BEER IN LATIN AMERICA: BEER LATIN AMERICA:
Market Overview - Introduction
This report analyses the market for beer in Latin America. For the purposes of the study, the market has been divided into four sectors:
* Lager
* Dark beer
* Stout
* Non-/low-alcohol beer
Much of the information in this report is of a statistical nature and, whilst every attempt has been made to ensure accuracy and reliability, Euromonitor cannot be held responsible for omissions or errors. The forecasts given are estimates based on the state of the market at the time of writing and the most reliable sources of information available.
Figures in tables are calculated from unrounded data and may not sum.
BEER IN LATIN AMERICA: BEER LATIN AMERICA: Market Overview - Main Findings
* The beer market in Latin America performed poorly in2007, affected by the Brazilian currency crisis andassociated loss in consumer confidence across the region.Wider availability of products stimulated demand amongmiddle and high income consumers during the review period,and these consumers remain the ones more likely toexperiment with products other than lager.
* Total beer sales in Latin America amounted to 23 billionlitres in 2007, marginally down over the previous year. Invalue terms, the regional beer market was worth aroundUS$40 billion in the same year, down 7% over the previousyear.
* Brazil continued to generate the greatest volume salesin Latin America, due to its large population and anestablished tradition of beer-drinking. Brazil, however,was also one of the worst performing national markets in2007, with a substantial fall in sales of standard lager -by far the most popular type of beer in the country.
* Colombia saw the most dynamic growth over the 2003-2007period, with sales increasing by around 11% in both volumeand local currency constant value terms in 2007. Theunstable political situation in Colombia was exacerbated bythe financial crisis across the region, which impacted onconsumer confidence, reducing expenditure on more expensivealcoholic drinks in favour of beer.
* Lager dominated the beer market in Latin America,underpinned by the popularity of standard lager across allnational markets in the region. The reason for lager'spopularity is to be found in the fact it is more suited tothe generally hot climate which prevails across most ofLatin America, as well as being the type of beer typicallyfavoured by southern Europeans, whose descendants populatethe region.
* Dark beer was the best performing sector in 2007,although progress was from a very low base. Dark beerremains largely a novelty drink in Latin America, and ittends to be drunk by better-off consumers in horecaoutlets, who are prepared to experiment. * Similar to what is the case in Asia-Pacific, glass isthe most popular packaging format throughout the region, aslager is traditionally sold in bottles across LatinAmerica. Generally low levels of disposable income in realterms means that the majority of consumers follow thetradition of using returnable glass bottles in many of themajor markets across the region.
* AmBev was the leader of the regional market in 2007,commanding a volume share of around 29%. The company wasformed after the merger of Brahma and Antarctica in Brazilin 2007. As a result, AmBev became the dominant brewer inthe region and one of the biggest in the world.
* "Other food stores" continued to be the most importantformat for the retail distribution of beer across LatinAmerica, accounting for over 46% of retail sales in 2007.However, supermarkets/hypermarkets experienced the mostrobust growth during the review period, largely at theexpense of "other food stores", with consumers increasinglyattracted by the variety of products and competitivepricing characteristic of supermarkets.
* Euromonitor forecasts that the beer market in LatinAmerica will grow by nearly 5% in volume compound annualgrowth rate (CAGR) terms between 2007 and 2013, with strongperformances from newer products such as stout and darkbeer, although the most important influence by far willremain lager. Real value growth will be lower, however,mainly due to intensifying competition between brewers aswell as retailers.
BEER IN LATIN AMERICA: Market Background - Taxation
Most countries levied lower levels of tax on beer in comparison to spirits, which reflects governments' more relaxed attitude towards drinks with a lower alcohol content.
In Brazil, IPI is a federal tax levied on domestic and imported alcoholic drinks. Rates vary according to the category of the alcoholic drink. On beer the rate is 80%. Merchandise and Service Circulation Tax (ICMS) is the state's value-added tax applicable to both imports and domestic products. ICMS varies from state to state in Brazil. For example, in S<176>o Paulo, the rate is 25%.
