How Droughts in Mexico Could Shape the Future of the Beer Industry

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As northern Mexico this year endured one its worst droughts in decades, brewers dotting the parched landscape guzzled vast quantities of water, pumping out national favorites like Corona and Tecate that helped make the country the world’s largest global exporter of beer.

At the imposing brick Heineken plant in the city of Monterrey, the pipes never stopped flowing, even as fights broke out at lines for government water trucks and parasites spread among children who missed regular baths.

The water in Blanca Guzmán’s neighborhood had been out for days when she decided to protest, joining a group of activists in July to block the entrance to Heineken’s office.

“You’d open the tap and there wouldn’t be a drop of water,” she said. The brewing factories, though, “they produced and produced and produced.”

As droughts become more frequent and severe around the world, brewers and other heavy industrial water users have landed at the center of the climate fight in Mexico, with activists leading a movement to reclaim resources from corporations that has gained recognition at the highest levels of government.

Even the promise of jobs and economic development is wearing thin as extreme weather events put the disparity in access to water between private industry and households on clear display, forcing some of the biggest global brands onto unsure footing.

Brewers in particular have become a target for activists, given the industry’s presence in the drought-prone north.

Heineken, Anheuser-Busch InBev and Constellation Brands all operate large plants in northern states that capitalize on proximity to consumers in the United States, where the most popular imported beers are by far Mexican. Overall, Mexican brewers sold more than $5 billion worth of beer abroad last year, making Mexico the top global exporter of the beverage, according to the World Bank.

Yet in July, eight of Mexico’s 32 states experienced moderate to extreme drought, resulting in more than half of the country’s 2,463 municipalities confronting water shortages, according to the National Water Commission.

In response, President Andrés Manuel López Obrador of Mexico said in August that he would end beer production in the north, where the majority of the industry operates, and send it to the more water-rich south.

“This is not to say we’re not going to produce any more beer,” he said during a news conference. “It’s to say we’re not going to produce beer in the north. That’s over.”

Mr. López Obrador has yet to follow through on the threat, and industry insiders say that so far, beer production in the north has been unaffected by his comments. But the president’s position reflects a broad challenge to the billion-dollar business that uses extraordinary amounts of water, at a moment when the effects of climate change are being felt most acutely.

To make beer — about two and a half liters of water are needed to produce one liter in Mexico — brewers here buy rights to gain access to water from the federal government in deals that can last for decades.

Heineken’s water permit in Nuevo León state, where Monterrey is, amounts to about six million cubic meters a year, according to Samuel García, the governor. The aquifers that the plant draws from are separate from the municipal supply, which relies mostly on three dams.

That largely allowed the company to avoid the same fate as the city this summer, when the lack of rain set records, dwindling the dams’ supplies, said Salvador Corrales, a professor at Monterrey’s College of the Northern Border who has studied Heineken’s local water usage.

As the crisis worsened, the authorities began to publicly pressure private companies with significant water rights to cede some of their allotment to the city.

Around the same time, Mr. García said that Heineken was using only about two-thirds of its permitted water and demanded the company send the surplus to the state. Heineken agreed to a temporary transfer of 600,000 cubic meters, in addition to a delivery from its wells equal to about 20 percent of the brewery’s consumption.

The brewer also filled five tankers with clean water each week for distribution to local communities and donated a well worth $1 million to the city, according to the company.

Several other companies also agreed to divert some of their reserves, including the steel giant Ternium, one of the largest holders of industry concessions in the state, and a major Coca-Cola bottler.

Nearly 5 percent of Mexico’s water is consumed by industrial users, according to the National Water Commission, a small but significant portion of the supply in a country that has long grappled with water scarcity.

As the federal government has assigned water permits to industrial users, water rights activists argue, it has failed to adequately consider the local environment and the effect the concession could have on water access for households.

“Giving out concessions based on market criteria has created these problems,” said Iván Martínez Zazueta, a doctoral student in geography who has advocated against the expansion of the beer industry in the border city of Mexicali. Mr. Martínez has called for improvements to how the effects of a concession are measured before it is authorized.

Sustainability practices put in place by the companies in recent years have allowed Mexican brewers to make beer with less water than the international average, and the industry employs hundreds of thousands of workers across farming and bottling jobs, according to Brewers of Mexico, a trade association.

But as the breweries continued production largely unabated this summer despite the drought, that good will was tested, as accounts spread of stores sold out of water but still stocked with beer and soda.

Manufacturers increased their output by nearly 5 percent in the first eight months of 2022 compared with last year, according to a recent report by Brewers of Mexico.

Supporters of the breweries are quick to call targeting of the industry’s water use misdirected. Mexico’s agriculture sector is responsible for the use of some 76 percent of the country’s water supply, according to the National Water Commission. The beer industry, according to José Luis Luege, a former National Water Commission chief, takes up about just .02 percent.

“It was one of those declarations that the president makes in the morning that is totally off base, but that generates real damage to the economy,” he said, referring to Mr. López Obrador’s vow to end brewing in the north.

It is not certain how the current administration could follow through on the pledge. While the federal water authority is able to revoke the current contracts with the brewers, the move would most likely be met with legal challenges. Instead, industry analysts predicted the comments could mean that the government would refuse to issue future contracts to brewers in the north.

A spokeswoman for the National Water Commission did not respond to a request for comment.

There are signs, however, that the administration is working to soften its stance toward industrial water access. Last month, the official in charge of issuing water concessions at the National Water Commission, a longtime water rights activist who was said to be holding up the contracting process, was fired. The agency said the move was made to “accelerate” an effort to reduce backlogs.

Still, Mr. López Obrador has shown that he is capable of dramatic action to blunt the growth of the north’s brewing industry.

In 2020, as construction was already underway on a Constellation Brands brewery in Mexicali, Mr. López Obrador abruptly called for a referendum amid a backlash to its potential water use.

The move came in response to years of protests organized by water rights activists, who said the Corona plant would take up too much of the region’s limited water supply.

Voters ultimately killed the project. The brewer has since announced plans to build the plant in the southern state of Veracruz.

If the rest of the industry is forced to follow suit and move south, production could be affected. Analysts say the south of Mexico is ill equipped to host the sprawling industry.

From a lack of access to railroad transportation, to a smaller labor force, “the south of the country doesn’t have the infrastructure that the north has,” said Raúl Rodríguez, a former Modelo executive whose organization, the Water Advisory Council, works with brewers and the government.

In Monterrey, a sense of normalcy is returning after September rains started to replenish the city’s water supply. Over the weekend, the traditional parties at the Rodrigo Gómez Dam outside the city were back, but reminders of the impending dry season persist.

A government campaign played over the radio warning people that “if we want water forever,” they should reduce and reuse their intake, and keep their showers short — to no more than three minutes.

César Rodríguez contributed reporting from Monterrey, Mexico.

Author: desi123 is an online news portal that aims to provide the latest trendy news for Asians living in Asia and around the World.

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