Last year, Companhia de Bebidas das Americas (NYSE:ABV), AmBev for short, raised prices 6-7% in order to deal with increased production costs, a result of worldwide grain shortages. As a result, AmBev temporarily lost some of its market share to competitors who were underpricing them. HSBC analyst Lauren Torres said that, while other beers might be slow to increase their prices, they’ll be forced up eventually. “We do believe that in the second half of this year, you’ll see AmBev take back that lost market share,” said Torres, recovering their footing and returning to normal.
AmBev did more than that. Since 2004, AmBev has been majority-owned by Anheuser-Busch InBev (NYSE:BUD), distributing Budweiser and Stella Artois in Canada where it holds a 42% market share. It also sells in various Latin American countries and is regional distributor for Pepsi (NYSE:PEP). Canadian volume for AmBev was down year-over-year, but that’s after the 2010 Winter Olympics in Vancouver temporarily drove demand above normal levels. Meanwhile Ambev’s Quinsa division in South America grew 23% in volume, and its Hila-ex, which covers tropical American countries, grew 13%. So in spite of their price increase, the company reported a per-share earnings increase of 37% year-over-year, with sales climbing 17%.
Why the success? Company officials say it’s the new bottle sizes and product rollouts. However, while product changes might account for some of their growth, it is more likely the result of increased demand. “Beer is expected to grow in total between 2010 and 2015 by 4% CAGR (compound annual growth rate)” in areas where AmBev dominates the market, namely Brazil (NYSE:EWZ), Bolivia, Uruguay, and Canada (NYSE:EWC).