Ambev: An emerging market company with a solid ROIC.

Ambev is the largest brewer in Latin America and one of the most dominant beverage companies in the region. Through a portfolio of iconic local brands such as Brahma, Skol, Antarctica, and Guaraná Antarctica, alongside global brands like Corona, Stella Artois, and Budweiser, the company has built leading positions across beer and non-alcoholic beverages. Supported by an extensive distribution network, scale advantages, and a growing digital ecosystem, Ambev continues to strengthen its market leadership while expanding into new categories and consumption occasions. The question remains: Does this Latin American beverage leader deserve a spot in your portfolio?

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The Business

Ambev is the largest brewer in Latin America by sales volume and one of the largest beverage companies in the world. The company produces, distributes, and sells beer, carbonated soft drinks, energy drinks, sports drinks, bottled water, ready-to-drink beverages, and other alcoholic and non-alcoholic products across the Americas. Its operations span Brazil, Canada, Argentina, Bolivia, Paraguay, Uruguay, Panama, the Dominican Republic, Guatemala, Cuba, and several other markets throughout Latin America and the Caribbean. Originally formed through the combination of the historic Brazilian brewers Brahma and Antarctica, Ambev has expanded over decades through acquisitions, strategic partnerships, and geographic expansion, establishing itself as the dominant beverage company in many of the markets in which it operates. Today, the company serves millions of consumers through a portfolio of local and global brands while benefiting from its position within the Anheuser-Busch InBev ecosystem. Ambev organizes its operations into four primary business segments: Brazil, Central America and the Caribbean, Latin America South, and Canada. Brazil is by far the company's most important market, accounting for more than half of total net sales and approximately 70% of total beverage volume. The Central America and Caribbean segment includes operations in countries such as the Dominican Republic, Guatemala, Panama, and Cuba. Latin America South covers Argentina, Bolivia, Paraguay, Uruguay, and Chile, while the Canadian segment consists primarily of Labatt, one of Canada's leading brewers. This diversified geographic footprint provides exposure to multiple consumer markets while reducing dependence on any single country outside Brazil. The company's business model is built around producing and distributing high-volume beverages through a combination of owned brands, licensed brands, and exclusive distribution agreements. Beer remains the foundation of the business and represents the majority of revenue and profit. Ambev owns many of the most recognizable beer brands in Latin America, including Skol, Brahma, Antarctica, Quilmes, Patricia, Presidente, Paceña, and Labatt Blue. In addition, the company produces, distributes, or markets global premium brands such as Budweiser, Corona, Stella Artois, Michelob Ultra, Beck's, Hoegaarden, Leffe, Modelo Especial, and Spaten through agreements within the Anheuser-Busch InBev group. This broad portfolio allows Ambev to participate across multiple price points, consumer segments, and drinking occasions, ranging from value-oriented local beers to premium international brands. In addition to beer, Ambev operates a significant non-alcoholic beverage business. Through long-term agreements with PepsiCo, the company holds exclusive bottling and distribution rights for products such as Pepsi, Gatorade, H2OH!, and Lipton in several important markets, including Brazil and Argentina. The company also owns Guaraná Antarctica, one of Brazil's most iconic soft drink brands, and distributes Red Bull through selected channels. These products provide Ambev with exposure to beverage categories beyond beer and allow the company to leverage the same manufacturing, logistics, and distribution infrastructure across a broader portfolio of products. A key aspect of Ambev's business model is its extensive route-to-market network. The company distributes its products through a combination of company-owned distribution centers and exclusive third-party distributors. In Brazil alone, Ambev serves approximately one million points of sale, including supermarkets, bars, restaurants, convenience stores, kiosks, and independent retailers. Because beverages are relatively low-value products that are purchased frequently, availability and distribution efficiency are critical. Ambev's ability to place products close to consumers across a highly fragmented retail landscape is one of the most important drivers of its market leadership. The company has also invested heavily in digital platforms that strengthen its relationship with both customers and consumers. BEES serves as Ambev's digital platform for retailers and businesses, allowing customers to place orders, manage inventory, access product recommendations, and purchase products from third-party suppliers through a single ecosystem. In