Mexican import duties on alcoholic drinks currently stand at 20% ad valorem; additionally, there is a customs handling charge of around 1%. Excise taxes on beer are currently 25%, although the rate levied on spirits is 60%. IEPS (Impuesto Especial sobre Productos y Servicios - Special Product and Service Tax) rates stood at 22% for drinks up to 14% ABV; 30% for drinks between 14-20%; and 45% for drinks in excess of 20%. Alcoholic drinks were also subject to a VAT rate of 15%. Under the provisions of NAFTA, tariffs on beer are being progressively phased out, dropping to zero by 2006. This is significant, given the importance of the US market for high profile Mexican brands such as Corona.
In Venezuela, on 1 June 2007 the former luxury goods tax of 16.5% was substituted by a 15.5% valued added tax (IVA). Beer production in Venezuela is controlled by the government. Argentina significantly reduced excise taxes on alcoholic drinks in 1993, in an effort to break the downward trend in formal sector sales and a concomitant increase in sales to black-marketers - know as contrabandistas - who undercut official products. Beer is exempt from excise taxes, while import duties are the same for wines, with varying levels depending on the country of origin, especially if they are sourced on Mercosur purchases. The only significant tax increase was a value-added tax hike from 18% to 21% in 1995. This increase, however, was not in every instance reflected by price increases at the point of purchase. In an intensely competitive environment, many manufacturers chose to absorb this 3% increment rather than transfer it on to consumers.
Table 1 Sales Tax/VAT on Beer by Country 2007
%
2007
Brazil 25.0
Chile 22.0
Argentina 21.0
Venezuela 15.5
Colombia 15.0
Mexico 15.0
Source: Euromonitor from Official Statistics
BEER IN LATIN AMERICA: BEER LATIN AMERICA: Market Background - Legislation
The production of alcoholic drinks is closely regulated in most countries, with strict legislation governing the retailing of alcoholic drinks, as well as advertising and consumption. Nevertheless, the legislation governing the beer industry is relatively relaxed compared with spirits.
Brazil introduced a number of new restrictions designed to reduce alcohol-related driving accidents in 2007. The most notable one was to prohibit the sales of alcoholic drinks at petrol stations in Rio de Janeiro. The sale of alcoholic drinks on highways in the state of S<176>o Paulo was also prohibited, following measures passed in December 2007.
Alcoholism is a growing problem in Mexico, and a number of states are attempting to implement stricter controls in terms of alcohol consumption. A recent high profile example of stricter legislation was seen in the state of Tabasco, where the state congress approved a measure to ban the sale of chilled beer as part of a wider initiative to decrease alcoholism in the state. The sale of ambient beer remains legal; however. Tabasco, which has a population of around two million, has one of the hottest climates in the country.
In Venezuela, the selling of alcoholic drinks is strictly controlled. Retailers can only sell alcoholic drinks between 11:30am to 9pm. During seasonal holidays such as Semana Santa (Holy Week), the government runs security operations to control consumption of alcoholic drinks, with beer retailers being an especial focus, given that beer is one of the most affordable alcoholic drinks for mass consumption. The consumption of alcohol in the street is strictly forbidden, as this is considered a source of crime.
In Argentina, the National Anti-Alcoholism Law (Ley Nacional de Lucha Contra el Alcoholismo) is the main piece of legislation regarding the alcoholic drinks industry, comprising a series of directives controlling the legal drinking age, advertising and drink-driving, as well as provisions for public health education regarding alcohol consumption. The most notable change this law introduced was the imposition of a wide range of restrictions, backed by stiff penalties, involving the legal drinking age. In addition to forbidding sales of alcoholic beverages to individuals under the age of 18, the law required the labels of all alcoholic beverages to include the phrase, in Spanish, "Sale prohibited to minors under 18". This was particularly significant considering that beer is typically consumed by younger people in Argentina and is sold in 1-litre bottles in both retail and horeca channels, rather than in barrels or on draught.
BEER IN LATIN AMERICA: Market Background – ConsumerExpenditure on Beer
Latin America recorded a decline in retail consumer expenditure on beer towards the end of the review period, due mainly to the sharp fall in the value of the Brazilian real against the US$, which - as Brazil is the largest national market in the region - had a severe effect on consumer confidence in other markets in the region. Despite the notable decline in 2007, Brazil continued to record the highest expenditure on beer throughout the review period, underpinned by its large population, which represents about a third of the region's total.
In contrast to most other countries in the region, Argentina posted a substantial increase in consumer expenditure on beer during the 2003-2007 period, aided by a more resilient economy as well as a more sophisticated retailing environment. Mexico was another country to show substantial progress, with the influence of US trends important in determining patterns of consumption.
