BRAZIL – Heineken, the world’s second-largest brewer, will invest 985 million reais (US$244 million) in Brazil to double its production capacity, reports Reuters.
The investment, which started in January and is expected to be concluded by June 2020, is the largest by the Dutch brewer in Brazil since it acquired the local operations of Japan’s Kirin in 2017 for 2.2 billion reais (US$590 million).
According to the company’sCEO Mauricio Giamellaro, Heineken has set a goal of double-digit growth in the mainstream and premium segments in Brazil, despite reporting lower than expected performance in the market.
The Heineken, Amstel and Eisenbahn maker saw its sales volumes in Brazil during the third quarter decline, but Giamellaro said that the trend is unlikely to persist.
Giamellaro said that Heineken expects the Brazilian beer market to sustain growth of 3% per annum over the next three years.
Brazil challenges brewers
Brazil has been an important market for most global brewers. However, operators in the Latin America’s biggest economy have been recording weakening growth, where tougher competition and a still sluggish economy have put pressure on beer sales.
After Heineken reported a decline in sales in Brazil, Ambev SA says that it expects some of the headwinds that hurt third-quarter results to carry into the fourth-quarter, as recent prices hikes in its home country keep a lid on beer volumes.
AmbeV, the leading brewer in Latin American has played down hopes of boosting its operating profit this year in Brazil, its largest market. The company saw a 2.8% drop in beer volumes in the third-quarter, contributing to a reduction in Ambev’s market share in Brazil.
The company attributed the decline to pricing dynamic in the third-quarter; including price hikes and discounts by some of its competitors. Ambev’s mainstream brands in Brazil, including Brahma, Skol and Antartica, were the most affected.
“It takes two to three months for the local market to adjust to price hikes, hence why we still see some headwinds carrying into the fourth-quarter,” Chief Financial Officer Fernando Tennenbaum told Reuters.
AB InBev, Heineken and Ambev’s have been stepping up the fight with increased marketing as they seek to increase overall profitability and even sells more beer in the market.