Brazil, more than 94% of active buyers purchase through BEES, and nearly 90% buy exclusively through the platform. Ambev has also developed Zé Delivery, a direct-to-consumer platform that allows customers to order cold beverages on demand. By 2025, Zé Delivery operated in more than 800 Brazilian cities, reached nearly 70% of the country's population, and delivered more than 66 million orders annually. Together, these digital initiatives enhance customer convenience, improve service levels, generate valuable consumer data, and strengthen Ambev's overall ecosystem. Ambev's competitive moat is primarily built on its brand portfolio, distribution network, scale advantages, exclusive partnerships, and digital ecosystem. Among these, brand strength is arguably the company's most important competitive advantage. The company owns some of the most recognized beverage brands in Latin America, many of which have been embedded in local consumer culture for generations. Brands such as Skol, Brahma, Antarctica, Quilmes, Presidente, and Guaraná Antarctica enjoy high levels of awareness and consumer loyalty in their respective markets. Beer is often a habitual purchase where familiarity, trust, and local identity play important roles in purchasing decisions. As a result, established brands tend to retain their market positions for long periods of time and are difficult for new entrants to displace. Ambev's portfolio is further strengthened by its access to some of the world's most valuable beer brands through its relationship with Anheuser-Busch InBev. This allows the company to participate in premiumization trends through brands such as Corona, Stella Artois, Budweiser, and Michelob Ultra while continuing to benefit from the scale and loyalty associated with its local brands. The combination of strong domestic brands and leading global brands enables Ambev to compete effectively across virtually every consumer segment and price point. Another important competitive advantage is Ambev's distribution network. Building a beverage distribution system capable of reaching hundreds of thousands or even millions of points of sale requires enormous investments, local expertise, and decades of execution. In Brazil, where retail distribution remains highly fragmented, Ambev's extensive logistics infrastructure creates a significant barrier to entry. The company can efficiently supply products to large supermarket chains as well as small independent retailers, bars, and restaurants throughout the country. This distribution reach improves product availability, strengthens relationships with customers, and reinforces brand leadership. Scale also provides Ambev with substantial cost advantages. As the largest brewer in Latin America, the company purchases enormous quantities of raw materials, packaging, and logistics services. This purchasing power allows it to negotiate favorable terms with suppliers and spread fixed costs across very large production volumes. Scale advantages extend beyond procurement and manufacturing into marketing, distribution, and technology investments. Because Ambev operates across multiple countries and beverage categories, it can leverage shared infrastructure and expertise in ways that smaller competitors cannot easily replicate. Exclusive partnerships and licensing agreements provide an additional layer of competitive advantage. The company's long-standing relationship with PepsiCo grants exclusive bottling and distribution rights for several important beverage brands in multiple markets. These agreements increase route density, strengthen customer relationships, and improve utilization of the company's manufacturing and distribution assets. Ambev's ability to combine beer, soft drinks, sports drinks, and other beverages within the same distribution system creates efficiencies that benefit both the company and its retail partners. The company's growing digital ecosystem further strengthens its competitive position. Platforms such as BEES and Zé Delivery deepen relationships with customers while generating valuable data on purchasing behavior, inventory needs, and consumer preferences. As more retailers and consumers adopt these platforms, the ecosystem becomes increasingly valuable and difficult for competitors to replicate. The integration of ordering, delivery, payments, marketing, and marketplace functionality creates switching costs and improves customer engagement. These digital capabilities also allow Ambev to respond more quickly to changing consumer trends while improving operational efficiency across its network. The beverage industry tends to reward companies that combine strong brands, broad distribution, and scale advantages. In many of Ambev's core markets, particularly Brazil, the company has spent decades building these advantages and reinforcing them through continued investment. The combination of powerful local brands, access to global premium brands, extensive distribution infrastructure, cost-efficient operations, exclusive partnerships, and digital platforms creates a highly integrated ecosystem that few competitors can match.

