AB InBev Unit Grupo Modelo to Build Brewery in Central Mexico

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.

Write to Anthony Harrup at anthony.harrup@wsj.com and Robbie Whelan at robbie.whelan@wsj.com

(END) Dow Jones Newswires

November 27, 2017 17:02 ET (22:02 GMT)