Backus increases domestic market share to 86 percent
Distribution, distribution, distribution. Ask any newcomer to a market and they will tell you that distribution remains the biggest obstacle to any business success. The privately-owned Ajegroup probably underestimated the problems it would encounter when it started brewing in Peru. Having mastered the challenges of building its first brewery ever near Lima, the family owners probably thought that selling beer in a country of 27 million people whose beer consumption has been rising significantly over the past decade would be easy. Alas, it was not to be.
Although the Ajegroup priced its Franca beer much lower than the market leader Cristal (Backus/SABMiller), most consumers had trouble literally laying their hands on a bottle. Thanks to exclusivity contracts with retailers, the market leader Backus managed to keep Franca off the shelves in Peru’s sales outlets.
Keeping Franca away from the doors while reducing overall market prices for beer – a move the Goliaths of the market will find easier to stomach than the Davids – meant that also the Caral brand, another economy brand targeted at young consumers, which was launched by the Ajegroup in March 2008, found itself unable to crack open the market.
In view of an overall price decline of 40 percent in recent years it is remarkable that the country’s three brewers, Backus, the Ajegroup and AmBev, found the money to engage in an all-out TV war. In the first six months of 2008 (which includes the low-consumption autumn period!), the Ajegroup spent USD 18.5 million on advertising its brands Franca and Caral on Peruvian TV. Backus, on the other hand, invested only USD 21.5 million in the same period in all of its brands (Pilsen, Cristal, Cusqueña, Barena and Trujillo) and in all media. AmBev, not wanting to be left out, spent USD 6 million, it was reported, to accompany the launch of its own economy brand Zenda, but only achieved a market share of 1.27 percent in July 2008.
In December 2008, SABMiller announced with a certain amount of pride that its brands achieved a market share of 86 percent, an increase of 5 percentage points over the previous year.
What SABMiller did NOT say was that the share of economy brands (Franca, Caral, Pilsen, Trujillo, Brahma) has risen to 30 percent in 2008 from 28 percent in 2007 and that they could NOT prevent that.
While the Cristal brand is said to have lost share nation-wide last year, Backus’ premium brand Cusqueña managed to increase its market share from 7.4 percent in April to 10.6 percent in November 2008. The Cristal brand continues to lead the market in Lima, with a share of almost 55 percent.
In its press release of 18 December 2008 SABMiller cites market research which gives AmBev Peru a market share of 8.5 percent in Lima.
Franca’s market share in Lima could be close to that – the Ajegroup had hoped to realise a share of 10 percent in 2008 – as the group had already grabbed a national market share of 4 percent in the first year after its launch.
Peru, with its total beer consumption of 10 million hl in 2007, is the smallest beer market in Latin America. Per capita consumption has been growing steadily for years and was 37 litres in 2007 but still significantly lower than at its peak in 1987 when Peruvians downed 42 litres each.
Caption (below): SABMiller calls Cusqueña one of its global brands – alongside Grolsch, Pilsner Urquell, Miller Genuine Draft and Peroni Nastro Azzurro. According to SABMiller, its Cusqueña brand is the biggest selling super premium lager in Peru. It is bottled at source and exported directly from Peru to the U.K. Photo: Ed Robinson/OneRedEye.com
