Northern Mexico Runs Out Of Water, May Impact Beer Production

Extreme drought in northern Mexico has sparked a water crisis. President Andres Manuel Lopez Obrador addressed the beer industry in the region to shift production elsewhere because of sustainability factors, reported Bloomberg. 

The water crisis is particularly critical in Monterrey, one of Mexico’s most important economic hubs and home to some of the largest beermakers in the world, such as Heineken NV. 

Some neighborhoods in Monterrey have been without water for nearly three months, and Heineken’s facility has suffered as waterways dry up. Residents have protested commercial districts due to their oversized demand for local water. 

Monterrey Mexico is having a water crisis. Protestors blocked traffic. Looks like America will need more warehouses. International supply chains are not predictable. pic.twitter.com/olKErrFRpP

— Daniel Spenrath (@Daniel_Spenrath) June 24, 2022

Lopez Obrador said the government would support a transition of the beer industry from the northern part of the country to the south or southeast, where water supplies are more abundant.

“This is not to say we won’t produce any more beer, it’s to say that we won’t produce beer in the north — that’s over,” the president said Monday at a daily press conference. “If they want to keep producing beer, increasing production, then all the support for the south or southeast.”

Lopez Obrador said Constellation Brands is the perfect example of how his administration directed the brewer to halt the construction of a beer plant in the border city of Mexicali because of water shortages. He said the company had planned a new brewery in the southeastern state of Veracruz, though local news outlet El Financiero said construction permits are still pending. 

Constellation is a top brewer in Mexico and has a portfolio that includes Corona Extra, Corona Light, Modelo Especial, Modelo Negra, and Pacifico, among others. 

The water crisis in Monterrey is so severe that Heineken offered 20% of its water rights to the drought-stricken town and even offered to donate a well to support the municipality. Lopez Obrador called on beermaking companies to assist cities with water shortages. 

There have yet to be significant reports of beer production disruptions. It’s essential to note Mexico is responsible for 76% of all the beer imported by the US last year, according to Commerce Department figures cited by the Beer Institute. If production upsets emerge, American beer drinkers could be in for a surprise of soaring prices, tight supplies, and an even worst-case scenario: A beer shortage. 

“You can’t give permits in places where there’s no water,” said the president. “So, we’re going to intervene and that’s what the state is for.”

Besides Heineken and Constellation, Grupo Modelo, owned by Ab InBev, is another larger brewer in the northern part of the country. 

While Lopez Obrador has only encouraged beermakers to shift production south, what could come next are water restrictions that would limit production and could create a beer shortage in the US.