Shares of the world’s second-largest brewer fell the most in almost three years yesterday after it said it was expanding more quickly than expected in Latin America’s biggest economy, where its beer business is less profitable than elsewhere.
Heineken became Brazil’s second-biggest brewer last year when it bought Kirin Holdings’ business there for about 2.2billion real (R7.8bn). The Japanese company had stumbled amid competition with industry giant AB InBev, and now Heineken is stepping up the fight with increased marketing, causing a decline in its overall profitability even as it sells more beer.
“We weren’t expecting these products to accelerate so fast in the first year,” said chief financial officer Laurence Debroux.
The company’s roster of brands in Brazil now includes Schincariol in the mass-market segment as well as more expensive Devassa and Eisenbahn lagers. Kirin’s Brazil unit was not profitable at the time of acquisition, though it is now, Debroux said.