UK: Latin America set to brew big - analyst
Latin America is well-placed to provide impressive figures for the beer industry, according to an investment analyst.
In a note to customers today (5 september), Lehman Brothers highlighted the region's potential, suggesting that both InBev and SABMiller will benefit from the situation.
"More stable economic conditions in Latin America should allow continued volume momentum as well as leave room for value extraction by players with strong execution capabilities such as AmBev and SABMiller, in our view," the analyst said.
"While further consolidation moves in the region are possible, we do not believe the main player's ability to extract value from their core markets will be affected."
The combination of low levels of per capita beer consumption and steady growth in both GDP and disposable income makes the area ripe for growth going forward for brewers, Lehman said.
Lehman also noted the low proportion of premium beer sales in Latin America. "We believe both AmBev and SABMiller have the willingness and the ability to grow the premium segment in their respective territories," the analyst said.
While AmBev's salespeople are able to market premium brands at the same time as selling the number one brand in some countries, other brands find themselves being marketed by a different salesperson, Lehman added. SABMiller, meanwhile, "has a strong track record in developing a full brand portfolio".
"Given the attractiveness of the Latin American beer markets," Lehman concluded, "it is understandable to believe that the level of competition will increase, with key competitors entering each other's territories and potentially new entrants coming. The reality is that these markets are complex, with high barriers to entry and requiring considerable local expertise and investments.
"Instead, we believe existing strongholds will prevail, and evolution in competitive positions will be slow, with key players keeping each other in check. Key moving parts in our view will be the gradual absorption of local players by AmBev and SABMiller."
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