The Miami Herald / November 25, 1995
By Larry Luxner
CARACAS -- Donald DeVost, chief financial officer at Cerveceria Polar, Venezuela's biggest brewery, longs for the days of ex-president Carlos Andres Perez.
"Under CAP, we had a far better climate for businesses, no foreign-exchange or interest controls, and free trade at the borders," the beverage executive laments. "Now all these things are gone. I don't see any change of policy until we have another foreign-exchange crisis."
Against that backdrop, it's no surprise the Venezuelan beer market is flat. What's new is the fact that Polar, the world's 19th largest brewer, is getting some unexpected competition from Brazil's Companhia Cervejaria Brahma, the world's No. 5 brewer.
Brahma, acquired in 1989 by Brazil's Banco Garantia, has annual sales exceeding $2 billion. It recently announced a $575 million domestic expansion program to construct two new breweries in Rio de Janeiro and Santa Catarina, and a $108 million joint-venture brewery in Argentina.
Likewise, early last year, Brahma purchased a controlling interest in, and assumed administrative control of, Venezuela's Cervecería Nacional in the city of Barquisimeto, west of Caracas. Brahma invested $50 million in Nacional's shares, improving the Barquisimeto plant -- the only one since the Caracas plant was shut down -- and putting in a distribution network. This year, it invested an additional $40 million in "management operations," marketing and employee training in order to increase its market share to around 20% by 1998, according to VenEconomy Weekly,a Caracas business magazine.
Distribution of Brahma Chopp began in the Venezuelan state of Lara, where the brewery -- which can produce over 200 million liters of beer annually -- is located; it immediately attracted a strong following. Brahma was then introduced in Caracas, in a lavish affair at the five-star Hotel Eurobuilding. The company has since canceled a distribution contract with Polar and set up its own network of independent contractors, almost all of which have come from Brazil, the newsletter reports, adding that Brahma has 250 delivery trucks at its disposal.
Yet Polar's DeVost says his conglomerate, headquartered in the Caracas suburb of Los Cortijos de Lourdes, currently has a "solid" 90% of the Venezuelan beer market, with Maracaibo-based Regional claiming another 7% and Brahma's Nacional only 3%.
Regardless of the discrepancies, Venezuela's beer market is estimated at 16.5 million hectoliters a year, about 78 liters for each of the country's 21 million inhabitants. That's unusually high for a country which is also among the world's leading producers of rum. Three of the world's top 10 rum distillers -- Industrias Pampero, Santa Teresa and Licoreras Unidas -- are based in Venezuela. Yet many Venezuelans, particularly younger ones, prefer beer over more traditional beverages.
"This per-capita beer consumption has remained constant even though the population has increased," said DeVost, a native of Vermont who has spent 20 years in Venezuela. "We don't have the seasonal variety you'd find in Brazil or Argentina. We shoot up in December, around Christmas, and also in March and April, around Holy Week. In a normal month we sell 1.3 million hectoliters, compared to 1.8 million around Christmas."
Polar, which has been around for nearly 55 years, prides itself on the company's well-organized distribution system, down to the final point of sale.
"Polar instituted just-in-time in the 1940s, selling every day rather than once a month," said Alejo Planchart, director of the executive committee and president of Cervería Polar del Centro C.A. "The idea was to keep a stock of fresh beer. We never gave discounts on quantity, because then people would buy large volumes and the beer would turn stale."
DeVost, noting that Polar's profit margins "haven't suffered too much" in the current crisis, says his company sells one of the most economical beers in the world. A 12-ounce can of Polar currently costs 85 bolívares(50 cents at current exchange rates), while a 7-ounce bottle goes for only 45 bolívares(26 cents). Between 70% and 80% of Polar beer is consumed in returnable glass bottles, says DeVost. "We get as many as 35 trips out of a single bottle. We eventually have to destroy the bottles because they lose their appearance."
In addition to sales within Venezuela, Polar also exports to Dade County, "where we have a loyal following of Cubans," and to nearby Caribbean nations. DeVost claims Polar easily outsells Heineken in the Dutch-speaking islands of Aruba and Curacao.
Yet he adds that "because of the economic crisis, all hard spirits have gone down, while beer has remained stagnant." Whisky is taking a particularly severe beating this season following the Caldera administration's decision to slash quotas on dollars assigned for whisky imports -- the first of a series of measures designed to cut imports of luxury items and boost Venezuela's shaky foreign reserves.
Despite its petroleum wealth, Venezuela's 1995 gross domestic product is expected to drop for the third year in a row, and prices are climbing by 70% a year. Thanks to runaway inflation, new 2,000-bolivar and 5,000-bolivar banknotes are being introduced. The 1,000-bolivar note -- the highest now in circulation -- is worth only $5.88 at the official rate of exchange, which is 170 bolivares to the dollar.
"The overall investment climate hasn't improved much at all since foreign-exchange controls took effect," said a U.S. Embassy official here. "We suspect that investment is down, though growth with Colombia has been quite substantial. There's a fair amount of contraband trade with Colombia. On the border, you can get 230 bolivares to the dollar."
The only good news might be that, after seeing its GDP decline by 1% in 1993 and 3.3% in 1994, there might be no drop at all this year, and even a slight improvement in 1996.
"It all depends on economic policy," DeVost says. "If the government starts producing incentives, the beer market will grow faster than the overall economy. Venezuela has 15% unemployment. You put these people to work, and they'll become beer-drinkers."