Latin Finance - May/June 2011 - 23

backus

as it has done with bottling plants for soft in the coming years. been done anywhere else in the world,” He and Paredes agree that per capita drinks, says Paredes. He says, however, says Priday. consumption could increase to 60 liters by that the company, which now operates One brand, Cristal, is targeted to the 2015. That would put Peru on the same in 17 countries in LatAm and Southeast lower and middle segments and is the level as Brazil and Mexico, but still far leader in Lima, the capital, giving it 36.5% Asia, could take advantage of free-trade agreements (FTA) signed by the Peruvian behind the regional leader, Venezuela, of national market share. Lima is home to where per capita consumption is close to government to export beer brewed in around 34% of the country’s population. 100 liters. Peru. Next is Pilsen, which targets more or less It exports to the US and Europe – the the same audience, but outside the capital. Strong Future It has 30.4% of the market. The remainder US FTA has been in place since 2009, Priday says additional investment is the European Union FTA has been is divided among regional brews and the required every year, because the company is signed but not yet implemented – and is high-end Cusqueña, which has jumped “absorbing capacity as quickly as we add it.” looking toward Asia. Peru is preparing to from around 1% of Backus’ revenues in Backus has been investing an average implement its FTA with Thailand, where 2006 to 10% of company revenues today. of $150 million annually for The competition also Average Quarterly Market Share % the past two years in increasing takes credit for helping Competition hasn’t hurt Backus capacity and is likely to to expand the market continue at this pace for the and continues to roll out 100 coming two to three years, says aggressive strategies to Backus Ambev AJE Group Priday. grow the pie while slowly 90 The company, however, chipping away at Backus’s 80 has no plans to access capital formidable presence. markets. “We do not need “Competition has 70 financing. It will all be internal been the major factor 60 to be quite honest, which is in the increase in per 50 good,” he says. Revenue was capita consumption. All more than $1.7 billion in beer companies offer better 40 and soft drinks last year, and products at better prices 30 should close in on $2.0 billion and with greater attention this year. to the needs of the 20 He adds, however, that if customers. This has led to 10 Backus does decide to seek the overall expansion of financing “we could issue a the market,” says Alfredo 0 1Q/2006 1Q/2007 1Q/2008 1Q/2009 1Q/2010 1Q/2011* bond, which would not be a Paredes, corporate affairs problem for us or for Peru at director for the AJEGroup, * Estimate this time.” says. Source: CCR Latin America, LF design Priday says there are three AJEGroup’s goal is things that make him extraordinarily AJEGroup opened its second soft-drink to capture 10% of the market with its optimistic about Backus’ future in Peru, plant last year. four brands, and would like to position including strong economic growth, the Exports, however, are minimal for all Tres Cruces, rolled out in February with switch from informal alcohol and the trend companies in the market, accounting for a $5 million marketing campaign, as towards frequency as opposed to intensity, around $3.5m. Backus represents 94.7% the chief local competitor to Backus’ with people having a few beers during the of the export market. Cusqueña. These two premium beers, as Priday says competition has been good week instead of gulping down as many as well as imports, account for around 8% possible on weekends. for the market, but two big competitors of the total beer market. Beer imports are “We are in a virtuous position. We may is enough. “Competition keeps us wise extraordinarily low, only slightly above and aware. It is important that consumers not have the volumes as other markets, $2.5m in 2010. but we have a strong economy, strong The company, however, readily admits have options, but we want to be the best brands and a competition that keeps us option,” he says. that the beer market will never be a core innovating. This adds up to strong revenue With the economy targeted to grow component of its portfolio. Beer sales above 7%, according to the Economy and growth,” he says. LF represent less than 5% of AJEGroup’s Finance Ministry, and enforcement of revenue in Peru. The bulk of its income is the new legislation to control illegal and soft drinks, followed by bottled water and > UPDATE informal alcohol production starting to juices. For daily news on Peruvian markets, see gain steam, Priday forecasts annual sales AJEGroup has no immediate plans to www.latinfinance.com increasing by as much as 14% annually expand beyond Peru with new breweries

May/June 2011

LatinFinance 23

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Latin Finance - May/June 2011

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