Brazil softens blow for InBev amid job cuts in Europe

By staff reporter

- Last updated on GMT

Related tags Inbev Latin america United states

Protests hit the headquarters of Belgian brewing giant InBev as the
brewer continues to cut back European brewing facilities, but the
group's strong foothold in Latin America is keeping the future

Protestors blocked the entrance to InBev's main office on Friday, highlighting a difficult period for the brewer after its recent decisions to cut 45 jobs at the main office as well as 303 in France and 232 in Belgium.

The moves come as InBev looks to re-organise itself in the face of shrinking Western beer markets. The group will close its Hoegaarden brewery in Belgium and has already shut one of its three breweries in Bulgaria to try and save money.

InBev's policy has elements of that pursued by rival brewer Carlsberg, which said recently it planned to shut around half its European breweries within a decade.

The trend reflects a more permanent beer market shift from Western Europe to emerging markets like Russia, China and Brazil.

On this point, however, InBev has already managed to put itself in a promising position, thanks largely to its focus on the emerging Latin American beer market; sometimes forgotten in the hype surrounding Russia and China.

Latin America makes up more than 40 per cent of InBev's earnings before interest, tax and appreciation (EBITA), twice as much as Western Europe, according to a recent report by Goldman Sachs​.

Heineken, Carlsberg and Scottish & Newcastle still rely more heavily than InBev on Western Europe for profits.

Brazil, in particular has become a key market for InBev thanks to its lucrative takeover of native brewing giant AmBev.

Goldman Sachs estimates that InBev's EBITDA from beer in Brazil will grow 29.5 per cent this year.

The report says Latin America as a whole has shown similar beer volume growth to Central and Eastern Europe. It predicts 20 per cent volume growth up to 2015.

And Brazil, the world's fourth biggest beer market by volume, was more profitable for brewers than either Russia or China in 2003.

InBev spokesperson, Marianne Amssoms, said the brewer's results in Latin America "speak for themselves"​. She said InBev was on the look-out for more opportunities there alongside China, Russia and Germany.

The entire Latin America region is predicted to make up almost a quarter of global beer profits in a decade's time, although beer prices in Brazil are still low - $0.85 per litre compared to $2.40 per litre in the UK.

Volatile economies in Latin America pose the main threat, says Goldman. "There is a relationship between GDP growth and beer consumption in Brazil. So, depending on the state of the economy, there will likely be considerable volatility."

Goldman predicted Brazil's beer market to grow by around three per cent annually over the next five years, which is slightly slower than anticipated growth in Russia.

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