Table 2 Retail Consumer Expenditure on Beer 2003-2007
US$ million
2003 2004 2005 2006 2007
Brazil 2,369.2 2,449.5 2,794.8 2,710.5 2,247.0
Mexico 1,448.7 1,582.8 2,013.4 2,133.7 2,110.2
Argentina 758.6 805.8 905.1 989.9 1,033.5
Venezuela 464.1 390.6 519.2 585.9 625.2
Colombia 515.4 577.6 599.3 562.1 533.4
Chile 192.8 204.8 245.8 238.4 219.1
TOTAL 5,748.8 6,011.1 7,077.6 7,220.5 6,768.4
Source: Euromonitor from National Statistics
Note: 2007 figures are estimates
Table 3 Retail Consumer Expenditure on Beer as % of Total
Alcoholic Drinks' Retail Consumer Expenditure 2003-2007
\ % value
2003 2004 2005 2006 2007
Argentina 28.4 29.2 30.1 30.0 29.8
Chile 28.4 29.2 30.1 30.0 29.4
Mexico 27.6 25.8 27.0 27.3 26.5
Brazil 27.6 25.8 27.0 27.3 26.2
Colombia 25.4 25.8 25.3 24.9 25.0
Venezuela 25.7 26.2 25.7 25.3 23.6
Source: Euromonitor from National Statistics
Note: 2007 figures are estimates
BEER IN LATIN AMERICA: Market Background – BeerConsumption
Per capita consumption in beer in Latin America increased by 3.5 litres between 2003 and 2007, although there was a slight decrease in 2007, undoubtedly occasioned by the impact of the financial crisis which depressed consumer confidence across the region. This was reflected more specifically in the drop in consumption in Brazil in 2006 and 2007, which was especially significant in terms of regional performance. Venezuela recorded the highest beer consumption in the region, despite registering considerable fluctuation between the low of 2004 and the high of 2006. Mexico and Colombia showed by far the greatest increases in consumption. In the case of Colombia, wider distribution helped boost consumption, while the influence of US drinking trends boosted growth in both Argentina and Mexico.
Table 4 Per Capita Beer Consumption by Country 2003-2007
Litres
2003 2004 2005 2006 2007
Venezuela 73.4 67.0 75.8 82.2 72.9
Colombia 38.9 46.9 55.7 59.5 65.2
Mexico 46.6 51.5 54.9 55.0 56.2
Brazil 47.8 48.9 48.9 48.1 45.7
Argentina 29.1 28.7 30.4 32.7 33.9
Chile 27.4 26.6 26.3 26.2 25.3
Other Latin
America 28.5 28.6 29.9 30.5 29.0
AVERAGE 41.3 42.9 44.4 45.7 44.8
Source: Official statistics, Trade associations, Trade
press, Company research, Store checks, Trade interviews,
Euromonitor estimates
BEER IN LATIN AMERICA: BEER LATIN AMERICA: Market Background - Advertising
With regard to the advertising of alcoholic drinks, there are more restrictions on television advertising, which of course has a higher profile than other media, such as print and outdoor billboards. Restrictions on time-scheduling are applied in many countries, principally Brazil and Mexico.
In Brazil, CONAR (Conselho Nacional de Auto-Regulamentac<176>o Publicitaria), the Self-Regulating National Advertising Board, announced in May 2005 that they were revising their recommendations for advertising in selected areas. CONAR's announcement does not have the weight of a law, but the entire advertising industry has historically followed all previous recommendations. The main points of the new recommendations are that spirits' commercials should not be aired before 9:30pm and cigarette and alcoholic beverage advertisements should not be associated with Olympic athletes. While increasingly youth-oriented, advertising for beer in recent years has concentrated on sport, culture and entertainment. An additional development recently saw the introduction of advertising by product placement in television programming.
Direct advertising of alcoholic drinks on television, however, is restricted. Alcoholic drinks with up to 24% of alcohol by volume can advertise at any time, while those with more than 12% ABV can only advertise after 9pm. Print advertising, however, is not subject to any restrictions.
