Post-merger branding strategies and market power in the Brazilian brewing industry

• Published in: Journal of Agribusiness in Developing and Emerging Economies
• Main Authors: Cerqueira, Malú N.P.S., Aguiar, Danilo R.D., Figueiredo, Adelson Martins
• Format: Article in Journal/Newspaper
• Language: English
• Published: Emerald 2020
• Subjects: Antarc*; Antarctica
• Online Access: http://dx.doi.org/10.1108/jadee-09-2019-0160; https://www.emerald.com/insight/content/doi/10.1108/JADEE-09-2019-0160/full/xml; https://www.emerald.com/insight/content/doi/10.1108/JADEE-09-2019-0160/full/html

Purpose The purpose of this paper is to investigate firm strategies and the exertion of market power in the brewing sector in Brazil following a merger between the two largest brewers (Brahma and Antarctica) that created Ambev and given that the existing literature is inconclusive on this subject Design/methodology/approach In this study the authors apply cointegration analysis to price series of beer brands. The authors use the reduced form vector error correction (VEC) model to measure the price responses of beer brands in terms of direction, magnitude and speed. The authors use monthly retail prices for the primary brands of beer in the city of São Paulo, Brazil's largest consumer market. Specifically, the authors use two sets of retail prices, one from bars (the main point of beer sales, with roughly 50% of market share) and another from supermarkets. The series range from 1994 to 2014, depending on the brand. Findings This study indicates that Ambev's two major brands (Skol and Brahma) behave as market leaders, while its third brand (Antarctica) has been used to challenge the low-price competitor (Nova Schin). The authors also found evidence that the pricing policies of Brahma and Antarctica have changed toward cooperation following the creation of Ambev. Research limitations/implications The main limitation of this article is that the authors only had access to retailer data. As the merger involved brewers, the authors would ideally use manufacturer beer prices in their econometric analysis. However, the consistency of our results suggests that retailers have been passively transmitting brand strategies launched at a manufacturer level. Social implications As the dominant firm created following the merger of the two largest brewers appears to use one of its brand to restrict entry of competitors and the premium brands to enjoy high profits, consumers tend to be harmed by high beer prices and lack of options. Furthermore, small and medium-size companies cannot grow due to entry barriers created by the ...