A Constellation Brands facility in Ciudad Obregón, Sonora, Mexico has expanded its production capabilities after pandemic-related delays. The upgraded facility will enhance production output by a capacity of 4.2 million barrels (5 million hectoliters). The expansion comes just in time as many of the largest alcohol beverage companies, including Constellation, have struggled to keep up with consumer demand for their popular hard seltzer and ready-to-drink (RTD) offerings.

“We have plans to more than double our Seltzer and ABA capabilities this fiscal year and expect to bring another 5 million hectoliters of capacity online next fiscal year giving us the flexibility to continue to expand with new flavors, new packages, and even new platforms in this space.” William Newlands, President and Chief Executive Officer at Constellation explained in a recent earnings summary call.

Newlands admitted the facility isn’t running at full capacity yet but it will be in the near future. He also assured investors the company would be able to produce enough product to meet demand during the busy season. “…[W]e certainly expect to be able to meet consumer demand during our key summer selling season…Admittedly, the demand has been robust and continues to be very strong, but we are expecting to be able to meet that demand, and certainly, Obregón is a big helper in that area.”

Constellation purchased the Obregón facility from Modelo in 2016 for $600 million. The $900 million expansion will allow Constellation to produce more of the company’s portfolio of beloved Mexican cerveza brands such as Modelo, Pacifico, Victoria and, of course, Corona. However, as popular as its Mexican beer varieties are, it’s the brand’s line of hard seltzers that cannot be produced fast enough to satiate consumer demand.

In March 2020, during the height of the pandemic, Constellation’s stocks dipped to $105 per share from a pre-pandemic high of $205 just a month earlier in February. The drop was a result of the company’s inability to keep shelves stocked with its Mexican hard seltzer and beer brands as well as production facilities being forced to shut down due to Covid-related regulations.

Mexicali Plans Abandoned

The Obregón expansion comes on the heels of news that Constellation must abandon plans for a $1.5 billion brewery in Baja California’s capital city, Mexicali.

The border city, which is experiencing a debilitating water shortage, rejected plans in 2020 for the facility after water rights activists and farmers expressed concerns. They argued that the plant would take much needed water away from the community to produce beverages for US consumption.

According to the Mexicali government, the alcohol company has two years to dismantle the facility, which was more than half complete and had an intended capacity of 10 million hectoliters. Losing the Mexicali facility and its potential added capacity makes the Obregón plant, as well as the company’s Nava facility in Coahuila, significantly more important.

Hard Seltzer Demand Rises

Corona Hard Seltzer was launched last spring. Constellation supported the launch with a $40 million marketing budget, making the seltzer its most heavily budgeted single brand investment. Corona currently controls a 6% share of the seltzer market and is the #4 hard seltzer brand in the country. The brand boasts 8 seltzer flavors including Cherry, Mango, Blackberry Lime, Tropical Lime, Raspberry, Strawberry, Pineapple and Passionfruit. Each 12 ounce can contains 90 calories, no carbs or sugars, and an ABV of 4.5%.

Additionally, Corona just launched its Limonada Hard Seltzer line “inspired by the traditional Mexican Limonada recipes we all know and love.” Corona Limonada is available in Strawberry, Watermelon, Grapefruit and Classic Lemon Lime. The beverages contain 100 calories, 3 grams of carbs, 3 grams of sugar and an ABV of 4.5% per 12 ounce can.

Corona’s lineup also includes Refresca flavored malt beverages (FBMs) which come in ready-to-drink cans. The tropical drinks are available in Coconut Lime, Guava Lime and Passionfruit Lime and all contain an ABV of 4.5%. The brand makes one Refresca Más flavor, Mango Citrus, which contains an enhanced ABV of 8%.

Mexico Welcomes the Investment

Ildefonso Guajardo, Mexico’s Secretary of Economy, warmly welcomed the new facility, “Undoubtedly, the investments made by Constellation Brands in Obregón will contribute to the already successful performance of The Mexican beer sector in the US and in the world.” He continued, “To the entire Constellation Brands family, thank you for your trust. I have no doubt that Constellation Brands is for Obregón and for Sonora, a guarantee of alliances and committed work.”

Daniel Baima, president of Constellation Brands in Mexico, returned the sentiment, “Mexico and Ciudad Obregón are of fundamental importance to Constellation Brands; the high calibre of talent in the community and their utmost commitment to making quality products are a few of the reasons why we selected Ciudad Obregón in the first place and continue investing here.”

Shirani Jayasuriya
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