Ambev and Brazil
AmBev Spotlight
Primary Article Contributors
Tom Jones - Industry Analyst for the Latin America Region
Ambev, Companhia de Bebidas das Américas, is Brazil’s beverage giant and is the leading distributor of beer and Pepsi products. Ambev was created after a merger of the Brahma and Antarctica breweries to become the biggest brewery in the Latin America region. In 2004 they acquired Canadian brewer Labatt’s in a merger with the Belgian brewer, Interbrew, to create Inbev. In 2008 Inbev completed a merger with Anheuser-Busch to form AB InBev. As a subsidiary of AB InBev Ambev is part of the largest distributor of beer in the world.
Brazil has had the privilege to host two major international sporting events in the course of two years; the FIFA World Cup 2014, and the Summer Olympics 2016. These two events should let Ambev be able to thrive. Instead however Ambev’s stock fell. Even among the rising sales/price of beer leading up to and during the World Cup Ambev failed to improve their numbers. So after a lackluster World Cup for Ambev, it is unlikely that the Olympics will fare better for them.
The continuing droughts in the Sao Paulo region is starting to become a recurring issue for Ambev’s production. Although this is the worst drought in eight decades Citigroup claims that the risk of water rationing is not a significant risk for Ambev. However, last year a less severe drought in the Sao Paulo region caused forced Ambev to interrupt production. Therefore it is unlikely that this this current drought will leave Ambev unscathed. Part of this problem for is the water distribution in Brazil (Figure 1). The amazon contains approximately 50% of Brazil’s water but for only 4% of the population. These droughts and continued mismanagement of water will prove to be an important issue for Ambev.
People will always want their beer and it is unlikely that Ambev will tank in the near future. However, with the problems stated above it is hard to believe that Ambev will thrive in the future unless they are able to improve their stocks during the Olympics and work towards better management of Brazil’s water distribution.
