Revolutionizing the Central American beer market

There are few business activities that have created as much enthusiasm in Latin America as the expansion of AmBev. Creating the world’s largest brewing company by volume, Brazil’s AmBev merged with Belgium’s Interbrew in 2004. In Latin America, the company has successfully introduced its brewery formula in Peru, the Dominican Republic, Argentina and Guatemala. Beverage Industry sister publication Industria Alimenticia recently visited Cabcorp, the Central American subsidiary of the group, in Guatemala and shared this report.

The history of AmBev in Guatemala began in 2002, when it reached an agreement with Cabcorp to develop a new company in which each business would have a 50 percent responsibility. “Each contributed their strength, AmBev with all its knowledge of the beer market and Cabcorp with its knowledge of the local market and distribution in five countries in the region,” Cabcorp’s Marcelo Pera explains.

Cabcorp is an anchor bottler for PepsiCo for the region, and wanted to expand into the beer market. The agreement came together quickly due to AmBev’s confidence in associating itself with the principal bottler in one of the countries in which Pepsi-Cola is the market leader.

Pera says the Guatemalan press provided extensive coverage of AmBev’s plant opening in Guatemala, and the launch of its Brahma beer brand, or Brahva as it is known there, in September 2003 was so successful it created more demand than the company anticipated. It was temporarily forced to go into select distribution until it could satisfy all of the demand.

“We came out very well, and in February 2004 we obtained national coverage,” Pera recalls. The company achieved 30 percent market share with the launch, he says.

The next logical step was the expansion of the brand in the rest of the Central American markets. The company launched the product in Nicaragua in June 2004, and in El Salvador in February 2005. Future expansion in the region is planned for Honduras, Costa Rica and Panama.

Without a doubt, a major consideration when a brewing company locates in a specific place is the quality of the water. Guatemala provided both good quality in terms of natural mineral content and quantity of water. The company decided to locate the factory three hours from Guatemala City and five hours from San Pedro Sula for its proximity to the rest of the region.

The plant is located close to the east and northeast area of the country, the hottest zone and with the highest rent per capita. For this, it made an original investment of $50 million, and added $10 million during the first year.

One of the principle challenges AmBev had to overcome in its partnership with Cabcorp was the education of operators whose previous experience was in the area of soft drinks. In order to have a totally new plant it contracted operators without training, and the first group of line supervisors spent four months at an AmBev factory on the outskirts of Sao Paulo, Brazil.

Many other personnel, such as sales, marketing and other departments, also were trained in Brazil. In total, almost 20 upper mid-level personnel were trained in the central headquarters over six months before they returned to specific areas in El Salvador, Honduras and Nicaragua. The total personnel of the company rose to 250 direct employees and 1,500 indirect, with 97 percent of the management hailing from Guatemala.

The plant has a production capacity of 1 million hectoliters annually. AmBev holds a strict policy of quality standards. All the raw materials are subject to preliminary certification of each provider — a process that validates the provider based on the type of business, facilities, quality of products and laboratory activity. In addition, the plant inspects the quality of all the items that arrive at the facility.

One of the principle preoccupations of AmBev in all its operations is respect for the environment. For this, it has a specially detailed system of flow management that guarantees that water used in the plant is returned in a form that is as drinkable as the water that went in.

With respect to distribution, Pera says convenience stores represent 65 percent, and the remaining 35 percent goes to locations such as bars, restaurants, dining rooms and cafeterias. Forty percent of all production at the plant in Guatemala is exported to El Salvador and Nicaragua. Our visit to AmBev in Guatemala left one clear message: the Central American beer market has gained a reputation as a regional leader, and AmBev, a winning name.

Enrique Saez is managing editor of Industria Alimenticia, Stagnito Communicaton’s Spanish-language publication. His complete report on his visit to AmBev in Guatemala can be found at www.Industriaalimenticia.com.