Heineken und FEMSA to extend their partnership in Kaiser for ten years
FEMSA will continue to be the exclusive brewer, distributor, marketer and seller of Heineken beer in Brazil.
In January 2006, Mexico’s FEMSA acquired a controlling stake in Cervejarias Kaiser from the Molson Coors Brewing Company. FEMSA Cerveza bought 68 percent of the equity of Kaiser for USD 68 million, using cash on hand. Although this was significantly less than what Molson had once paid for Kaiser, Molson Coors must have been glad to have someone else worry their pretty heads over the Brazilian beer business. As was announced, Molson Coors retained a 15 percent ownership and Heineken 17 percent stake in Kaiser.
During the fourth quarter 2006, FEMSA completed a capital increase of USD 200 million in Kaiser. Heineken did not participate in the capital increase so its stake has been diluted.
Heineken has refused to comment to which level its stake has dropped. However, according to the FEMSA statement Heineken has an option to increase its ownership in the company up to its former level of 17 percent in the coming months under the same economic terms of the capital increase – a decision Heineken may be pondering now.
For its part, Molson Coors decided to pull out of Kaiser and sold its remaining 15 percent stake to FEMSA for USD15.6 million.
Following ten years of beer consumption being lodged at 85 million hl per year, beer sales in Brazil are expected to break the 100 million hl mark in 2007. AmBev grew 5.1 percent in the first quarter of 2007. After heavy investment in marketing and advertising, FEMSA claims that it has managed to reverse Kaiser’s falling fortunes and increased volumes.
The recent growth in the Brazilian beer market has to be attributed to the growing popularity of premium beer brands. Volumes have increased by over 200 percent between 2002 and 2006. Premium beer’s volume share has hit 7 percent and, according to Euromonitor International’s forecasts, will reach 15 percent by 2010.
Not only does Brazil have the fifth largest population in the world, it is estimated that three million potential beer consumers reach the legal drinking age each year. In addition, governmental efforts to narrow the gap between rich and poor have enabled more Brazilian consumers to experiment with premium beers, says Euromonitor in a report which was released late in 2006. Young drinkers are particularly likely to try premium beer, viewing it and especially imported brands, as a status symbol.
The current economic and political stability is a draw for foreign exporters. GDP is expected to grow at 4 percent annually between 2005 and 2010, leading to increased consumer spending power, and the appreciation of the local currency is certain to provoke a rise in imports.
