CCU Drops as BofA Cites Competition From AmBev

Cia. Cervecerias Unidas SA, Chile’s largest brewer, fell to a one-month low after Bank of America Corp. recommended selling the stock amid competition from Brazil’s Cia. de Bebidas das Americas, known as AmBev.

CCU, which is controlled by the billionaire Luksic family, Chile’s richest, dropped 2.7 percent to 7,327.8 pesos at the close in Santiago, the lowest since April 15. The benchmark Chilean Ipsa index advanced 0.9 percent.

Bank of America said yesterday in an e-mailed report that it reinstated coverage of CCU with the equivalent of a sell rating and a price target of 8,200 pesos, or $35 per American depositary receipt. The Chilean market was closed yesterday for a local holiday.

CCU, the Santiago-based maker of Cristal and Escudo beers, has watched its share of the Chilean market reduced by 7 percentage points to 79 percent by the end of 2012, Bank of America said. AmBev has increased its market share to 14 percent from 12 percent, according to Bank of America.

“AmBev’s aggressive pricing strategy has been one of the main reasons for CCU’s market-share loss and margin contraction,” Bank of America analysts Fernando Ferreira and Isabella Simonato wrote in the report. Sao Paulo-based AmBev’s main brand in Chile is Brahma, according to the report.

AmBev probably won’t renew CCU’s license to produce and distribute the Budweiser brand in Chile in 2015 and Argentina in 2025, the analysts wrote. AmBev’s controlling shareholder, Anheuser-Busch InBev NV, owns the Budweiser brand.

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