Specialist
Former VP at Heineken NV
Agenda
- Consumer trends in key LATAM beer markets, including coronavirus impacts
- Heineken's (AMS: HEIA) brand portfolio, highlighting growth opportunities
- LATAM competitive landscape, focusing on Heineken vs AB InBev (BRU: ABI)
- Growth opportunities, including regional expansion and premiumisation
Questions
1.
Can you outline some long-term trends that have been building up and defining the LATAM beer market? What beer industry developments have you followed as the pandemic has played out over the past 18 months?
2.
Which significant LATAM countries should be monitored? Which regions have been piquing your interest recently?
3.
Brazil is the third-largest beer market globally, with a few challenges but a lot of upside, as you mentioned. A few players are there. Can you expand on the challenges and upside in Brazil?
4.
Colombia is a highly profitable market, which may, in part, be driven by the fact that it is dominated by one player, AB InBev. What is the barrier to entry for other players such as Heineken or Molson Coors in Colombia? How has AB InBev remained so successful in this market and held its dominant position?
5.
AB InBev seems to have really strangled the market’s distribution, holding the power and distributor relationships. Do you think consumers in the LATAM markets are open to exploring other brands if mainstream players such as Heineken and Molson Coors could enter? Is there also that strong brand equity stemming in these markets?
6.
How might the beer market evolve across key countries such as Colombia, Mexico and Brazil? What trends do you expect to dominate and drive this market? How is beer consumed in these regions as this seems to differ greatly from developed markets such as the US?
7.
Are there any premium brands or is there premiumisation in the LATAM beer market, or is it dominated by mainstream value brands? Do you expect premiumisation to be a trend or might it be a while before this accelerates as markets mature?
8.
Developed markets’ global brands have been doing relatively well. How do global brands perform in LATAM? Do global brands have any success or is it more of a local brand-dominated market?
9.
Is growth in LATAM markets still very much volume-driven? Is a mix emerging, with pricing having an effect?
10.
Can you give a high-level overview of Heineken’s standing in LATAM, highlighting the countries in which it has a presence, including the three major countries we spoke about, as well as its strategy for the region?
11.
Does Heineken’s route-to-market differ much from AB InBev’s, especially in the big South American countries? Have there been any strategic route-to-market changes or plans to try to compete?
12.
How would you compare Heineken’s growth over the past five years to the beer market widely or AB InBev specifically? Do you think the company has done a great job? Might it be disappointed in where it is now or running ahead of its aims?
13.
You mentioned Heineken has done exceptionally well in markets such as Mexico and I think it has outperformed itself in Brazil. What do you think has been the company’s secret to success, perhaps that it entered the market when it was ripe for a competitor or that it had a formula to its strategy?
14.
Do you think there is scope for further acquisition of smaller LATAM breweries or independents? Are there players that you think would make sense for Heineken to consider for M&A? A lot of growth in LATAM countries seems to come easier via acquisition, as with many beer markets globally. Acquisition almost seems an easy way to cement a foothold in the market, especially in developing markets such as LATAM.
15.
Heineken’s portfolio will differ across the LATAM countries, but you mentioned the beer market remains weighted in mainstream in the top three regions, Brazil, Mexico and Colombia. Is Heineken’s weighting across premium and mainstream value similar to the wider market or is it over-indexed in some categories?
16.
AB InBev is Heineken’s biggest competitor, most likely globally. Does Heineken’s brand equity compete well with that of AB InBev across key geographies? Are there regions you think Heineken’s brands might be lacking positive organic growth vs AB InBev’s or vice versa?
17.
I have noticed that Heineken brands do exceptionally well and may even rival Corona, but really outperform brands such as Budweiser and Stella, especially in some African markets. Does Heineken – the Heineken brand –have the same success in LATAM? Do you think this is a blueprint for Heineken that it is strong at rolling out and leveraging its brand equity?
18.
What is the landscape and desire for craft beer in LATAM countries? Is the craft segment slowly taking growth and popularity? Does this form part of Heineken’s strategy?
19.
o you think the zero-to-low-alcohol and hard seltzer categories are too immature to really be a feature in LATAM?
20.
What is the pricing environment across LATAM countries? Does price just move with inflation or are brewers quite good at passing on slight price increases?
21.
Is there any material price difference between AB InBev and Heineken? Is one priced slightly higher than the other in the mainstream, premium or value segments?
22.
Some of AB InBev’s strategy reports highlight aims to adopt a smart affordability strategy, especially in Brazil. What do you think this means? Do you expect a risk of price war in any regions if AB InBev aims for a lower pricing strategy?
23.
Are many raw materials sourced locally inland in LATAM? With what is happening in the global supply chain, is there a risk of a raw material increase if any products are coming out of country?
24.
Are the grains used to brew beer in LATAM countries typically sourced outside of the region, or does LATAM have a strong local base?
25.
Does everything we have discussed point to margin compression for AB InBev and Heineken? Are there other cost aspects to consider when building out P&L? Marketing and innovation spend might be creeping up, given the intensifying competition.
26.
Are there any key working capital considerations investors should monitor, especially in countries where there are many returnable bottle and glass initiatives?
27.
How do emerging markets react to a recessionary environment, given they operate very differently to developed markets? Is it a case of “win or lose, we’re on the booze” or do consumers see real downside and move away from beer and alcohol in a recessionary environment?
28.
Could excise tax increases be a hit to brewers, given there has been a lot of government and fiscal spending in many countries? Are there other significant risks that might face Heineken specifically or the LATAM beer market widely?
29.
Is there a big illicit market that will always pose a risk, perhaps in Brazil, Colombia or Mexico in the LATAM region, or are these countries dominated by formal trade? Do you think consumers would leave to the illicit market, which is quite prevalent through the Africa regions, if there is an excise tax increase and brewers try to pass on price increases?
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