Latin America: Cia. Cervecerias Unidas AS seeing early signs of demand destruction

Latin American beverage giant Cia. Cervecerias Unidas SA is seeing early signs of demand destruction amid the highest inflation since the 1990s, Bloomberg reported on May 30.

CCU - Chile’s top brewer and a major supplier of alcoholic and non-alcoholic drinks in the region -said that while consumption has held up fairly well so far, it will probably moderate in the coming months.

“I would expect that in the second half of this year, people’s consumption will be a little more restricted,” Antonio Cruz, head of new business and strategic planning, said in an interview on May 27 from CCU’s offices in Santiago.

The ripples from supply-chain disruptions spurred by the pandemic and the war in Ukraine are reaching producers and consumers around the world. CCU is no exception, with costs rising “strongly” this year, Cruz said. Chilean inflation is estimated at 9% this year as growth slows to 2.1% from 12%.

So far, the company’s margins have held up as it pushes to offset surging costs of everything from grains, aluminum and glass with greater efficiencies. It has managed to source all the inputs it needs, albeit at elevated prices, Cruz said.

The wave of inflation hasn’t damped CCU’s appetite for growth. The firm controlled by Chile’s richest family is looking to build its presence in Argentina, Bolivia, Colombia, Paraguay and Uruguay, even though it has encountered restrictive practices in some markets, he said.

Antitrust authorities in Colombia and Uruguay recently issued resolutions against the world’s No. 1 brewer, Anheuser-Busch InBev NV, for alleged abuse of its dominant position in response to complaints by CCU. In past years, the two brewers have been involved in a legal battle in Argentina and Uruguay.

AB InBev’s activities have been considered lawful by the Colombian Superior Court, the Leuven, Belgium-based group said in a written response, adding that its Bavaria unit intends to continue to cooperate with authorities.

“We want to compete on equal terms and that is what these exclusionary practices do not allow us to do in these other countries,” Cruz said. “We look at the issue with a long-term view. We believe that there are opportunities. These kind of obstacles put a short-term brake on us, but we want to keep looking.”

CCU’s goal is to grow faster abroad than in Chile, thereby reducing its home nation’s 70%-plus share of earnings.

“We are always looking for opportunities abroad, but our strategy is more to continue consolidating our position in the countries where we are already,” Cruz said.

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