BEER IN COLOMBIA - ANALYSIS

Country Report | Jun 2018

HEADLINES Market Sizes

Total volume sales of beer remain steady at 2.4 billion litres in 2017 Sales of Beer
Premiumisation and craft beers driving sales of beer Total Volume - million litres - 2003-2022

Imported lager sees the highest total volume growth rate of 24% in 2017 2.436 Forecast
Average retail unit prices of beer increase by 8% in current value in 2017 3.000

Bavaria SA still the leading company with a 96% total volume share in 2017
2.500
Over the forecast period, total volume sales are expected to see a CAGR of 4% to
reach 2.9 billion litres in 2022 2.000

PROSPECTS 1.500

Flat beer sales in 2017

1.000
Beer faced a challenging 2017, with total volume sales stagnant, impacted by adverse
weather conditions with low temperatures and prolonged rainy seasons, budget 500
restrictions among consumers due to economic difficulties and the increase in value
added tax of three percentage points, which impacted prices of many goods and
services in the country, hitting hardest the low- and middle-income consumer groups 0
2003 2017 2022
that are important beer drinkers. The new police code in 2017 also negatively affected
beer sales because of a misinterpretation of the part that prohibits the consumption of
alcoholic drinks in public places. In Colombia, many small independent grocers have
tables outside where people can enjoy a beer, soft drink or any other product that the Sales Performance of Beer
store offers. The code only bans consumption in such places, but the general % Y-O-Y Total Volume Growth 2003-2022
perception is that sales of beer and alcoholic drinks are forbidden at independent small

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grocers, the most important channel for beer, which is not true. The new code is
regulating the places permitted for consumption. 0.2% Forecast
20%
Premium beers are thriving
Domestic mid-priced lager beer continues to have the largest share of total volume
sales, but it has lost share to premium and craft beers. For many years the presence of 15%
premium brands was concentrated on locally-produced beer, a small participation of
imported brands and an atomised industry of artisanal beers. Nevertheless, the
sophistication in tastes of Colombians, the rapid expansion of the pub culture and the 10%
arrival of Central Cervecera de Colombia in 2015 have expanded the alternatives for
consumers, who are more open to new experiences around beer, with tastings and
pairings with different types of food gaining popularity. 5%

Tax reform of alcoholic drinks has a positive impact on beer

0%
The tax reform for alcoholic drinks of 1 January 2017 had a major impact on wine and
spirits because it imposed an ad-valorem tax plus a specific tax per each degree of
alcohol content and a VAT of 5%, but beer was only affected by the increase in the -5%
2003 2017 2022
general tariff of VAT from 16% to 19%. As a result, the variation of beer prices was
moderate compared with other alcoholic drinks and encouraged many consumers to
switch to beer, mainly to premium and craft brands.
Sales of Beer by Category
COMPETITIVE LANDSCAPE Total Volume - million litres - 2017 Growth Performance

Bavaria SA continues as the top player Dark Beer

0,5
Bavaria SA, now globally owned by Anheuser-Busch InBev NV, continues to hold the Lager
largest volume share of beer, but over the review period it faced competition from 2.415,0
Central Cervecera de Colombia SAS, craft beers and imported brands. Domestic brands Non Alcoholic Beer
owned by Bavaria continue to be well positioned among Colombians, and the company 20,1
continues with similar promotional strategies to its former owner SABMiller. One of Stout
the most interesting strategies that the company carried out for Aguila, its flagship -
brand, was to reduce the price from November 2017 until July 2018, after the FIFA -5% 70% 140%
World Cup ends, to the prices of 2014, when FIFA World Cup 2014 took place, to boost
BEER 2.435,6 CURRENT % CAGR % CAGR
demand amid economic deceleration, in which prices are increasingly becoming a key YEAR % 2012-2017 2017-2022
purchasing decision variable. The change of ownership of Bavaria also brought new GROWTH
brands like Stella Artois and is giving new impetus to Budweiser and Corona, which
have been displaying healthy growth.

New brands arrive with Central Cervecera de Colombia SAS

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Since 2015 Central Cervecera de Colombia SAS has introduced new brands in the mid- Competitive Landscape
priced segment like Tecate and Sol, which have enjoyed great acceptance among
Colombians. Heineken is recording double-digit growth and has been gaining visibility
through the sponsorship of electronic music festivals in the country, while being the Company Shares of Beer
official sponsor of UEFA Champions League also contributes to improving recognition of % Share (NBO) - Total Volume - 2017
the brand as many Colombians follow European teams that the leading Colombian
Bavaria SA 95.7%
footballers play for. Heineken, a premium beer, reduced its prices in 2017 as part of a
corporate strategy to reach consumers in low-income segments. Bogotá Beer Co SA 2.4%

Discounters importing low-priced beers Central Cervecera de Col... 1.3%

Almacenes Éxito SA 0.2%

A changing landscape in the beer market has been crucial to attracting new imported
brands in all price tiers. One of the most interesting movements observed during 2017 Others 0.3%
was the presence of imported beer brands, mainly German, at discounters like D1,
which have been directly importing the product and are offering it at low prices that
reach a maximum of COP2,000 per 330ml metal can.

CATEGORY BACKGROUND

Lager price band methodology

During 2017, the beer category has seen new brands in the mid-priced segment like
Sol, Tecate or Coors Light being accepted by Colombians, but the majority of sales in
this segment are still dominated by domestic brands like Aguila and Poker, which
offer a variety of bottle sizes suitable for different types of consumers or moments
of consumption. In premium brands, Club Colombia remains the most
representative brand, with craft beers like BBC also gaining ground and distribution
after being acquired by AB InBev.
The beer culture in Colombia is expanding beyond the traditional domestic brands
with craft beers and imported brands with global recognition like Stella Artois
attracting more sophisticated consumers.

Summary 1 Lager by Price Band 2017

Category Price range per litre

Premium COP6,320-14,212
Mid-priced COP5,272-9,953
Economy n/a

Source: Euromonitor Interna tiona l from officia l s ta tis tics , tra de a s s ocia tions , tra de pres s , compa ny
res ea rch, s tore checks , tra de interviews , tra de s ources

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Note: Price ba nds for la ger a re ba s ed prima rily on price, but pos itioning a nd pa cka ging a re other Brand Shares of Beer
fa ctors tha t a re cons idered in cla s s ifica tion % Share (LBN) - Total Volume - 2017

Table 1 Number of Breweries 2012-2017 Poker 31.8%

2012 2013 2014 2015 2016 2017 Aguila 28.4%

Breweries 8 8 8 8 8 8 Aguila Light 11.5%
Craft breweries 44 56 66 84 106 136 Pilsen 9.6%

Source: Euromonitor Interna tiona l Club Colombia 6.7%

Costeña 3.4%
Bogotá Beer Co 2.4%
Corona Extra 1.3%
Poker Ligera 1.0%
Aguila Cero 0.8%
Redd's 0.7%
Heineken 0.6%
Cola y Pola 0.5%
Coors Light 0.3%
Budweiser 0.2%
Sol 0.2%
Tecate 0.1%
Others 0.4%

Increasing share Decreasing share No change

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