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CASTLE MALTING NEWS in partnership with www.e-malt.com Portuguese
04 July, 2022



Brewing news Brazil: Beer prices up 11.1% between June 2021 and May 2022

The escalation of inflation that has spread through products and services in Brazil in recent months has hit a sensitive item in the consumer basket: beer. The country is the third largest consumer of the product in the world, after China and the United States. According to data from the Nielsen research company, obtained by the Sheet, the price of the drink advanced 11.1% between June 2021 and May 2022, a period in which consumption in volume grew 9.5%.

In comparison to the previous year (June 2020 to May 2021), however, there was a rise of 11.2% in price and a drop of 8.2% in volume, with the decline in consumption attributed to inflation. The retreat comes at a time of resumption of movement in bars and restaurants, with the advance of vaccination against Covid-19 and the end of restrictions.

The situation involving the increase in the price of beer inputs (such as barley and malt, due to the War in Ukraine), the rise in fuel prices (which makes logistics more expensive), and the loss of Brazilian purchasing power (each increasingly pressured by generalized inflation) led to a pact between the industry and bars, the main sales channel for the drink: the price adjustment for these establishments must be lower than the adjustment practiced for supermarkets.

“Prices have been rising gradually due to different factors in recent months, and there is an expectation of a new increase between August and October,” says Paulo Solmucci Júnior, president of Abrasel (Brazilian Association of Bars and Restaurants). “But we negotiated with the big manufacturers a smaller transfer to bars and restaurants, which face a delicate moment, only 40% of them are making a profit after the pandemic,” says Solmucci. “There is a commitment from the industries in this sense.”

The executive highlights the most recent data from the IPCA (National Broad Consumer Price Index), referring to May, which point to a variation of 5.22% in the price of beer in bars in the last 12 months, and of 9.38% in households.

Sought by the report to talk about new price increases on products, the three major manufacturers in the country — Ambev, Heineken and the Petrópolis group (owner of Itaipava) — declined to give interviews.

But a report by the American newspaper The Wall Street Journal, published on June 16, reveals that AB InBev, owner of Ambev, realized that it was behind in relation to cost increases in certain markets, such as Brazil and the United States, because of inflation accelerated since the beginning of the year, despite regular price updates. The newspaper heard AB InBev’s chief financial officer, Fernando Tennenbaum.

“It’s a vicious circle: as the price goes up, people buy less,” says Ciro Medeiros, service manager for beverage manufacturers at Nielsen. “Emergency aid, in the first year of the pandemic, helped consumption, but, with the squeeze in family income, the trend is for sales to continue to fall, with some refreshment in the last two months, due to the World Cup and the New Year parties.”

According to Medeiros, unlike other related categories, the consumer’s “indulgence” — outside the basic food basket, such as cookies and chocolates — in which it is possible to offer the same product in smaller packages to contain the price increase, the sale of beer does not work with this strategy.

“Instead, the industry prefers to work with returnable glass packaging”, says the consultant. “It’s a more expensive package than aluminum, for example, but it can be used several times.”

In a note, Ambev, which concentrates just over 60% of the country’s beer market, reported that the bet on returnables is its focus at the moment, for sustainability and for reducing consumer prices. This is the main packaging sold in bars and restaurants.

According to Abrasel’s Solmucci, about 60% of the bars’ revenue comes from beer, while in restaurants this slice is 20%. “The bars cannot pass the full increase to the consumer, hence the importance of this type of agreement with the industry,” he says.

From the manufacturers’ point of view, bars and restaurants accounted for 59% of sales by volume last year, according to data from research firm Euromonitor. This year, the share of these establishments should shrink two percentage points, to 57%, while supermarkets will be with 43% of sales in volume, informs the research company.

“The trend is that more people look for beer in supermarkets, a channel that offers lower prices than the bar,” says Rodrigo Mattos, an analyst at Euromonitor. In this sense, the search for a premium beer, which compensates for the savings of exchanging the bar table for the living room, should have an impact.

“We will see an increase in the sale of mainstream beers, of average price,” says Mattos, noting that this movement should be seen mainly this year in supermarkets. Premium sales, in turn, tend to stall.

Analyst Marcelo Monteiro, from Lafis Consultoria, agrees. “We are going to see an exchange of premium brands for the traditional ones of average price,” says Monteiro. “That consumer who was getting used to buying the most expensive beers, to drink at home, tends to go back to the mainstream,” he says.

According to Monteiro, despite the better prospects for the job market in the second half of the year, income does not grow because of double-digit inflation. “Due to the World Cup and the end-of-year festivities, the drop in consumption may slow down, from 8% to 4% or 5%,” he says. “But prices will continue to rise, up even higher, 14%, because there are no factors that stop the current escalation of prices.”





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