O-I partners with Constellation Brands
Not just a supply agreement, two company's are involved in a shared venture to open a glass container facility in Mexico.
October 9, 2014 By Andrew Joseph
Perrysburg, OH—Owens-Illinois, Inc. (OI) has announced it will join a 50-50 venture with Constellation Brands Inc., to operate the glass container production plant in Nava, Mexico, that Constellation recently agreed to purchase from Anheuser-Busch Inbev (ABI).
The plant will provide bottles exclusively for Constellation’s adjacent brewery, which brews a leading portfolio of Mexican beer brands for export to the U.S., including Corona Extra, Corona Light, Modelo Especial, Negra Modelo and Pacifico.
To help meet current and rising demand from Constellation’s brewery, the joint venture plans to expand the plant from one furnace to four over the next four years. O-I and Constellation will each initially contribute approximately US$100 million to the joint venture.
The capacity expansion, which is expected to cost approximately $350 million, will be financed by equal contributions from both partners. O-I will account for the investment and returns as an equity joint venture.
In a related development, O-I has agreed to enter into a long-term agreement to supply glass containers to Constellation’s Nava brewery. Supply under the agreement, primarily from O-I’s plant in Waco, Texas, begins in late 2015, ramping up significantly in the following year. O-I is expected to supply the output from at least one furnace under this agreement.
After the joint venture expansion is complete, supply under the agreements will add the equivalent of approximately 20 percent of O-I’s existing North America production.
“Constellation is an important and strategic customer, so we are pleased to support the expansion of its beer business in these ways,” says O-I chairman and chief executive officer Al Stroucken “The financial flexibility O-I has developed allows us to take advantage of strategic opportunities that promise strong returns over an extended period of time, while allowing us to deliver on our capital allocation commitments.”
O-I is the world’s largest glass container manufacturer with revenues of $7.0 billion in 2012. It is headquartered in Perrysburg, OH, and employs approximately 22,500 people at 79 plants in 21 countries.