Brazil: Ambev reports 8.9% drop in second-quarter beer volume

Ambev disappointed investors by reporting an 8.9% drop in beer volume in the second quarter—its steepest quarterly decline ever, excluding the first quarter of 2020 during the pandemic, according to analysts, Valor International reported on August 1.

In an interview with Valor, Ambev CFO Guilherme Fleury said the company expects improvements in the second half of the year, citing better preparedness for higher commodity prices and favorable weather for beverage consumption.

Heineken’s decision to hold prices steady for three months weighed on competition, helping the rival gain market share over Ambev in Q2, as previously reported by Valor. While Ambev largely attributed the volume decline to cooler weather, analysts pointed to the company’s strategy of prioritizing price increases over market share as a key factor.

That critical view sent Ambev shares down 5.25% by the end of Thursday’s trading session, closing at R$12.46. The company lost R$10.9 billion in market value in a single day, according to Valor Data.

In Q2, Ambev posted net income of R$2.79 billion, up 13.8% year-over-year. Net revenue edged up 0.2% to R$20.09 billion. But the volume drop stood out: total volumes declined 4.5% to 39.569 million hectolitres, with beer volume in Brazil falling 8.9% to 20.042 million hectolitres.

Markets had expected a smaller drop in Brazilian beer volumes—around 2.5%—making the result particularly disappointing. Weak performance in Brazil and China also weighed on the results of Ambev's parent company, AB InBev.

Ambev attributed the volume drop mainly to colder-than-usual weather in Brazil’s South and Southeast regions. The company said June alone accounted for over 60% of the quarterly decline.

The CFO said Ambev enters the second half better equipped to face challenges like rising commodity costs, including aluminum. “We already made a significant effort on pricing—bringing prices in line with inflation—and we’re beginning to see that reflected in the results,” Mr. Fleury said, noting that weather conditions in July have been more favorable.

Speaking with analysts, Ambev CEO Carlos Lisboa expressed optimism. “July was nothing like June in terms of weather, and we’ve seen a clear improvement,” he said. “Looking beyond July, we remain confident, with no signs of fundamental shifts in consumer demand.”

Asked about price competition, Mr. Lisboa said pricing disputes were one of the last factors affecting volume performance.

Price strategy dominated much of the company’s call with analysts, especially after Heineken gained share by delaying price adjustments. According to sources, Heineken raised its prices between May and June, while Ambev implemented price hikes mostly in April and May. The more competitive pricing helped Heineken raise its share of Brazil’s beer market to 25.4% in the first half of the year, up from 23.8% in the same period last year, according to Nielsen.

Heineken’s beer volume drop in Q2 was also milder—single-digit and below 4%, according to reports.

Regarding the budget segment, Mr. Lisboa said there were signs of improvement for Skol, one of Ambev’s flagship brands, which has faced volume declines. He noted better distribution in recent months and admitted the brand wasn’t prioritized during Carnival, resulting in weaker performance.

Still, Ambev’s Q2 results fell short of market expectations and raised questions about its strategy. The sharp decline in beer volumes in Brazil was a focal point for analysts at Bank of America (BofA), BTG Pactual, and Itaú BBA, all of whom cited Ambev’s focus on price over volume as the main driver of its underperformance.

Citi and XP analysts also pointed to secondary factors like intensified competition and colder weather as contributors to the weaker results.

The core debate, highlighted by BofA, Jefferies, and BB Investimentos, is whether margin gains from pricing and cost control can offset the company’s shrinking market share—and whether that strategy is sustainable in the long term.

BB Investimentos downgraded its recommendation on Ambev from “buy” to “neutral,” opting for a more cautious stance until the company proves it can balance growth with profitability.

On the positive side, Itaú BBA noted improvements in Ambev’s international operations, while Citi and BB Investimentos highlighted volume growth in South America—marking the region’s first quarterly gain in over a year.