Femsa Raises Beer Prices in Mexico as Much as 3.5%

Fomento Economico Mexicano SAB (FEMSAUBD), Latin America's largest beverage company, raised its beer prices in Mexico by 3 percent to 3.5 percent, on average, said Jorge Luis Ramos, chief executive officer of the unit.

Femsa, as the Monterrey-based company is known, began increasing prices about three weeks ago and finished today, Ramos said in an interview with journalists at a conference today.

Mexico's second-biggest brewer sold 2.9 percent more beer in the second quarter, including its Dos Equis, Tecate, Carta Blanca and Sol brands. The increase follows a move by Grupo Modelo SAB (GMODELOC), the maker of Corona, which said on Aug. 19 that it would charge an average 2 percent to 3 percent more in the country.

``We're finishing up,'' Ramos said about the price increase. ``We did it by different brands, packaging presentations, areas and channels'' of distribution.

Femsa rose 80 centavos, or 1.8 percent, to 45.96 pesos in Mexican stock exchange trading at 4:10 p.m. New York time. The shares have gained 10 percent this year, compared with a 2 percent drop at Grupo Modelo, the largest Mexican brewer.

Cost Pressure

Higher prices for grains and other raw materials that have increased costs aren't expected to rise any further this year and may begin to fall by the second half of 2009, Ramos, 55, said. Commodity expenses may drop between 8 percent and 10 percent next year, he said.

``We don't see for the rest of 2008 more pressure than we already have on our costs,'' Ramos said.

In Brazil, the company's beer sales volume is growing at about 10 percent annually, double the growth of the Brazilian beer market of about 4 percent to 5 percent, he said. Femsa, which bought Cervejarias Kaiser SA in January 2006, has about 9 percent of the Brazilian beer market.

Femsa expects earnings before interest, taxes, depreciation and amortization will break even in Brazil because it's spending heavily to build its brands there, Ramos said. That investment will continue for the next several years, he said.

To contact the reporter on this story: Thomas Black in Monterrey, Mexico, at tblack@bloomberg.net.

To contact the editor responsible for this story: Michael Nol at mnol@bloomberg.net.

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