Getting the
World Tipsy

Francesco Neves

They don't make deals like that, not in Brazil anyway. The largest beer maker in the country gobbled up the second place creating in the process the third largest beer company in the world in a $4.5 billion deal, the biggest ever in the country. Together they will have 71.6% of the Brazilian beer market, which has provoked shouts of "monopoly" from the public, but mainly from the smaller competitors that have names like Schincariol and Kaiser.

Welcome to globalization Brazilian style. Due to the passion these beers arouse in consumers, the recent announcement that Brahma and Antarctica would share the same board of directors under the name Ambev (American Beverages) led some to compare the acquisition to their favorite soccer team being bought by its main adversary. Both companies are centenary institutions. While Companhia Antarctica Paulista was founded in 1885, by a group of friends from São Paulo, Companhia Cervejaria Brahma was created three years later in Rio by Swiss Joseph Villiger.

Brahma employs 9,700 people, produces 4.3 billion liters of beer yearly, has 28 factories and had $42.2 million of profit in the first quarter of 1999. On the other hand, Antarctica has 6,800 workers, makes 2.1 billion liters of beer a year, has 22 factories and had a profit of $9.95 million in the first quarter. Brahma is already the world's 8th largest beer maker and Antarctica the 15th. Combined they will lose in size only to American Anheuser-Bush and Holland's Heineken.

For decades, Brazilians willing to drink a beer had to answer the question: "Antarctica or Brahma?" More recently the choices increased, but both continued to be overwhelmingly the favorites. Brahma and Antarctica have been engaged in an ad war since the beginning of the century. That fight got louder in the '50s and nastier in recent years. Many celebrities were used to sing the virtues of both sides.

When Brahma launched it Malzbier in 1914 the beverage was presented as "especially recommended to nursing moms." Antarctica started to sell its Guaraná soft drink in 1921, something that was copied by Brahma six years later.

This decade the dispute between Washington Olivetto's W/Brasil ad agency, which had the Antarctica account, and Eduardo Fischer's Fischer, Justus, on the Brahma side made school. The war was never so heated as during the 1994 soccer World Cup in the U.S. when the stadiums were invaded by fans of both beers. Brahma was presented as "Number 1" while Antarctica was "The National Preference." Another rivalry had to do with Carnaval. Brahma has been sponsoring the Carnaval in Rio while Antarctica chose the Salvador (state of Bahia) one.

Thinking
Global

Curiously, the idea to merge the companies came from a man who drinks only mineral water, abstaining completely from beer or soft drink. He is 59-year-old Jorge Paulo Lemann, the chairman of Brahma. Lemann was naturally looking overseas. The international vocation of the new company can be seen in the fact that it was born with three names to fit diverse markets. It will be called Companhia de Bebidas das Américas, in Brazil; Compañía de Bebidas de las Américas in Latin America and American Beverage Company in the United States and the rest of the world.

Brahma had everything going for it. After introducing streamlined and modern concepts of management it had a 30% increase in profits in 1998 while Antarctica suffered a 20% decline. Convincing Antarctica to accept the merger was not easy though. Many had tried unsuccessfully in the past, including American Anheuser-Busch whose best deal was to secure a partnership with the beer company_this arrangement will end now_mainly due to what was seen as arrogance by the Yankees.

Brazilians are not big beer guzzlers. While Germans drink 140 liters of beer per capita a year, and Americans consume 80 liters, Brazilians survive with 50 liters. On another front Brahma and Antarctica are also soft drink producers, each one producing 1.2 millions liters of soda a year. Combined they represent 14.6% of the soft drink market, which is still no serious competition for Coca Cola (46.5%). Pepsi has miserly 4.8% share.

The merger will not happen before the Cade (Conselho Administrativo de Defesa Econômica_Administrative Counsel of Economic Defense) studies the case_it has 120 days to do this_but nobody believes there will be a veto, since President Cardoso has already hailed the merger and encouraged other similar deals. He also will be the one to sign the final authorization.

World's Top Ten Beer Producers in 1998 Production in millions of hectoliters Anheuser-Busch (US) 121.3 Heineken (Holland) 79.1 AmBev (Brazil) 64.0 Miller (US) 52.9 SAB (South Africa) 43.0 Interbrew (Belgium) 36.8 Carlsberg (Denmark) 33.7 Grupo Modelo (Mexico) 30.0 Kirin (Japan) 29.2 Foster's (Australia) 28.7

 

AmBev Earnings: $5.73 billion Actives: $4.5 billion Employees: 17 mil Factories: 50 Production in liters: 8.9 billion

Beer and chopp (as draft beer is called in Brazil) has inspired some of Brazil's greatest composers, who not only imbibed the potion as well as sang about it. While Paulista (from São Paulo) composer Adoniran Barbosa only drank Antarctica, some icons of bossa nova like Tom Jobim, Vinicius de Moraes, and João Gilberto were Brahma guys. Caetano Veloso and Chico Buarque de Hollanda even wrote a famous ditty in which they celebrate the Brazilian way of life and Brahma:

Vai Levando Caetano Veloso and Chico Buarque Mesmo com toda fama Com toda Brahma Com toda cama Com toda lama A gente vai levando A gente vai levando A gente vai levando essa chama Mesmo com todo emblema Todo problema Todo sistema Todo Ipanema A gente vai levando A gente vai levando A gente vai levando essa gema Mesmo com nada feito Com a sala escura Com um nó no peito Com a cara dura Não tem mais jeito A gente não tem cura Mesmo com toda via Com todo dia Com todo ia Quando não ia A gente vai levando A gente vai levando Vai levando Vai levando essa guia

Keep on going Even with all the fame With all the Brahma With all the bed With all the mud We keep on going We keep on going We keep on taking this flame Even with all the emblem All the problem All the system All Ipanema We keep on going We keep on going We keep on taking the gem Even with nothing done With the room dark With a knot in the chest With a straight face There is no way We have no cure Even with all the road With the whole day With all the going When not going We keep on going We keep on going Keep on taking Keep on taking this way

The merger has made some people recall with nostalgia a phrase attributed to Vicente Matheus, the late president of the Corinthians soccer club: "We would like to thank Antarctica for having sent us these little Brahmas." The same phrase wouldn't be funny at all today, just a portrait of a new reality.

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