This excerpt taken from the ABV 6-K filed Mar 9, 2005.
THE REAL AMERICAN BEVERAGE COMPANY
In 2004, we consolidated our position as the Real American Beverage Company, with operations in the three regions of the continent extending from Patagonia to Alaska. We maintained a dynamic and expanding presence in the distribution and marketing of beer in each one of the countries in which we operate. We are the leader in the beer markets in Brazil, Canada, Argentina, Bolivia, Uruguay and Paraguay. We fulfilled the promise inherent in our name and the ambitious strategic goal established when Brazils Brahma and Antarctica brewer-soft drink companies merged to form AmBev just five years previously. At the end of 2004, AmBev was poised for further growth after delivering 22% EBITDA real organic growth. We demonstrated during the year that our company has the people, processes and results-driven culture to be successful not only in our home market of Brazil but also beyond its borders. We have developed effective ways to replicate the best methods and practices that have worked so well for us in Brazil throughout the expanding AmBev network of bottling plants, distribution systems and beverages businesses around the Americas. This has involved a company-wide effort to ensure that we have the best people and policies in place in each one of our operations, enabling us to compete for market leadership in every segment and in every country we choose to enter.
The bottom line is that the new, enlarged AmBev is the second-largest brewer in the Americas in terms of volumes and cash generation. Excellence in operations, the best execution in the industry, strong brands and strict financial discipline were among the factors that allowed AmBev to engineer a consistent recovery of beer market share in Brazil, grow our Brazilian soft drink and non-alcoholic businesses and raise or maintain share in each one of the Hispanic Latin American markets where we do business. Along with overall market share increases, sales volumes, margins and profits were higher, in some cases spectacularly so, in all of the countries in which we operate. Of special importance was the performance of our strategic partner, Quinsa, which again delivered outstanding growth for us in the Southern Cone region of South America.
But 2004 was particularly notable for us as the year we established, as of August 27, 2004, a major foothold in North America. AmBev and Belgiums Interbrew (now InBev) concluded a business combination that included the merger of Labatt Brewing Company Limited, a leading brewer in Canada, as a wholly owned AmBev franchise. The combination with Interbrew has led us into an exceedingly valuable global alliance with a top world player and given us a great platform for exporting to the U.S. and other international destinations, while the incorporation of Labatt provided us a 41% volume share of the Canadian beer market. We are very enthusiastic about our prospects in North America and are working towards catalyzing the exchange of best practices between Labatt and AmBev. We are focusing on moving up the learning curve to develop a winning strategy for this important new AmBev operation.
The business combination with Interbrew and the incorporation of Labatt also led to an upgrade of AmBevs foreign corporate credit rating to Investment Grade level, the first Brazilian company to achieve such status. In December, Standard & Poors Ratings Services raised Ambevs corporate credit rating to BBB- from BB- and also raised the local currency corporate credit rating to BBB from BBB-, reflecting the improvement in our business and financial profiles after the Labatt merger and Interbrew combination were concluded. As a result, we will have improved access to less expensive financing.
Such recognition comes as no surprise to us. Everyone at AmBev is working on delivering long-term, sustainable results as a part of our performance-driven culture and the drive and leadership quality of our people. It should also be noted that although we are now concentrating on improving our existing operations around the hemisphere, we will continue to evaluate new opportunities in markets and countries where we are not yet present.
As our companys reach in recent years has quickly radiated outwards from Brazil through a combination of alliances, greenfield projects and acquisitions, we decided in 2004 to put a new management structure in place to fully benefit from the new opportunities that will be emerging. Consequently, during the year we designated one general manager for each of the new business units: Brazil, Hispanic Latin America (which we now call HILA) and North America. The restructuring will substantially enhance our ability to efficiently manage our businesses across borders and continents.
AmBev is a company that challenges itself every day. We have an unquenchable thirst for growth and we dream what seem to be impossible dreams and then our unbeatable and highly motivated team rolls up its sleeves and works harder than anybody else in the industry to make them come true. We became the real American beverage company in less than five years by setting very high goals and then systematically surpassing them: we expect nothing less from the future as we strive to achieve increasingly impossible margins and add economic value for shareholders. Around here, thats simply the norm!
01811-2 COMPANHIA DE BEBIDAS DAS AMÉRICAS-AMBEV 02.808.708/0001-07
11.01 MANAGEMENT REPORT