Falling sales and high inputs challenge Ambev’s resumption

Despite the encouraging results that Ambev has been presenting since the beginning of the pandemic, there are signs that the pace of sales has begun to lose momentum. Data from the Brazilian Institute of Geography and Statistics (IBGE) show that the production of alcoholic and non-alcoholic beverages declined, respectively, by 9% and 11% in the last quarter of 2021, compared to the same period of the previous year.

Everything indicates that the sector is beginning to feel the loss of consumer purchasing power due to high inflation, in addition to having suffered from the weather conditions at the end of 2021, with more cold days than expected for the time.

At Ambev, this scenario is expected to make beer sales volume drop 5% in the fourth quarter of 2021, compared to the fourth quarter of 2020, according to projections by XP. The house, however, estimates a 10% rise in prices, which will result in a 5% increase in revenue for the period.

In addition to this industry slowdown, another challenge for the beverage maker is to recover its margins amid cost pressure. Ambev’s Ebitda margin (an indicator of the company’s operating profitability, obtained by dividing Ebitda by net revenue) was 47.5% in 2015 and reached 37% in 2020. According to BTG’s estimates, this number dropped to 33% last year and will drop to 31.9% in 2022.

pressures

For analysts, despite the retreat, the number is still good, but the difference between Ambev’s margin and that of competitors has decreased in recent years. With the rise in the prices of raw materials, such as aluminum and wheat, and the depreciation of the real (part of Ambev’s costs are in dollars), the tendency is that the company will not be able to reverse the downward trend in the margin in the short term. .

The company’s financial director, Lucas Lira, admits that the profitability of the business is under pressure, but recalls that this has occurred due to factors that are beyond Ambev’s control. According to him, the only way to respond to this is to increase revenues. “There is no magic solution. Our ‘mood’ is one of recovery, and this recovery is driven by revenue growth due to our commercial strategy”, says the executive.

Although the commercial strategy is considered the right one, the challenge could become even more difficult this year if the slowdown in sales observed at the end of 2021 continues, warns a market analyst.

With a bet on innovation, company catches its breath in the pandemic

The years leading up to the pandemic were difficult for Ambev. Recognized for historically presenting above-average performance, the beverage giant had its worst operating result in at least ten years in 2016 and floundered in the following years. Amid the quarantine, however, he reversed the game and sold like never before.

Market analysts applauded the drinks maker’s comeback last year, but now consider that the profit margin has not yet reached the levels of the past and that the sector is starting to slow down – which could pose a new challenge to the company.

More optimistic estimates point out that the company closed 2021 with an Ebitda (earnings before interest, taxes, depreciation and amortization) of more than R$ 23 billion. If the number is confirmed, it will be the first time that the result will exceed R$ 22.2 billion in 2015. BTG Pactual projects R$ 23.6 billion, while Citi forecasts R$ 22.2 billion and Credit Suisse, BRL 21.7 billion.

Technology

Ambev’s recovery, precisely in the midst of the pandemic, was achieved thanks to the expansion of the company’s portfolio and the investments it had already been making in technology. “We made big bets on innovation, and this laid the foundations for this new chapter in the company’s history. I would say that 2021 is the first year of this chapter of rebuilding our business”, says the company’s CFO, Lucas Lira.

The 2015 and 2016 recession and the period’s inflation had weakened sales of the company’s traditional brands, such as Skol, Brahma and Antarctica. During the crisis, lower-income classes began to consume cheaper beers, while high-income classes expanded their consumption of premium drinks. Also at that time, the increase in beer sales in wholesalers harmed the company, which has an exclusive contract with bars and has, in this channel, its greatest potential.

The trend was that in quarantine, with consumption at home, the company’s situation deteriorated further. It was not what was seen. “Revenue growth in the country has surpassed that of the industry for five consecutive quarters, and the market share in the year (2021) is 3.8 percentage points higher than in 2019”, said analysts Thiago Duarte and Henrique. Brustolin, from BTG Pactual, in a December report.

For analyst Gustavo Troyano, from Itaú BBA, the expansion of the portfolio, especially the premium and core plus segments (between traditional and premium), was key in Ambev’s recovery. According to him, today the fight between companies in the sector is a “portfolio game”, and offering the right products helps the company to gain market share.

Currently, 20% of the company’s revenue in Brazil comes from beverages that were launched less than three years ago. Among Ambev’s novelties, Brahma Duplo Malt, a core plus product that began to be sold a few days before the arrival of the coronavirus in the country, is considered one of the company’s biggest successes.

Zé Delivery

Another decisive factor was Zé Delivery, a beverage sales application. In the second quarter of 2020, the app registered 5.5 million orders, which is 3.6 times the number of orders from the previous year. In the last quarter of last year, that number was already at 15 million orders.

In addition to ensuring a sales channel for drinks during the quarantine, Zé Delivery brought market intelligence to the company, with information about consumers and their preferences. “These technological initiatives started recently at Ambev. The process is slow given the size of the company, but they have the potential to transform Ambev from now on”, says Troyano.

Among the innovations that boosted the company is Bees, a platform whose implementation in Brazil began in the third quarter of 2020 and through which companies that sell Ambev products can place their orders.

The strategy is for the platform to help companies improve their sales with suggestions based on the establishment’s profile. Today, most of Ambev’s active customers are on the platform. Before arriving in the country, the platform was tested in the Dominican Republic, where 85% of the revenue came from Bees in the third quarter of 2021.

The information is from the newspaper. The State of São Paulo.