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In-Line Q2 for Ambev but Further Cost Pressures Loom

Analyst Note

| Philip Gorham, CFA, FRM |

Ambev delivered a second quarter with upside to our expectations on the top line. Organic volume growth of 19% was broad-based and comfortably beat our forecasts. As expected, the gross margin softened, down 50 basis points organically, and we think there is likely to be more pressure to come in the latter half of the year. Ambev is a wide-moat company with dominant market positions and better-than-average pricing power. We have high conviction that even if margins continue to contract this year, the firm will be more than able to offset inflationary pressure in the medium term. We reiterate our BRL 18 fair value estimate, and with the stock having pulled back as commodity prices have continued to rise, we now consider it to be fairly valued.

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Company Profile

Business Description

Ambev is the largest brewer in Latin America by volume and the fourth- largest beer producer in the world. It produces, distributes, and sells beer and PepsiCo products in Brazil and other Latin American countries. It also owns Argentina's largest brewer, Quinsa. Ambev was formed in 1999 through the merger of Brazil's two largest beverage firms, Brahma and Antarctica. In 2004, Ambev combined with Canadian brewer Labatt, giving Interbrew (now Anheuser-Busch InBev) a controlling interest.

Rua Dr. Renato Paes de Barros, 1017, 3rd Floor
Sao Paulo, SP, 04530-001, Brazil
T +55 1121221200
Sector Consumer Defensive
Industry Beverages - Brewers
Most Recent Earnings Jun 30, 2021
Fiscal Year End Dec 31, 2021
Stock Type
Employees 50,479