Heineken enters Peru and buys beer brand Tres Cruces
Peru | Following an auction, Heineken succeeded in acquiring the local beer brand Tres Cruces from soft drink firm AJE Group (AJE) and will now try to take on the market leader Backus (AB-InBev).
Heineken said on 9 September 2020 that it also signed a strategic partnership with (AJE), which boasts a strong route-to-market and distribution network across Peru. AJE will act as Heineken’s local sales and distribution partner.
Were it not for the covid-19 pandemic, which is currently ravaging the country, Peru would tick most of the boxes of a promising beer market. According to Heineken, it has around 14 million hl of annual beer sales, of which about 40 percent are sold in the capital of Lima alone. It is the largest market in the Andean region where Heineken did not yet have operations. What is more, the premium beer segment is significantly underdeveloped, representing less than 4 percent of the total market. Peru has a population of 32 million people, solid macroeconomic fundamentals, attractive consumer demographics, and a stable local currency.
David versus Goliath
AJE’s share of the beer market would be tiny. In 2016, the Peruvian beer market was controlled by Backus (which was part of SABMiller) with a 96 percent share and AB-InBev, which had 3 percent. This left 1 percent in market share to AJE and a host of craft brewers.
AJE Group is a privately-owned beverage manufacturer, which was founded in 1988. Its business plan centred on budget-priced soft drinks, packaged in PET bottles. Later AJE branched out into bottled water, sports drinks and energy drinks too. Often retailing at a price of 25 percent below Coke’s or Pepsi’s, its brands are aimed at consumers from the “bottom of the pyramid”.
Its first such product was a cola, called Kola Real in Peru. AJE has since moved into more than 20 countries worldwide, mainly in Latin America, Asia and Africa, where it offers its core brand Big Cola and a host of non-alcoholic beverages. According to Statista, the company’s revenue amounted to USD 1.01 billion in 2018, on an output of allegedly 36 million hl. Reports say that of the group’s global sales, 30 percent is from carbonated drinks, 65 percent from non-carbonated drinks and 5 percent from beer.
A local brewer by default
AJE’s decision to start brewing beer in Peru came about by accident. Having entered into Mexico in 2002, it wanted to build a brewery there to tap into the country’s lucrative beer profit pool. However, the Mexican regulators spoiled its plans and the brewery’s kit had to be diverted to Peru. In 2007, AJE launched its first low-priced beers Franca and Club, which were joined by its premium beer offering Tres Cruces in 2011.
Financial terms were not disclosed. However, the local news-site mercadonegro.pe reported that negotiations between AJE and several potential buyers began nine months ago. Heineken succeeded in clinching the deal for an estimated USD 50 million.
