Beer market shrinks and raises pressure on industry giants

Sao Paulo-The Giants of the beverage sector, which grew packaged by expansion of domestic consumption began to take a backseat with the shrinking income of Brazilians.
Ambev, leader in the segment of beers, closed 2016 featuring 66.3% in this market, according to data from Nielsen consulting. A year earlier, the company held slice of 67.5%.
"From time to time goes up or down [the percentage market share of company] and I think we have to put our discomfort with being behind [than before]," commented Chief Executive Officer of Ambev, Bernard P, in a teleconference.
Even investing in the expansion of the premium segment, Ambev was unable to escape the fall and sales volume and net revenue fell 6.6% and 5.7%, respectively, in 2016.
According to the Brazilian Institute of geography and statistics (IBGE), the total output of beverages in the Country shrank 2.7% in the same period.
The poor performance of the company in the market of beer was featured also in the result of Anheuser-Busch InBev (Ab InBev).
"Several initiatives, including the premium segment and growth in returnable glass bottles were well received, but the volumes of beer in Brazil fell, revenue suffered and sales costs increased by about 2015," Ab InBev ceo Carlos Brito and the Chairman of the Board of Directors, Olivier Goudet, in a report.
Despite the prospect of executives to be positive for the future of the market of beer in Brazil, the alcohol analyst Euromonitor International Consulting, Anna Ward, noted that competition in the segment "remains intense, particularly in the premium segment", considered crucial to the sector.
"The recent purchase of the operations of [Brazil] Kirin by Heineken has strengthened the presence [the company] in the country and closed the gap between it and market leader InBev", commented. According to her, Brazil is a key market for expansion of Heineken.
"The focus of Heineken in Brazil is the value, not volume, and the increasing focus of your premium offer is proving successful so far. The premium lager [intermediary] should be the fastest-growing segment between 2015 and 2020 with an annual growth rate of 3%, leading to an increase of 212 million litres in volume, "he quoted her.
Heineken reported high of 3.7% on sales volume of the premium segment last year, with double-digit growth in Brazil.
Taxation
However, in assessing the Euromonitor analyst, additional tax increases on category may take other manufacturers, such as AB InBev to put more emphasis on selling products with higher added value.
AB InBev pointed out that, at the beginning of 2017, has been regaining market share. "AB [InBev] began the fiscal year confirming the improvement in participation and we expect more favorable market conditions," the analysts at Credit Suisse Bank, Sanjeet Aujla, Alexander Evans, Laurent Grandet, in a report.
In the lower value-added labels, Ambev will keep the strategy of reshaping of brands in 2017. After Skol, Brahma this year must go through changes.
"The Brahma, let''s strengthen the identity of the brand, the more traditional Brewer," said Vice President financial and investor relations officer of Ambev, Ricardo Rittes, in Conference call. He recalled that Brahma Extra products and variants of the brand grew by 250% in the last year.
The manufacturers must face competition with the craft breweries, which although they have little participation in the market, keep growing.
According to the executives heard by the DCI recently, despite pressure from large, handmade labels are able to maintain or expand participation in the Country.
"Two years ago they were 250 craft brands in the country and today there are about 450, so the competition has increased. And the big are trying to fight the craft with the effort to sell malt labels. But even with that pressure, we continue to grow and we''re already in 20 States of Brazil ", told the Director of the DCI" Schornstein "brewery, Adilson Altrão.