E-Malt.com News article: Brazil: Beer production on the rise but Ambev shares value declines

Brazil’s beer production is up. And yet the biggest beer maker in the country is down. For a defensive stock, in a weak market, smack dab in the middle of the FIFA World Cup, Ambev has to be one of the biggest disappointments going for Brazil investors, Forbes reported on June 26.

With the exception of the last five days, Ambev has underperformed the Brazilian stock exchange. It’s even underperformed Petrobras, which is arguably the most hated stock in Brazil despite having a fairly decent year in terms of equity gains.

Ambev is down 5% over the last month. And it is falling against a backdrop of rising beer sales, and higher prices for that beer, too.

Brazilian beer makers produced 3.2 billion litres of beer in the second quarter of the year in preparation for the World Cup, 12% more than it did last year, according to industry group CervBrasil. Estado de Sao Paulo’s Broadcast news agency reported on June 26 that industry was going through an “endless summer”. It’s winter in Brazil at the moment. But that endless summer is not paying off for Ambev shareholders. The surf is definitely not up.

On June 25, pollsters at Brazilian firm Ibope Repucom said the obvious: that beer and soccer were like chips and salsa. Yes, but apparently beer sales and Ambev are not.

The World Cup has been increasing beer sales all year, following a weak 2013 when production dropped by 2.6%. From January to June, beer production rose by 11.2% compared to the same period last year.

Beer prices have also risen. According to inflation data, they rose 10.3% this month, compared to the same two week period in June of 2013. That’s low compared to some Brazilian cities, where beer prices have gone through the roof. In Salvador, Bahia, home to World Cup matches, prices are up 25% in the last 12 months. In Rio, they’re up 16.9%.

If Ambev can’t get a lift from numbers like that, what will happen to the stock when FIFA leaves town on July 13?

Perhaps the 2016 Summer Olympics in Rio will provide shareholders with a much needed lift.


27 June, 2014