest single private investment in the state’s history, government officials said.

“Historically, Hidalgo has been one of the five states most lagging in economic growth in the country,” Mr. Romo said. “What we’re doing with these investments…is to completely turn around the scenario we had.”

Hidalgo has depended heavily on public investment, and was affected by government budget cuts in recent years, Mr. Romo added.

“We’re convinced that one of the best ways to help develop industry in the country is to invest in areas that historically have not had a lot of investment,” said Mr. Leyva, who is also AB Inbev’s zone president for the Middle Americas.

Hidalgo competed with the nearby states of Mexico, Tlaxcala and Querétaro for the new Modelo plant, and is one of three states that submitted proposals last month to try to attract Amazon.com’s second global headquarters.

Omar Fayad Meneses, governor of the state, said recent improvements to highways, railroads and other infrastructure had made Hidalgo more salable for corporate expansions.

“A lot of things have come together at the same time that have been very positive for Hidalgo to attract investment,” Mr. Fayad said.

Mexican President Enrique Peña Nieto thanked Modelo during the announcement at the presidential residence of Los Pinos here, and said that beer is one of Mexico’s most important agroindustrial products. The country is the fourth-largest beer producer in the world after China, the U.S. and Brazil, with production of around 11 billion liters a year.

Investments like the new Hidalgo plant “help the whole country grow,” Mr. Peña Nieto said.

H/T: Fox Business
About the Author
Brennan Turner

Brennan Turner is the CEO of FarmLead.com, North America’s Grain Marketplace. He holds a degree in economics from Yale University and spent time on Wall Street in commodity trade and analysis before starting FarmLead. In 2017, Brennan was named to Fast Company’s List of Most Creative People in Business and, in 2018, a Henry Crown Fellow. He is originally from Foam Lake, Saskatchewan where his family started farming the land nearly 100 years ago (and still do to this day!). Brennan's unique grain markets analysis can be found in everything from small-town print newspapers to large media outlets such as Bloomberg and Reuters.