Constellation buys glass plant from AB-InBev and plans brewery expansion

Constellation Brands, a major wine and beer company, will acquire a glass production plant in Nava, Mexico for USD 300 million from AB-InBev, pending approval from regulators. This was reported on 2 October 2014.

To operate the glass plant, Constellation is entering into a 50-50 joint venture with Owens-Illinois, a leading glass bottle manufacturer. The glass plant will supply the bottles for Constellation’s adjacent Nava Brewery, where capacity will increase to 25 million hl beer in 2017 from currently 20 million hl.

Constellation previously announced that it had also entered into a long-term supply agreement with Vitro, a Mexico-based glass manufacturer, which will supply about 25 percent of the glass needed for Constellation’s beer business for seven years as of this October.

Last year, as part of its acquisition of Grupo Modelo, AB-InBev was forced to sell all of Modelo’s U.S. business to Constellation for USD 5.3 billion, giving Constellation the rights to import, market and sell the Corona and Modelo brands. The Nava brewery was part of this package.

The purchase of the glass manufacturer will most likely give Constellation more control over the quality of its beer bottles at the Nava facility. In August this year Constellation had to recall selected bottles of Corona Extra because they might have contained small particles of glass. As a consequence, Constellation’s second-quarter results to 31 August 2014 included a USD 9 million charge resulting from the recall. The defective bottles came from a glass plant operated by a third party manufacturer that supplies the Nava brewery with bottles.