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Even after price adjustment, Ambev remains under pressure due to exchange rate and raw materials threats

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AmBev crates in Fortaleza 01/10/2019 REUTERS/Paulo Whitaker

Ambev remains focused on increasing its profit margin in the coming quarters, after readjusting prices across the entire beverage portfolio throughout September, said the brewery’s executive president, Jean Jereissati Neto, this Thursday (31).

After the publication of the company’s balance sheet, the executive commented that the company’s strategy in September was to anticipate expected increases in the cost of inputs such as aluminum and other raw materials susceptible to exchange rates.

“We are committed to continuing to expand margins in the future. We are not going to change our objective in terms of price.”

In the third quarter, Ambev recorded a profit margin before interest, taxes, depreciation and amortization of 32% compared to 32.4% a year earlier.

READ MORE: Craft beer changes the face – and taste – of the Brazilian market

Jereissati has been Ambev’s CEO since 2019 and will be replaced by executive Carlos Lisboa in early 2025.

Argentina undermines results in South America…

Regarding the company’s operations in Argentina, a country that has put pressure on Ambev’s performance in South America, the assessment of company executives is that the measures taken by the government are improving public account numbers, but weighing on the purchasing capacity of customers. consumers.

“We have the impression that we have actually reached the minimum level (in the third quarter). We believe we will see incremental improvements from now on,” said Jereissati Neto. “Argentina is already experiencing operational performance and EBITDA is suffering less. In a way, we will start to see a new cycle beginning… Next year will be a positive year for Argentina”, he added.

READ MORE: Milei Effect: Investors see lower risk of Argentina defaulting

… China affects global results

On the other side of the world, a drop in confidence and demand in China has hit beer sales at two of the world’s biggest brewers. Anheuser-Busch InBev – one of Ambev’s controlling shareholders with 62% of the company’s share capital – and Carlsberg reported a decline in volumes that was worse than expected, as cautious Chinese consumers reduced their spending. The slowdown in consumption in the US, one of the biggest beer markets in the world, didn’t help either.

AB InBev, maker of Stella Artois and Budweiser, said volumes fell 2.4% in the third quarter, more than estimated by an analyst consensus compiled by Bloomberg. Denmark’s Carlsberg reported that organic volumes fell 0.2%, which it attributed to weaker sales in Western Europe and Asia.

READ MORE: Porsche and Mercedes accuse scam and cut costs due to weak demand in China

“It’s clear that consumer confidence is hitting new lows,” said Carlsberg CEO Jacob Aarup-Andersen, speaking about China in an interview with Bloomberg. He said the Chinese government’s stimulus measures, which aim to counteract the damaging economic effects of a slump in the housing market, have not yet improved consumer behavior.

Marketing expenses

Consumer companies are struggling to get customers in many global markets to meet their spending limits and reduce their expenses, after a period of high inflation left them feeling the pinch. In China, an initial surge in spending that followed the end of the world’s strictest Covid lockdowns has since fallen significantly. This decline in Chinese demand is hurting a wide range of sectors, from luxury and consumer goods to mining.

Corona Cero, AB InBev’s non-alcoholic beer brand. Photo: Bloomberg

In an attempt to win back customers and lost market share, many consumer goods manufacturers are finding that they need to limit price increases where they can to ease pressure on consumers and increase advertising budgets.

Therefore, AB InBev has been investing money in marketing globally, especially in the US, where it had to recover from a marketing accident involving Bud Light. Its Michelob brand sponsored the US team at the Paris Olympics and its non-alcoholic beer Corona Cero was an official sponsor of the global sporting event.

Profit prospects

The third quarter for AB InBev was “weak but not terrible,” RBC Capital Markets analyst James Edwardes Jones wrote in a note, adding that the company’s updated forecast that profit will come in at the upper end of guidance was “ satisfactory.” North America also did better than expected, he said.

For the brewery, non-alcoholic beer sales continued to be a bright spot as people increasingly move away from alcohol. Non-alcoholic beer sales rose 6% for Carlsberg, while AB InBev said Budweiser Zero volumes grew at a low percentage.

* With information from Reuters and Bloomberg

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