Brazil’s largest brewer, AmBev Friday last week agreed to merge its unit in Venezuela with Cerveceria Regional. The move will see AmBev acquire a minority stake in the combined entity as it seeks to strengthen its market presence in Venezuela. Analysts believe the merger is aimed at reinforcing AmBev’s position in the Brazilian market, the biggest beer market in Latin America and the Venezuela market, considered the second largest in Latin America.

The Brazilian brewer’s operations in Venezuela have had an unimpressive performance and according to a filling to the securities exchange, Cerveceria Regional reiterated that it will control about 85% of the combined entity. Even so, Cerveceria’s stake could decline to 80% over the coming four years, said the filling.

AmBev is controlled by Anheuser-Busch InBev NV, currently the biggest brewer globally. No details regarding the financial figures involved in the transaction were given in the announcement. Joao Castro Neves, AmBev chief executive said the firm had experienced a tough quarter with regard to its Venezuelan, Ecuador, El Salvador, Guatemala, Nicaragua, Peru and Dominican Republic business. According to AmBev, beer volumes in the above nations declined by 3.8% year-on-year in the second quarter of this year, coupled with poor postings in Venezuela.

On the other hand, the firm’s gross profits in its businesses in the nations dropped by 43.8% from the second quarter of last year. According to existing statistics, Venezuela has the third highest per capita beer consumption, after the Czech Republic and Germany. That subsequently makes it an attractive market for brewers such as AmBev. In Brazil, AmBev is the third largest brewer.

AmBev shares declined by 0.2% at 191.19 reals in late morning trade in Sao Paulo compared with a 0.6% decline in the benchmark Bovespa index. AmBev formally Companhia de Bebidas das Américas (American Beverage Company-AmBev) is a subsidiary of global brewing company Anheuser-Busch InBev and is the biggest brewery in South America and the fifth in the world.

AmBev operates in 14 countries in the Americas and its portfolio includes beers like Antarctica, Brahma, Bohemia, Skol, Stella Artois and soft drinks like Guarana Antarctica, Soda, Sukita amongst others. As the largest bottler of PepsiCo outside the United States, it sells and distributes Pepsi products in Brazil and other Latin American countries, inclusive of Pepsi, Lipton Ice Tea and Gatorade by agreement of franchising.

24 Aug 2010