In Brazil's Bullish Beer Market, Brahma Is King

As foreign brewers jostle for a toehold, Brazil's leader expands

In the fierce competition for sales in Latin America's biggest beer market, Cervejaria Brahma, Brazil's leading brewer, misses few chances to score marketing coups. As the only private sponsor of Brazil's Olympic Committee, it recently put out 30 million cans of Olympic commemorative beer. A current blitz of TV commercials is linking its products to Brazilian enthusiasm for sports such as volleyball and soccer.

The prize is a beer market that has been sharply expanded, in Brazil and most of Latin America, by free-market reforms that have revived economies and stoked consumer spending. Rising Brazilian beer consumption, up 24% last year, is spurring rapid expansion by brewers such as Brahma. The surge is attracting major U.S. and European brewers searching for room to grow abroad. "We consider Brazil right at the top of our list of opportunities for beer growth," says Miller Brewing Co. CEO Jack MacDonough.

"EXPLOSIVE." No brewer is profiting more than Brahma, which has a 48.2% share of the Brazilian market, up from 43.5% in early 1995. Its sales rose 20% last year, to $2.3 billion, and profits jumped by 43%, to $257 million, fattened by sharply rising productivity. This year, analysts expect Brahma to overtake Japan's Kirin Brewery Co. in volume of beer production to become the world's fourth-biggest brewer--trailing Anheuser-Busch, Heineken, and Miller. Taking advantage of more open markets, CEO Marcel Telles is also pushing Brahma into other Latin countries, aiming to make it the first regionwide beer power.

In Argentina, from a standing start three years ago, Brahma now has 8% of the market and plans to double capacity at a plant it opened there last year. Brahma bought Venezuelan brewer Cerveceria Nacional in 1994, and it plans to build a plant in Colombia. "Latin America is an explosive growth market for the next 10 years," Telles says.

To capture a share in that growth, Miller has joined forces with Brahma. Last September, Miller signed a 50-50 joint venture with Brahma to market and eventually to produce Miller beer in Brazil. Imported Miller Genuine Draft has taken the lead among Brazilian premium beers, and a Brahma plant will be converted to brew it. The partners say Genuine Draft, aimed at high-income consumers, doesn't compete with Brahma's brands, led by Chopp. The agreement, which covers all of South America, is key in Miller's strategy for the region.

Anheuser-Busch, also staking out Latin markets, bought 5% this year of the beverage unit of Antarctica, Brazil's No.2 brewer, with an option to increase to 30%. Production of Anheuser's Budweiser beer will start this year in Brazil and also in Argentina, where Anheuser has a partnership with Chilean brewer CCU. Heineken owns 14.2% of Kaiser, Brazil's third-biggest brewer.

JEANS AND T-SHIRT. The market could be dampened if Brazil's economic-stabilization program falters. "It's going to be a roller coaster, but it has an upward trend now," Telles says. Meanwhile, Brahma is setting a torrid pace, with $840 million in investments planned through 1998 to increase capacity by 54%. Its expansion reflects the hard-driving, "meritocratic" culture that Telles, 46, brought from Brazilian investment bank Garantia, where he was formerly chief operating officer. A controlling stake in Brahma was bought in 1989 by an investment fund that was set up to pool the annual bonuses of Garantia partners--but it is independent of Garantia.

Brahma motivates its employees by paying them 15% of total profit as bonuses tied to measures of individual performance. And to keep employees in touch with all facets of the business, Telles has installed Brahma's headquarters in a 3,000-square-meter space, with no individual offices, overlooking Sao Paulo's Pinheiros River. Telles, whose work attire is black jeans and a white T-shirt, shares a row of desks with seven other Brahma board members. Visitors are spotted easily because they are the only ones wearing jackets or ties.

If an opportunity arises, Telles says, Brahma would be interested in acquiring a brewer outside Latin America. Its growing base in Brazil could give it the clout to join the global beer scramble.