Comment - Brazil takes Anheuser-Busch InBev back to its roots
Anheuser-Busch InBev CEO Carlos Brito sees good times in Brazil
Brazil has been the powerhouse for Anheuser-Busch InBev's beer sales so far in 2010 and there is every reason to believe that growth will continue.
It is more than six years since AmBev embarked on a mission to expand its presence beyond its native Brazil, starting with the merger with Belgium's Interbrew in March 2004 and culminating with the resultant firm, InBev, paying US$52bn to acquire Anheuser-Busch in late 2008.
While the deals have significantly increased the firm's volumes and global reach, there is a sense that things have come full circle in 2010. Brazil, AmBev's old stomping ground and where the brewer accounts for 70% of all beers sold, is the main driver for Anheuser-Busch InBev sales.
In the third quarter of 2010, the firm's beer volume sales in Brazil rose by 12.5%, following on from a 15% increase in the first half of the year. Brazil is rapidly closing on the US, where beer sales have continued to slip, for the title of A-B InBev's largest market by volume.
For all the talk about China and Russia's beer market potential in recent years, Brazil has emerged as the dark horse. Its economy is predicted to grow by 7% in 2010 and by an average 6% per year up to 2014, according to Government projections.
Brazils' per capita beer consumption is 56 litres, lower than nearby Mexico and significantly below the US, which remains above 80 litres despite the recent market decline. Brazil's 200m population is also young, something many emerging economies have in common and which bodes well for beer. Around 27% of Brazilians are under the age of 14 years, compared to 16% of Britons and 20% of Americans.
A-B InBev's CEO, Carlos Brito, said that AmBev's strong sales momentum in Brazil was down to many consumers' new-found wealth. "We have seen a lot of new consumers that are trading up, or that are trading up from C or D socioeconomic classes, and that has given our mainstream brands a great boost," Brito told analysts during the firm's third quarter results conference call.
The firm has strived to increase its presence in the northeast of the country, where it has been less strong than in Rio de Janeiro or Sau Paulo. "A lot of people who were either outside of the market or consuming subpremium brands are now consuming our mainstream brands, which is great news for us," Brito said.
AmBev has seen some margin erosion due to this influx of consumers in lower-price segments, but its group-wide operating profits rose by 12% in the third quarter. Brito said that A-B InBev plans to launch Budweiser in Brazil in 2011 and that "premiumisation remains a strong opportunity".
He said that Brazil was a "vibrant" market and added that he was cheered by a macroeconomic outlook that includes healthy exports, strong job creation and good consumer confidence. The country's new president has this week also pledged to rein in inflation.
So far this year, Brazil has provided sanctuary for A-B InBev from those who argue that the brewer is only about cutting costs.
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