Photographer: Paulo Fridman/Bloomberg

Beer Is Back in Style in Brazil and Ambev Is Set to Gain, UBS Says

Brewer margins should bounce as Brazilians finally get back to drinking beer.

Beer has reached an inflection point after volumes declined between 2015 and 2017, UBS analysts Lauren Torres and Guilherme Haguiara said in a note to clients Monday. With the economy recovering, consumers becoming more inclined to try to premium brands and competition among local brewers rationalizing, that should mean a good 2018 for groups like Ambev SA, maker of Budweiser and others.

UBS surveyed 1,512 Brazilians aged between 18 and 54 to analyze consumption trends of alcoholic beverages. It found that spending on beer is increasing and should keep going. The category in the survey that is showing the most growth is "drinks mostly beer several days a week," the report said.

And Brazilians are increasingly willing to spend more on premium beers. The survey found that 77 percent of respondents said they like to try new brands, and 66 percent said craft beers are trendy and cool.

The data convinced UBS to reiterate a buy recommendation for Ambev, one of six. The company has eight hold recommendations and one sell. Besides controlling two thirds of the Brazilian market, it also offers several premium and craft beer brands including Bohemia, Original, Colorado and Wals.

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