USA & Mexico: Constellation Brands faces challenge to US$1.5 billion brewery in Mexico

Constellation Brands will have to keep fighting for a new US$1.5 billion brewery in Mexico, after a petition for a public vote on its construction was accepted for consideration by the Baja California State Senate, The Drinks Business reported on December 21.

The drinks company announced plans for the new brewery in Mexicali, Baja California, back in January 2016, which was hoped to have a brewing capacity of 10 million hectolitres by December 2019.

However this looks to be in jeopardy after a petition to have a public vote on whether locals actually want this brewery gained 18,595 signatures.

The petition is born out of a fear that the brewery will use up too much of the limited water available in the Mexicali valley, 80% of which is designated for agriculture and farming, with only 2% designated for industry.

Constellation Brands has filed a legal challenge with the state electoral authorities against the body’s decision and demand the vote be suspended.

The company, which brews popular beer brands Corona and Modelo for the US market, says they have already gained the necessary authorisation after it had been subject to a public vote two years ago, and has completed the requisite environmental checks for construction. It says reopening the decision violates its rights.

The state electoral commission will now have until the end of March to review their decision and decide whether the vote will go ahead.

If the commission concludes that the vote will go ahead, Constellation Brands will only find out if it can proceed with construction after the next electoral process on 2 June 2019.

$700 million will have been spent on construction by that point, which would have to be dismantled if the public decision went against the company.

If the plans are voted down, the region will lose out on an estimated 5,000 jobs, 4,000 of those directly from the construction of the brewery. This represents over $77 million lost in annual labour income.

Julio Portales, VP of Constellation Brands, has been critical of the decision to have a public vote.

He said: “We are giving a terrible signal from the state of Baja California about the legal certainty of investments.

“We are acting like a country that is not willing to respect private property. It seems that we are driving away the investment we need to generate development and employment.”

Constellation Brands contests the concerns over the proposed brewery’s water usage. It estimates that the brewery would need 1.8 million cubic metres of water annually which, it says, is the equivalent of the water pulled up every year from only one of the region’s 2,000 wells.

Portales blames politicians for scaremongering people into thinking they will be in danger of a water shortage if the brewery is built in the region.

The company has emphasised its commitment to the north Mexican state by saying it will be investing $4.5 billion over the coming years but, if construction is rejected by the people, it will not consider Baja California any longer as a suitable location for construction.

Constellation Brands is not the only company with breweries in the north of Mexico.

Heineken has a plant in Tecante, also in Baja California, where they recently expanded capacity. The Dutch company has also recently invested $475 million in another brewery in Meoqui, Coahuila.

Anheuser-Busch has two breweries in the north of the country, and Constellation Brands has another two but the Mexicali site would be its third.

21 December, 2018