The global roll-out of InBev's Brazilian beer, Brahma, adds a third premium brand to the global brewer's international portfolio but some observers have suggested it's an unnecessary step which threatens to cannibalise existing InBev sales. Olly Wehring reports.

The launch by InBev of Brahma, the second biggest-selling beer in Brazil and eighth largest brand in the world by volume, in 15 new markets has given the brewing world a clear signal of the newly-merged company's future intentions.

As the first major move by InBev since its formation in March last year, some observers have wondered what sort of message this sends out to the rest of the industry, while several commentators have queried what benefit, if any, the launch offers the brewer.

In launching Brahma in 15 countries next month, rising to 23 markets by the end of the year, InBev is hoping to build on the interest in Latin culture, and the appeal of Brazil in particular. "The market research we ran about Brahma prior to launching was very convincing about the popularity of Brazil around the world," InBev's Marianne Amssoms told just-drinks. "This has led to the global introduction." Although the exported version of Brahma will be lighter and sweeter than its Brazilian counterpart, InBev will emphasise its exotic appeal and offer "a taste of Brazilian culture," the company said last week.

Brahma will join both Stella Artois and Beck's as the brewing giant's global, flagship brands. The plan to launch the Brazilian beer worldwide dates back to the merger between Interbrew and AmBev, Amssoms says. "Following the merger between Interbrew and AmBev (in March last year), we stated that we wanted to focus on three flagship brands in the future, with Beck's and Stella Artois coming from Interbrew and Brahma coming from AmBev," she said. "We were also very explicit about the synergies that these three brands could bring to the new company. Our target is annual synergies of €280m, with half of this coming from cost synergies, and the other half coming from product synergies. So the introduction of Brahma globally was something we decided we wanted to do immediately after the merger."

InBev's brace of flagship brands is well established in the brewing industry. Stella Artois is currently the fifth-largest beer brand in the world, available in 80 countries, while Beck's comes in at number 10 and can be found in 120 countries. With such a popular stable, some observers fear that the introduction of Brahma could do more harm than good, suggesting that Brahma could cannibalise InBev's biggest brands.

However, at a news conference in Brazil last week, AmBev's general director, Luiz Fernando Edmond, played down the threat, saying that InBev's market share in the US and Russia was small. In Europe, Edmond said, the company has very little to worry about. "Certainly if you cannibalise a product with a product that has a better margin," he said, "then it's a healthy cannibalisation."

Amssoms expands: "Brahma is a totally different proposition to both Stella Artois and Beck's," she told just-drinks. "The brands can perfectly co-exist, we feel. There's clearly enough scope for all three to be successful."

So, what does InBev see as Brahma's major competition? Logic suggests Sol, Corona and San Miguel, to name three, ought to be concerned. "We're not going to position Brahma against any specific brand in the market - it has a very broad appeal," says Amssoms. In New York last week, InBev USA president Simon Thorpe also said that Brahma is not targeting the same consumers as Anheuser-Busch. "Our target consumer group is unisex, professional and urban," Amssoms says. "This in itself is a very broad target group."

A large part of this target group of affluent professional men and women between the ages of 21 and 35, however, is moving more towards to wine and spirits in the US, according to a report last week. The report by Morgan Stanley, based on a survey of US drinkers, concluded that wine and spirits will continue to take market share from beer in the US going forward.

William Pecoriello, beverage analyst with Morgan Stanley, said: "Beer (is) likely to continue to lose share to wine and spirits due to health and demographic trends. Spirits have built strong image and share among 21- to 27-year-olds, which bode well for future growth." Although beer continues to be the most popular alcoholic beverage in the US, its market share has dropped from 59.5% in 1995 to 56.7% in 2003, based on alcohol content.

Nevertheless, InBev remains convinced that the launch is a strong pointer for its future. "Only seven months after the two companies combined, we experience today a very strong, visible and tangible sign of the collective strength of this company," InBev's chief executive John Brock said last week. However, the company has set modest targets for the brand. By the end of 2007, InBev hopes Brahma will contribute around €30m in EBITDA, equal to 1.5m hectolitres. Last year, Brahma sold a total of 18m hectolitres.

Whatever the pros and cons of the Brahma roll-out for InBev, there can be little doubting that another entry into the premium beer market throws up challenges for everyone. And when that entry comes from the world's biggest brewer by volume, the other beer makers will be monitoring its success or failure very closely.