Compañía de las Cervecerías Unidas S.A. (ADR) (CCU), Companhia de Bebidas das Americas (ADR) (ABV): Is It Worth Investing in Brewers in the Americas?

According to Euromonitor, beer will have the fastest per capita growth among alcoholic beverages in Latin America. In Latin America, growth in per capita beer consumption will be mainly driven by growth in domestic standard lager beer. Beer volumes continued to decline in North America as consumers looked for value over volume. Wine per capita consumption will increase 10% in both regions between 2012 and 2017.

A market leader in Chile

Compañía de las Cervecerías Unidas S.A. (ADR) (NYSE:CCU) is the largest brewer in Chile. It distributes several leading brands, including Cristal, its most important product, and holds 80% market share in the Chilean beer market. It is the only brewery with a nationwide production and distribution network in Chile.

Compañía de las Cervecerías Unidas S.A. (ADR) (NYSE:CCU) operates as the third-largest brewer in the Argentine market, which presents additional growth opportunities. Its main competitor is Quilmes, which holds nearly three fourths of local market.

In addition, it is Chile’s second-largest bottler of carbonated beverages and the leader in the mineral water market. It also has wine-making operations in Argentina and Chile. Compañía de las Cervecerías Unidas S.A. (ADR) (NYSE:CCU) is thus well-diversified between alcoholic and non-alcoholic businesses, providing some stability to operations.

The company’s first quarter net income of $85.3 million was lower than expected. Sales increased 8% year-over-year, and volumes rose 9.7%. Gross profit margin rose by 290 basis points to 57.3%, but normalized EBIT rose only 3%, as higher labor and distribution costs continue to weigh on bottom line growth.

The giant

Companhia de Bebidas das Americas (ADR) (NYSE:ABV), commonly known as AmBev, is the largest brewer in Latin America. It produces, distributes, and sells beer and PepsiCo products in Canada, Brazil and other Latin American countries. It also owns Argentina’s largest brewer, Quinsa.

Brazil is one of the world’s largest beer markets by volume and it is Companhia de Bebidas das Americas (ADR) (NYSE:ABV)’s largest division, as the company has 69% of market share. In fiscal year 2012 Brazilian beer operations accounted for 60% of total sales.

Companhia de Bebidas das Americas (ADR) (NYSE:ABV) also has important market share in other countries, such as Argentina (77%) and Canada (41%). In Canada it owns the Labatt brand. Companhia de Bebidas das Americas (ADR) (NYSE:ABV), combined with Molson Coors, controls just over 80% of the Canadian beer market.