Six months on from the merger that created the giant Brazilian brewer AmBev, just-drinks.com re-evaluates the Brazilian beer market. Despite multi-national interest in Brazil, complex distribution agreements, soft-drink alliances and the marketing spend of the "Big Two" are threatening smaller and international players.

Since the Antarctica-Brahma merger under the AmBev holding company in March of this year, both national and international competitors on the Brazilian market are revelling in the opportunity to fight for market share.

The creation of Brazil's largest beer concern AmBev was always likely to jump-start the Brazilian beer industry. And unsurprisingly Ambev and Kaiser, its major rival, have in the past six months made efforts to become more efficient and aware of their consumer's preferences. However, what has surprised industry analysts has been the unpredicted growth of smaller producers as Kaiser loses its foothold in the market. How long this trend can continue, as Kaiser begins to spend ever more money on distribution and brands, is another matter.

In preparation for the summer season, AmBev has focused on increasing its market portfolio, dedicating R$330 million towards developing a new look and highlighting changes in promotion of an old brand, Antarctica Pilsen. Reporting quarterly results for the first time as AmBev, the company boasts a 9% increase in earnings before taxes. Brahma's reported 16% increase in sales volume which compensated for Antarctica's poor performance may have been a result of the consolidation of Antarctica and Brahma's contractual agreements with local vendors and distributors last month.

Fall out fever

A predicted early sale of Bavaria by AmBev, as a condition of the merger, is making headlines and generating interest in brewers from around the world. Sandra Muraki, a spokeswoman for AmBev, declined to comment on how any possible international bidder, such as Canada's Molson or Portuguese Unicer, would affect this already turbulent market. However, she was able to confirm that a final agreement would be reached in the next few weeks.

AmBev has so far focused its efforts on Uruguay, Argentina and Venezuela. Currently, negotiations are underway to finalise a joint venture with Danone to purchase Salus, a $30m mineral water, beer and soda producer in Uruguay with plans to take advantage of Salus' number two spot in beer production there.

AmBev has already experienced an 18% increase in sales and a 1% increase in market share over the last year in Argentina and is hopeful that its new venture in Uruguay will increase brand recognition as expansion continues in South America. Venezuela's economic instability and a decline in product demand over the last 15 months has forced AmBev to rethink local promotion and distribution plans by providing refrigeration options to local distributors. AmBev's new direction has effectively increased sales volume to Venezuela by 16.7% in the last year.

In addition to developments in South America, AmBev's recent debut as an American Depository Receipt (ADR) on the New York Stock Exchange was publicised throughout the world. The stock has since split 5 for 1 to increase investor interest, although experts believe that this decision was made to support the 5-10% price hikes over the past months. CADE, the anti-trust counsel overseeing the industry since the merger, is paying particularly close attention to this trend attributed to AmBev's stock options. Analysts predict that AmBev will experience a 5% growth in sales this year, however there are varying opinions on the actual value of the stock.

Foreign aid


"All eyes instead are on the results of the Bavaria sale in efforts to predict which of the bidders may continue to seek a presence in the Brazilian market."

News of Kaiser's President, Humberto Pandolpho, stepping down earlier this month has suddenly made Heineken's rumoured interest in increased involvement in the company more of a reality. Concerns over the company's loss of over 1% of the market, equivalent to R$110m per year according to a national beer industry data provider Sindicerv, has market analysts predicting a possible sale.

Such recent changes in Kaiser leadership has opened the company up to new perspectives. Kaiser continues to maintain low profile in the international spotlight under acting President Miguel Alarcon, formerly part of the company's advisory board, focusing on increased distribution throughout the country. Under Alarcon (who has 20 years of beverage industry experience with Coca-Cola) there are plans to integrate with Coca-Cola's distribution channels by optimising its distribution agreements locally. The hope is that this will support increases in production currently underway.

Various reports reveal that the former President Pandolpho's decision to leave the company was a result of his inability to stop the AmBev merger. However ongoing speculation of negotiations between Kaiser and Heineken may be the more likely reason.

In the meantime Kaiser is working hard to reverse the falling market share. According to Ines Martins, a spokesperson for Kaiser, the company already holds 13.1% of the market and plans to increase its market share 5% over the summer months in Brazil. In response to AmBev's promotion of its Pilsen, Kaiser also debuted a new look for its Pilsen brand beer. In addition, it also introduced a new brand, Santa Cerva, with planned distribution to local street-side, open-air eateries and bars, which represent 15% of the market throughout Brazil.


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Kaiser's Summer Draft, newly released in 600 ml clear-glass bottles, has been predicted to take a whopping 50% of the Draft market in Brazil as brand loyal consumers find the new packaging available in grocery and convenience stores as well as in bars and restaurants. Kaiser hopes that its investment of close to R$1 million on its increased distribution, changes in packaging of its Draft beer and a R$2 million face-lift will pay off. Only time will tell if the focus of the company and new leadership will affect profits over the next few months.

Changes in AmBev and Kaiser's operations do not affect the immediate interests of the international brewers in such a high volume market. All eyes instead are on the results of the Bavaria sale in efforts to predict which of the bidders may continue to seek a presence in the Brazilian market. At the moment the favourites to clinch the brand are Molson and Unicer.

However, as the industry evolves and producers optimise their contracts and agreements with distributors creating a synergy between soft-drink manufacturers and brewers, international competitors without experience in Brazil may be faced with unforeseen challenges. With Coca-Cola's increasing involvement with Kaiser and AmBev's streamlined distribution system within its subsidiaries, these powerful distribution giants may be tough competition for smaller local and international producers wanting a piece of this feudal market.