Changes in beer consumption in the country put in check the ' Ambev model '

Known for high profit margins and for the delivery of good results to investors, Ambev has lived a different time. In 2018, when the stock market was the most profitable investment in the country, with the Ibovespa index advancing 15%, the company's shares have fallen almost 30%. The company was the lost market value, in absolute figures, last year: $340.7 billion to R R $241.8 billion. Since January, however, the paulista advancing on the expectation of economic growth, Ambev has regained part of the losses of 2018. For Bradesco, one of the biggest challenges is the growth of the sale of drinks in atacarejos, which takes advantage of the Ambev direct distribution and longer range, especially in bars. The company now has 1 million points of sale, while Heineken (owner of Kaiser and Schin) has 600,000 and Petrópolis (of Itaipava), 700,000. The problem is that the sale of beer in supermarkets, which does not require a distribution system as complex as the assembled by Ambev, has advanced in recent years. Moreover, in countries that went through deep crises like Brazil, consumption has not returned to the bars after the resumption. In a report, the Bradesco provides that the sale of beer in markets to expand from the current 38% to 41% by 2022. Another barrier in the way of Ambev is the enlargement of the segments "premium" and "discount", and the loss of the mid-tier space, in which its main brands (Skol, Antarctica and Brahma) predominate. In crisis, the market "discount", in which are the cheapest beers and whose brands make a difference to the consumer, advanced 19% to 25% of. The "premium", which was not affected by the retraction of the income also grew, to 12% – ten years ago, bordered on the 5%. Result: the segment that Ambev has a tradition lost space. Although the company launched new products to respond to these changes, the results remained. "Ambev continues with lower performance in the traditional category while the growth in ' premium ' has not yet translated into higher profitability," said Thiago Duarte in BTG Pactual's report. The Chief Financial Officer of the company, Fernando Tennenbaum, says, however, that the profitability of the premium segment is greater than that of the traditional, but does not give numbers (read below). Competition in addition to the changes in the industry, analysts highlight that the competition is also fiercer. In the last ten years, Ambev lost nearly 5 percentage points of the market, according to Euromonitor. UBS says that Heineken has consolidated its brands, making the recovery of "market share" of Ambev. The Bank did a survey with 1600 consumers which found that the perception of Heineken as a premium brand went from 20% to 24% in the last year, while Stella Artois (Ambev) backed out of 35% to 31%. Despite the difficulties, the trend is that the brewing industry begin to improve slowly. The projections point to a recovery of the market as a whole, after three years of retraction. Date of 2019, with the brazilian stock exchange advancing so accelerated, the roles of Ambev recovered 16% value. On Friday, 7, the company closed evaluated in R $286.4 billion. The costs, however, could again squeeze margins. Ambev makes financial transactions to protect themselves from currency fluctuations in the short term. This impact is usually come 12 months later. The high dollar 2018, so go hit now in the company. "It is unlikely that 2019 is as bad as it was 2016 (for the company), but we're still seeing little room for positive surprises," highlights the BTG. The market is materializing the margins (Ambev) maybe not back to pre-2016 level. The competition and the industry have changed, says an analyst. In a recent report, UBS noted that the margins of the company will reach the pre-crisis level before 2025. Strategy to expand the product offering is the main strategy of the beverage giant Ambev to retrieve market and deliver results more similar to those preceding the crisis. From 2015, the company expanded the line of its three main brands (Skol, Antarctica and Brahma) with ten releases. "Our portfolio is much more robust than that of three years ago. We made an investment in families. Today, for instance, Skol, Skol Skol Hops and Malt. You can play the products in different occasions, "said the Chief Financial Officer of the company, Fernando Tennenbaum. Although always have been placed against the thread of beers "discount" – because I believe that, in it, the consumer does not differentiate the brands, the company also invested in this market. Last year we launched our in Pernambuco and the magnificent in Maranhão, both with cassava in its revenue and cheaper than traditional brands. The Executive claims that the entry in the segment was not a strategy to respond to the crisis, but an "opportunity" to relate to the public from regions where "discount" must always prevail. To Tennenbaum, in other States of the country, this market will again shrink as the brazilian economy recover. Although Ambev assert does not predict a significant expansion in the most popular segment, the launch of new brands has been well regarded by investors. Second report of the banco BTG Pactual, the tax benefits granted to the company by the States where the drink is being produced allow it to be sold to 10% cheaper than the Schin-today in the hands of the Heineken – and no loss in profit margin. Optimism Tennenbaum says still be optimistic about the economic recovery of the country – and therefore with Ambev. "With the growing Brazil, you can retrieve the margin. How much (margin), it's hard to say. " He admits that there will be an impact of the exchange rate this year due to the devaluation of the brazilian currency in 2018, but nothing to compare to 2016. That year, he adds, the devaluation was of greater magnitude and the result of the company was also hurt by the increase in the GST in several States. "Now, the big question is if we're going to see the volume (of sale). It's a little on the minds of investors, "Tennenbaum responds, when asked about the company's performance in the stock market in 2018. Estimates of the CervBrasil (Association of the sector which Ambev no longer part) point out that beer production last year stood at 13 billion liters, 8 percent less than the registered in 2014, record year. Entity projection for this year's high of 3% in volume if the Government can speed up structural reforms in the economy. In contrast, scenario must be a stagnation.