Mexico also has strict advertising restrictions regarding format, design and scheduling. Advertisements for alcoholic drinks are therefore relatively rare on television. Mexican authorities have established schedule restrictions, and they can only be shown between 10pm. and 6am. Commercials have to be vetted by the Ministry of Health before being shown. Open beer bottles are not allowed to be shown with a hand touching them. Also, no commercial can feature people below the age of 25 years. There are further restrictions on what can be portrayed, but the most significant element of any advertisement is the message "Evite el exceso" - avoid excess - which has to appear either written in white letters during the commercial, or stated at least once.
In Venezuela, the advertising of alcoholic drinks is not allowed in broadcast media such as radio and television. This ban is not applicable, however, to the cinema, print media or billboards. Advertisers are prohibited to use sports personalities for the promotion of beer. Brewers have attempted to side-step these restrictions by, for example, using the image of malta, a soft drink consumed by young people - which coincidentally shares its name and packaging to a brand of beer - as a way of circumventing the ban on television and radio advertising. Malta is a sweet drink targeted at young people and kids, and is highly recommended as a nutritious drink. Malta as a brand is used to sponsor sport, especially baseball, where people in stadiums typically drink a lot of beer.
Argentina specifically prohibits advertising targeting individuals under 18 years of age; portrayal of drinking by minors; implying that the consumption of alcoholic beverages improves mental or physical performance; and the portrayal of drinking as a stimulant for sexual or violent behaviour.
BEER IN LATIN AMERICA: Market Background -Drink-driving
To combat the rising number of car accidents in the region, many countries have strict drink-driving legislation.
In Brazil, the government recently started the Codigo Nacional do Transito (National Traffic Code), which levies stiff penalties on drunk drivers. Until recently, the police did not administer blood alcohol level checks, but this is now widespread practice. The implementation of the new code reflects the country's changing mood with respect to drink driving. Brazil is now attempting to prevent and punish driving under the influence of alcohol. Penalties for driving while intoxicated include fines, driving licence suspension and vehicle confiscation. Legislation additionally prohibits the sale of alcoholic drinks to persons under the age of 18. In practice, however, this restriction is rarely enforced. Social drinking in Brazil generally begins at the age of 15 or 16.
Argentina also has severe restrictions applied to drivers of freight and passenger transport vehicles, such as trucks and buses, or vehicles transporting children, such as school buses. For drivers of these vehicles, any blood-alcohol level is sufficient to constitute an offence. The Anti-Alcoholism Law prescribed severe penalties for all drink-driving violations. Other measures of the Anti-Alcoholism Law addressed the population at large. The labels of alcoholic beverage containers were required to include the phrase, in Spanish, "Drink in moderation". Of greater significance was a three-tiered definition of drink-driving. A blood-alcohol level of greater than 500 milligrams per litre constituted drunken driving for any motorist, while blood-alcohol levels of greater than 200 milligrams per litre constituted intoxication for riders of motorcycles and similar two-wheeled vehicles.
In other countries legislation exists, but is often not applied with great regularity, given levels of corruption and a lack of resources.
BEER IN LATIN AMERICA: Market Background – DrinkingHabits
Generally speaking, beer-drinking in many Latin American markets is heavily influenced by US trends. Younger consumers are the driving force behind beer sales for the most part, and it was the emergence of a bar culture in the region which has helped foster sales in recent years.
In Brazil, the majority of the adult population consumes alcoholic beverages, typically during the evenings or at weekend social gatherings. It is socially acceptable to consume alcohol during the day, but lunch time consumption is not widespread. Brazilians drink beer on most occasions, and with most meals. There are no social stigmas or class connotations associated with the beverage. Certain occasions - such as weddings - may be more appropriate for wine or spirits, but beer is usually offered alongside other types of drink, due to its popularity. Although mature, the market for beer in Brazil is robust, and the drink does not seem in danger of losing popularity to either wine or spirits in the near future. The habit of drinking beer is of course influenced by the climate, and only in the south where it is cooler do Brazilians purchase significant quantities of darker beers and stouts.
Argentinean beer drinking habits are increasingly influenced by US trends. This is reflected in many younger Argentineans' preference for beer rather than wine, the country's traditional preference regarding alcoholic beverages. In the context of Argentine food culture, this tendency is combined with the growing consumption of fast food. Young Argentine diners frequently choose beer as a beverage to accompany on-premise consumption of international fast foods, such as hamburgers and pizza. The growing market for beer is becoming particularly characterised by aspirational purchases, as younger consumers became aware of the image values of different brands as portrayed in advertising campaigns.