Brazil: Beer industry affected by colder-than-usual weather

Colder-than-usual weather, especially across South and Southeastern Brazil, is again weighing on the beer industry, raising concerns of another sharp decline in volumes in the third quarter. The warning signs came after alcoholic beverage output in July was weaker than expected, Valor International – Globo reported on September 18.

At the same time, the ongoing price war has kept Ambev in focus. Analysts pointed to the brewer’s decision to bring forward price hikes as one reason behind its steep second-quarter volume decline. Ambev, the leading brewery in Brazil, raised prices in mid-April, while Heineken and Grupo Petrópolis followed only in July and August. August inflation data, showing beer prices stabilizing, has been read as a partial relief for Ambev.

Industry challenges were clear in the second quarter, when overall beer volumes dropped. Executives across companies cited weather as the main driver. Ambev was hit hardest, reporting an 8.9% decline in Brazilian volumes—its steepest fall on record outside the pandemic’s first quarter in 2020. CEO Carlos Lisboa said sales had improved early in July. Yet, the second half of the month turned unusually cold in key markets.

According to the Brazilian Institute of Geography and Statistics (IBGE), alcoholic beverage production fell 15.4% year-on-year in July. Although no product breakdown was released, beer typically accounts for about 90% of the category.

“This data doesn’t provide an exact figure for what could happen in the quarter. But we’re talking about a 15% decline. It’s a clear signal the quarter may be tracking negatively,” said Renata Cabral, an analyst with Citi.

Meanwhile, the BTG Pactual team of analysts stressed that production declines don’t always mean weaker sales. Still, analysts Thiago Duarte and Guilherme Guttilla noted that with Ambev holding over 60% market share, “a 15% sector-wide drop is hardly conceivable without Ambev’s participation.”

The analysts point out that Ambev last raised prices in the second quarter of 2012. “We are increasingly motivated to believe that this is affecting volumes more seriously than breweries had predicted.” BTG now forecasts Ambev’s Brazilian beer volumes to fall 1.8% year-on-year in the third quarter.

Regarding competition, the outlook seems to be stabilizing. August inflation data showed beer prices rising 4.5% year-on-year, compared to 5.1% for overall inflation. It is a fact that beer prices have increased less than of other products, but the spread has been bigger: 1.6 percentage point in June and 2.1 percentage points in May.

In the market, August data was seen as a relief for Ambev, showing that competitor price adjustments have begun to take effect, narrowing the brewer’s competitive disadvantage.

Price-driven market share battles are nothing new in the industry. Late last year, Grupo Petrópolis, owner of Itaipava, rolled out deep discounts across its portfolio to regain share and strengthen cash flow amid its restructuring process.

Today, Ambev’s pricing strategy is under close watch. On one hand, aggressive price hikes risk ceding share to rivals; on the other, holding back on increases pressures margins.

In a statement, Ambev said it had a solid start to 2025. The early price adjustment, it explained, was intended to prepare the company for expected cost increases in the second half. “[The increase was implemented] with the awareness that it could bring short-term pressure on volumes. Even so, share loss was very limited, in the low single digits, in line with Nielsen data,” the brewer noted.

Ambev also stressed that 2024 was the hottest year in the past decade, creating a tougher comparison base for 2025, which has been atypically colder.

Heineken, in a separate statement, pointed to a slowdown mainly in on-premise consumption, hit by lower temperatures in the South and Southeast and by current macroeconomic conditions. “Still, with most of our volume concentrated in the off-trade [supermarkets], we can weather this period with less impact,” the company said.

“We believe in the potential of the high season, which historically drives beer consumption, and in brand events and activations such as The Town festival and Formula 1, in addition to year-end celebrations, which should set the tone for the recovery of on-premise demand,” Heineken added.

Grupo Petrópolis did not immediately respond to requests for comment.