The Interbrew-AMBEV Merger Story|Business Strategy|Case Study|Case Studies

The Interbrew-AMBEV Merger Story

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Case Details:

Case Code : BSTR137
Case Length : 20 Pages
Period : 2002-2004
Organization : Interbrew, AmBev
Pub Date : 2004
Teaching Note :Not Available
Countries : Brazil, Belgium
Industry : Brewery

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This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.

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About Ambev

AmBev was founded in 1885. However, the company in its present shape was set up in 1999, when two leading Brazilian brewers - Companhia Antarctica Paulista and Companhia Cervejaria Brahma were merged to create AmBev. Like Interbrew, AmBev also expanded its operations through acquisitions.

The company acquired 95.4% of the Uruguay - based company - Cerveceria Malteria Paysandu, thereby gaining 48% market share of the country's beer market. In 2001, the company bought over the assets of Cerveceria International, a brewery in Paraguay; increasing its market share in that country.

In 2002, the company achieved a higher revenue growth by distributing two of the world's famous soft drink brands of PepsiCo - Pepsi Twist and Mountain Dew. The company expanded further in 2003 by spending US$ 40 mn on a brewery in Peru. In December 2003, AmBev acquired Cervecerķa SurAmericana, the second largest brewery in Ecuador.

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By early 2004, AmBev had a 65% share in the Brazilian beer market and a 17.2% share in the country's soft drinks market...

The Rationale

Both Interbrew and AmBev had strong reasons to merge. For Interbrew, it would mean access to the Latin American beer market, identified as a potential region for high growth, where AmBev had a dominant market share (Refer Exhibit IV for AmBev's share in the various Latin American countries).

Two countries in the region - Argentina and Brazil - were particularly promising as beer consumption there had been growing at an annual rate of 5% over the past 10 years. Compared to this, the average beer consumption in Interbrew's major markets - Europe and the US -- was growing much slower. Further, given the trend of rapid consolidation in the beer industry, it was all the more important for Interbrew to firm up its position. Commenting on the deal and its benefits to Interbrew, James Williamson, beverage analyst at SG Securities , said, "There are very few targets of this size so although I think you will see consolidation continue in the brewing sector, it will be bolt-ons, nothing of this size...

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