E-Malt.com News article: Brazil: Premium beer industry grows in Brazil

When Marcelo Ramos opened a bar in one of Rio de Janeiro’s biggest slums selling Belgian beer for R$200 ($83) a bottle, his friends thought he had lost his mind, Financial Times reported on January 20.

“They all told me: you’re crazy, you’re throwing your money away – people here are poor!”, says Ramos, a 39-year-old mobile phone technician who set up the bar in his father-in-law’s garage at the end of 2012.

Just over a year later his Bistrô Estação R & R (Bistro Stop R & R) in Rio’s Complexo do Alemão favela now sells more than 200 beers – the most expensive of which is Belgium’s Deus champagne beer.

But it is not just the residents of Rio’s slums that have started to venture away from the country’s notoriously bland mainstream beers. While total lager sales across Brazil rose 92 per cent from 2007 to $44.37 bln in 2012, premium lager sales jumped 131% over the same period. Imported premium lager sales surged 184%.

For investors, the niche market offers one of the few remaining bright spots in Brazil, where slowing economic growth and rising indebtedness have cast a shadow over mainstream beer sales and many other previously buoyant consumer industries.

Lauren Torres, a beverage analyst at HSBC, estimates that premium beer still only accounts for 5% to 6% of the market, compared with around 15% in countries such as the US, leaving vast room for growth in Brazil – the world’s third-largest beer consumer and producer.

After acquiring Brazil’s second-largest beer group, Schincariol, for R$6.3 bln in 2011, Japan’s Kirin is expected to start brewing its Kirin Ichiban beer in the country early this year.

Smaller craft producers such as Scotland’s BrewDog are also planning to try their luck in Brazil. The Aberdeen-based producer and pub operator is planning to open its first bar in São Paulo this month, selling local beers from the Brazilian craft brewery Way Beer alongside its own.

Ambev, the Latin American arm of Anheuser-Busch InBev and the region’s biggest brewer by sales with around 70% of the Brazilian beer market, has also pursued the premium sector. It has boosted the marketing of its more expensive beers such as Bohemia and launched an even more upmarket version – Bohemia Royale.

“We saw the same trend in the US and Europe years ago but the Brazilians and Latin Americans in general were always very brand-loyal,” says HSBC’s Torres. “However, over the last five years Brazil has really started opening up,” she says, pointing to similar moves in Chile, where foreign brands such as Corona have found success.

Almost 40 mln people have risen from poverty into the lower middle classes over the past decade in Brazil, creating a large market for aspirational brands as Brazilians look for ways to show off their new status.

Pernod Ricard’s Chivas whisky, for example, recently ranked Brazil’s north-eastern city of Recife as the top market in the world in terms of per capita whisky consumption.

Ramos has seen this phenomenon first-hand at his bar in Complexo do Alemão. “People always dress up to come here and it’s a popular place to celebrate birthdays or weddings,” he says. Many customers prefer to stand outside to drink, not only to stay cool but also in the hope that someone they know might see them, he says.

Fledging businesses in favelas such as Complexo do Alemão have also benefited from government programmes that have driven out gangs and brought infrastructure investments.

However, the growth of Brazil’s premium beer industry comes just as the wider market braces itself for a slowdown. According to data this month from the Brazilian beer industry association Cervbrasil, beer production fell 2% last year – the first decline in at least three years. Ambev has said that it expects consumption to have also dropped last year for the first time in a decade.

“There was a reduction in consumers’ disposable income as people had to spend more paying back debt,” says Paulo Petroni, head of Cervbrasil, adding that the 2 per cent decline was equivalent to one fewer can of beer per person per month.

However, the World Cup and the late timing of Brazil’s Carnival this year should help boost sales through to July, even as the weather begins to get colder.

For Ramos, it means he may be able to quit his mobile phone job and open the bar seven days a week. “Now everyone applauds me – I even got a prize from Rio’s governor for business innovation last year,” he says. “No one calls me crazy now.”


22 January, 2014