E-Malt.com News article: Canada & Brazil: AmBev is sure its Labatt Brewing is on track to increase profits by 15%

Brazil's AmBev said on October 5 that it has helped decrease costs at its brewery in Canada, Labatt Brewing Co., and added it is on track to increase profits 15 % this year. "We are on our way to deliver on our target," Reuters quoted Pedro Aidar, AmBev's head of investor relations.

Labatt, which came under AmBev's control a year ago when Belgian parent InBev bought the Brazilian brewer in 2004, has struggled to increase market share in Canada, where the industry is saturated and the competition stiff.

Labatt's market share is down half a point to 41 % from the same time last year. In an attempt to streamline operations and boost profit margins, InBev slashed 40 million euros of costs from Labatt's operations through job cuts and other savings.

Labatt has already closed one plant and said it will close another this year. It does not see any more closures and said that by the time both facilities are offline the brewer will have reduced staff by around 450. Cost-cutting measures are seen as one of the factor's behind Labatt's projected profit growth this year and Aidar said he does not expect the same kind of growth in 2006.

"I don't think this will be the same next year," he said. "We don't know how we will regain profit growth. We have lots of ideas, we just don't have the exact path." He added: "There is no way we would grow slower than 4 to 5 percent."

Aidar, who is in Toronto this week to visit the Canadian operations, rebuffed suggestions that there is a Brazilian way of doing business but acknowledged that some of AmBev's methods are being used in Canada.

In January, Labatt employed AmBev's "zero-based budgeting," which means setting the year's budget with no reference to the previous year, a technique used by AmBev for 10 years. Also, its executives travel economy while the underlings and executives alike scour the books for more ways to save.

A Labatt's spokesman admits its operations have changed since AmBev came into the picture. "People are more accountable and there is a sense of urgency and speed." said James Villeneuve.

Labatt, like its biggest domestic competitor, Molson Coors Brewing Co., is trying to invigorate its core brands, such as Labatt Blue, in a saturated market. It points to the premium brands its parent company makes -- Stella Artois and Beck's -- as a way to buffet lagging domestic brands.

AmBev is Latin America's largest brewer and now a powerhouse in InBev's portfolio. South and Central America contribute nearly 50 percent of earnings. With the Brazilian operation's help, InBev is angling to meet a target of earnings before interest, tax depreciation, and amortization margin of 30 percent by 2007. "We don't only look at barley and malt and aluminum, we look at all of our business," said Aidar.


07 October, 2005