SABMiller arrives in Brazil with Grupo Petrópolis

Grupo Petrópolis, Brazil's second largest brewery in Itaipava, brand owner and struck a deal with the British SABMiller to distribute its brands in Brazil. With the agreement, the group gives the first step to establish a direct operation in the Brazilian market, where Ambev dominates with a participation of 68.4%.
The spokespersons of the two companies refused to give more details about the agreement. Companies reported that the Petropolis will have license to do the distribution of some of the SABMiller brands over the next few years. It is unclear whether the Brazilian company will also bottling the beers of the multinational. The Petrópolis operates in the country with 12 brands of beer, including Itaipava, Crystal and Petra. The Brazilian Group has units in 20 States and six factories and produces a year 26 million hectolitres of beer.
The agreement represents an entry shy of SABMiller in Brazilian territory, which currently has as main competitors Ambev, Grupo Petrópolis, Brazil Kirin and Heineken. A survey by Nielsen published at the end of the first quarter indicated that Ambev was leading the industry with 67.12% market share, followed by Grupo Petrópolis, with 12.4% stake. The Brazil Kirin (ex-Schincariol) held 9.9 percent of the market and the Dutch Heineken had 8.84% stake.
Ambev increased its share in the second quarter to 68.4%. The team of analysts of BTG Pactual, led by Thiago Duarte, said in a report that the company's growth could be weaker this year due to the slowdown in the macroeconomic environment. BTG Pactual is projected for the second half of the year a growth of 3% in sales of beer in the Brazilian market. The accumulated from January to August, production in the country grew by 6.9%.
The Brazil is the only large market in Latin America in which SABMiller had no direct operation yet. The region accounts for 33% of currently earnings before interest, taxes, depreciation and amortization (Ebitda) of SABMiller in the world. In Latin America, the British already dominates the markets of Colombia, Peru, Ecuador and Central American countries. Overall, SABMiller is the second largest market and holds 200 brands, including Miller, Cusquenian and Foster 's.
The strong participation of SABMiller in other countries of Latin America was a factors which led Anheuser-Busch InBev (AB InBev) to seek resources to make a takeover bid from rival. According to recent reports, which cite market sources, the AB InBev did not make direct proposal to SABMiller, but attempts to raise funds with banks to make the approach. The information is not confirmed by the brewery. The news about a possible offer came in the wake of the failed attempt that SABMiller did to acquire Heineken in August.
Overall, according to Euromonitor, the AB InBev owns a stake of almost 20% in the market of beer, while SABMiller has 9.6%. Heineken is the second runner-up, with 9.3%. In August, SABMiller attempted to acquire the Dutch manufacturer of beer, but the offer was rejected by the controlling family.
On Wednesday, the ratings agency Moody's has changed from neutral to positive perspective in relation to SABMiller, considering the improvements that the company performed in its operating performance in recent years and the expectation of an improvement in the company's credit metrics. SABMiller currently has a net debt equivalent to 2.7 times its earnings before interest, taxes, depreciation and amortization (Ebitda) and kept, since the first quarter of the year, an Ebitda margin of 33%. These indicators, according to Moody 's, indicate that the company is on the right trajectory for an improvement in its credit rating in the next 12 to 18 months.