E-Malt.com News article: 2180

Brazil, São Paulo: Companhia de Bebidas das Américas – AmBev, the world’s fifth largest brewer and Brazil’s leading Beverage Company, announced on February 12 its decision to enter the Dominican Republic’s beverage market, competing in both the beer and soft drinks segments.

Encouraged by the successful launch of its operation in Guatemala, which has been created in association with PepsiCo’s anchor bottler for the region, Central America Bottling Corporation (Cabcorp), AmBev will now replicate a similar version of that business model in the Dominican Republic. To achieve that, the Company announced on February 12 an agreement with Embotelladora Dominicana CXA (Embodom), PepsiCo’s exclusive bottler for that country. Upon the conclusion of this transaction AmBev and Embodom will be partners in a company that will commercialize both soft drinks and beer in the Dominican beverage market, in which AmBev will hold a 66% stake.

AmBev will acquire a 51% stake at Embodom for US$ 60 million due in three installments: US$ 40 million in February 2004, US$ 10 million in February 2005 and US$ 10 million in February 2006. The 66% stake will be achieved via asset contribution to Embodom, composed of US$ 10 million in cash and an operational beer production plant, built with existing assets rom AmBev.

Despite the financial crisis that hit the country in 2003, AmBev is confident in the recovery of the Dominican economy, as well as in the promising potential of the country’s beverage market and the excellent operational capabilities demonstrated by Embodom’s share of the soft drink market, the company said in the report.

AmBev estimates the size of the Dominican beer market in terms of total volumes and value at 3.2 million hectoliters and over US$ 430 million, respectively. As already observed in Guatemala, the joint operations of a new beer brand and a strong and efficient soft drinks business, with deep local expertise (as is the case of the Embodom organization), generate significant synergies, translated into both lower investment needs and operational costs. Moreover, the complete portfolio consisting of beer, soft drinks and mineral water creates a higher relevance to the points of sales, improving the company’s competitive position.

This transaction is another step towards AmBev’s expansion in Latin America, allowing the Company to now enter the Caribbean market. The Company has been using a combination of acquisitions, greenfield and joint venture projects throughout the region in order to consolidate its position in attractive markets, while at the same time preserving shareholder value and its strong credit profile.

Embodom currently holds a leadership position in the Dominican soft drinks market, with a market share of 56.0% as of November 2003, according to EMEVENCA data. The company sells PepsiCo’s core soft drinks brands (Pepsi Cola, Seven Up and Mirinda), as well as its own brand Red Rock. Embodom has one bottling plant with capacity to produce 2.3 million hectoliters per year, which is located in the city of Santo Domingo, capital of the Dominican Republic and its main market. Besides the plant, the company counts on 25 distribution centers across the country, servicing the whole Dominican beverage market.


12 February, 2004