Heineken to Become Second Biggest Beer Business in Brazil
Heineken has agreed to acquire Brasil Kirin, one of the largest beer and soft drinks producers in Brazil, from Kirin Holdings of Japan for €664 million. The transaction will transform Heineken’s existing business across Brazil by extending its footprint, increasing scale and further strengthening its brand portfolio. On closing, Heineken will become the second largest beer company in Brazil, with a stronger commercial platform from which to capture future profitable growth in an exciting beer market.
Brazil is the fifth largest country in the world with over 200 million people. Beer volume in 2015 was 139 million hectolitres, making it the third largest market globally. Whilst the macroeconomic environment has been challenging over the last few years, the longer term fundamentals of the Brazilian beer market are highly attractive supported by a growing population and a positive GDP outlook. In addition, the premium segment of the beer market, which has outperformed the broader beer market in recent years, has a relatively low share compared to many other markets, providing a compelling and attractive opportunity for future growth.
Jean-François van Boxmeer, chief executive and chairman of Heineken.
Brasil Kirin is a large beer producer in Brazil, operating 12 production facilities with its own distribution network. It has a particularly strong presence in the North and North East, where Heineken currently has less exposure. It owns an extensive portfolio of beer brands and its share of the Brazilian beer market in 2015 was c.9%. The portfolio includes Schin, one of Brazil’s largest brands covering the mainstream and value segments, as well as the Devassa brand. Furthermore, it owns the speciality brands Baden Baden and Eisenbahn, which will complement Heineken’s existing premium portfolio.
Brasil Kirin also has a soft drinks business comprised of carbonated drinks, bottled water and other beverages. The soft drinks portfolio, which has around 2%1 market share, includes the iconic Itubaína brand.
Jean-Francois van Boxmeer, chairman and chief executive of Heineken, comments: “This transaction marks a step-change in scale in an exciting beer market, building on our success to date in the premium segment and strengthening our platform for future growth. It reiterates our commitment to the Brazilian market and confidence in our ability to generate attractive returns over the long-term across all segments of the market.”
Heineken expects to deliver significant cost synergies from the acquisition through production efficiencies, including logistics and brewery optimisation, and through optimising selling, general and administrative expenses. However, the transaction is likely to be dilutive to Heineken’s margin in 2017.
Completion of the acquisition is subject to customary regulatory approvals and is expected in the first half of 2017.
