Grupo Modelo and Constellation Brands Create Joint Venture

19/07/06 Grupo Modelo, S. A. de C. V., Mexico’s leading company in the brewing, distribution and sale of beer, and Constellation Brands, Inc., a leading international beverage alcohol producer, importer and marketer have reached a new agreement to create a joint venture for the purpose of importing and marketing Modelo’s Mexican beer portfolio in the United States and Guam for a 10-year period, effective Jan. 2, 2007.

The joint venture board will consist of directors half from Grupo Modelo and half from Constellation Brands, including Grupo Modelo Chairman and Chief Executive Officer Carlos Fernández and Constellation Brands Chairman and Chief Executive Officer Richard Sands. The joint venture will be headquartered in Chicago and led by beer industry veteran, Bill Hackett, currently president of Constellation’s Barton Beers group.

“We are pleased with the creation of this joint venture and believe that it offers Modelo brands excellent long-term growth opportunities in the United States with the establishment of a unified import system,” stated Carlos Fernández. “Constellation Brands has demonstrated its commitment to our brands for more than a quarter-of-a century and we could not ask for a better partner to work with us in the U.S. This agreement allows Grupo Modelo to move to a single importer, which will create strategic alignment across the nation and the ability to create even more growth in one of the world’s most dynamic beer markets.

The joint venture will benefit from the existing momentum and popularity of our brands with consumers, add value to our business and expand our mutual relationship, which dates from 1978.”

Constellation Brands’ Chicago-based Barton Beers subsidiary began importing Modelo brands to the U.S. in 1978, serving 25 primarily western states. Barton grew the business in its geography from 150,000 cases in 1978 to more than 70 million cases in 2005. Corona Extra, Modelo’s flagship brand, has been the number one imported beer to the U.S. since 1997 and is the number six beer in the U.S. overall, while the other four Modelo brands imported into the U.S. are all in the top 20.

“We’re delighted about bringing together two companies with proven entrepreneurial cultures in a collaborative effort to take the Modelo portfolio to its next level of development in the U.S.,” said Richard Sands. “This is a unique opportunity for Grupo Modelo and Constellation Brands to build a business alliance that was never before possible, and to build it in such a way that the joint venture will seek to maximize the future growth potential for the top Mexican beer portfolio. We believe the JV will have unsurpassed people, processes, expertise and retailer and consumer insights that will enable us to effectively and creatively expand the business.”

The joint venture is expected to become operational on, Jan. 2, 2007, and the new agreement runs through Dec. 31, 2016. The contract renews in 10-year periods unless Modelo gives notice prior to the end of year seven of any term. Subject to the brand owners’ approval, Constellation’s national rights to import St. Pauli Girl and Tsingtao into the U.S. will be part of the joint venture.

The new agreement forming the joint venture is being filed by Constellation with the Securities and Exchange Commission in redacted form as an exhibit to a Current Report on Form 8-K.