AmBev, the Brazilian drinks giant and world's fourth largest brewer, has grabbed the rights to produce and distribute Pepsi's recently acquired sports drink Gatorade, in the Brazilian market.

The deal, which begins in January next year and is valid for 20 years (ending 2017), is an extension of AmBev's current franchise agreement with Pepsi, signed in 1997, to produce and distribute Pepsi products in Brazil.

The deal sees AmBev's share of the non-alcoholic beverage market increase to 16%.

Juan Vergara, AmBev's executive officer of soft drinks and nonalcoholic beverages said: "The strong growth of the soft drinks and non-carbonated beverage markets has led to increasingly aggressive competition in the industry, as evidenced by the large number of new brands that have recently been launched.

"In addition to many small companies and regional players, several multinationals - such as Nestle, Parmalat, Coca-Cola and Danone - are now competing in this segment of the beverage market."

In a statement the company also said that the partnership with Pepsi reinforces AmBev's strategic target to grow its non-alcoholic beverages business.

To accomplish this goal, AmBev created a separate division in April 2000 to closely manage this growing segment and leverage its product portfolio. Consequently, the soft drink and beer businesses have been fully segregated, and independent policies and strategies have been developed and implemented for each.

Distribution of the Gatorade brand will continue through Quaker's existing network of third party distributors. AmBev will assume distribution to supermarkets in January 2002, which was previously handled by Quaker.