Chilean Brewer CCU Rallies as Goldman Says Buy on Andes Growth

  • Chile's CCU was raised from neutral at Goldman Sachs
  • Beer mergers create opportunities for CCU to expand markets

Latin America’s worst-rated food and beverage stock climbed after Goldman Sachs Group Inc. recommended buying the shares, betting consolidation of international brewers will create growth opportunities.

Cia. Cervecerias Unidas SA, Chile’s largest brewer, rose 1.6 percent to 6,988.3 pesos at 2:50 p.m. in Santiago, its biggest increase in three weeks, after Goldman Sachs raised its recommendation from hold. CCU’s average consensus rating, including 10 sell opinions, is the lowest among 18 Latin American food and drink stocks. Still, after a 23 percent gain in the past 12 months, the shares trade at a 20 percent premium to peers on a price-to-earnings basis.

CCU stands to gain from mergers in the brewing industry, as it may increase market shares through innovation and strong commercial initiatives, Goldman Sachs says. Brewer Anheuser-Busch InBev SA/NV agreed in October to acquire peer SABMiller PLC for 79 billion pounds ($120 billion) to expand in China and other emerging markets. SAB Miller currently controls 98 percent of the Colombian market and 95 percent of Peru’s.

"With brewer consolidation in the region accelerating, CCU could potentially gain additional distribution opportunities where market concentration is very high," Goldman analyst Luca Cipiccia said in a note to clients.

CCU is already looking to make inroads in the Colombian market. In 2014, it signed a joint venture with soft drinks producer Postobon SA to invest $400 million in a beer plant there. Goldman Sachs says that the plant is on target to begin operations next year.

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