If you cannot beat them, join them
AmBev, whose business in Venezuela has been struggling, said in a securities filing that Cerveceria Regional will own 85 percent of the combined business, but that this stake could drop to 80 percent in the next four years.
No financial details of the transaction were disclosed.
AmBev Chief Executive Joao Castro Neves reportedly said that the company had a "difficult second quarter" in the so-called Hila-ex division that includes its business in Venezuela, Ecuador, El Salvador, Guatemala, Nicaragua, Peru and the Dominican Republic.
The company said beer volumes in that region fell 3.8 percent year-on-year in the second quarter, weighed down by results in Venezuela, while gross profits in that division tumbled 43.8 percent from the second quarter of 2009.
With 100 litres of beer per capita, Venezuela has the world’s third-highest per-capita beer consumption, behind the Czech Republic and Germany.
Cerveceria Regional was founded in 1929 and was bought by the Cisneros Group of companies in 1992. It enjoys a market share of around 20 percent.
AmBev entered the market in 1994 when it bought the brewer C.A. Cervecera Nacional. But despite its efforts, AmBev’s market share is languishing at 4 percent having dropped from 15 percent in 2006 according to company reports.
Market leader with about 75 percent of total beer sales, is Cerveceria Polar, owned by billionaire Lorenzo Mendoza, who controls a consumer products group that sells the nation’s leading brand of beer and the corn flour used to make arepas, the flat cakes that are a staple of the Venezuelan diet.
Both Mr Mendoza and Gustavo Cisneros are the wealthiest men in Venezuela. The fortune of Mr Mendoza was estimated at USD 3.5 billion last year by Forbes, while Mr Cisneros’s was USD 4.2 billion. Both men have had their brushes with President Hugo Chavez, who earlier this year threatened to nationalise Polar.
Safeguarding his business from Mr Chavez’s unwanted attention, Mr Cisneros has reduced his dependence on the local market by branching out into media overseas. Polar may have to follow suite by boosting exports or making acquisitions abroad to diversify beyond Venezuela.