Management

Carlos Eduardo Klutzenschell Lisboa serves as the CEO of Ambev, a role he assumed on January 1, 2025, after more than three decades with the company. He joined Ambev in 1993 and has spent virtually his entire professional career within the organization and its parent company, Anheuser-Busch InBev. Throughout that time, he has held a variety of leadership positions across marketing, operations, and regional management, giving him extensive experience across both developed and emerging markets. His appointment as CEO reflects the company's long-standing tradition of promoting leaders from within and developing executives who deeply understand its culture, operating model, and strategic priorities. Carlos Lisboa began his career in marketing and quickly established himself as one of the company's leading brand builders. He played an important role in the development of Skol, which became one of the most successful beer brands in Brazil and helped strengthen Ambev's leadership position in its most important market. His success in brand management and consumer engagement led to increasing responsibilities within the organization and helped establish his reputation as a leader with a deep understanding of consumer behavior and market dynamics. Over the course of his career, Carlos Lisboa has accumulated significant international experience. He served as Vice President of Marketing at Ambev before becoming President of Labatt in Canada, one of the company's most important international operations. He later served as Global Vice President of Global Brands at Anheuser-Busch InBev, where he was responsible for overseeing some of the world's largest beer brands. He also led the Latin America South Zone at Ambev and subsequently the Middle Americas Zone at Anheuser-Busch InBev. These roles provided him with experience managing diverse markets, navigating different economic environments, and balancing the needs of both mature and emerging economies. Carlos Lisboa holds a degree in Business Administration from the Catholic University of Pernambuco and has completed a specialization in marketing from FESP in Brazil. Throughout his career, he has developed a reputation for combining strong commercial execution with a deep understanding of brand building. His background spans both local brands with deep cultural roots and global premium brands, providing him with a broad perspective on the beverage industry and consumer trends. As a leader, Carlos Lisboa places significant emphasis on culture, ownership, and long-term value creation. He has frequently highlighted the importance of dreaming big, acting like an owner, and maintaining high ethical standards. These principles closely align with the culture that has long defined both Ambev and Anheuser-Busch InBev. He has also emphasized the importance of developing talent, maintaining operational discipline, and continuously improving execution across the organization. Given the importance of culture to Ambev's success, his deep roots within the company may prove to be a meaningful advantage. Carlos Lisboa assumed leadership at a time when Ambev continues to focus on premiumization, digital transformation, and strengthening its direct relationships with both retailers and consumers through platforms such as BEES and Zé Delivery. His extensive experience in marketing, brand development, and international operations appears particularly relevant as the company seeks to grow its premium portfolio while continuing to expand its digital ecosystem across Latin America. Given his more than 30 years of experience within the Ambev and Anheuser-Busch InBev system, his proven track record of building leading brands, and his deep understanding of both developed and emerging markets, Carlos Lisboa appears well positioned to lead Ambev through its next phase of growth. His combination of commercial expertise, international experience, and commitment to the company's ownership culture aligns closely with the qualities that have helped make Ambev one of the most successful beverage companies in Latin America.

The Numbers

The first number we will look into is the return on invested capital, also known as ROIC. We want to see a 10-year history, with all numbers exceeding 10% in each year. Ambev has consistently achieved a ROIC well above that threshold, generating returns between 17,8% and 28,1% over the past decade. While ROIC has moderated somewhat from the exceptionally high levels seen in 2016–2018, it has remained remarkably stable around 18–20% in recent years and even improved to 20,3% in 2025. This consistency is particularly impressive given that the company operates in several emerging markets that have experienced economic volatility, currency fluctuations, and changing consumer demand over the period. Several structural characteristics explain why Ambev has been able to maintain such attractive returns on capital. First, the company benefits from an exceptionally strong portfolio of brands. In Brazil, which accounts for the majority of revenue and volume, brands such as Skol, Brahma, and Antarctica have been market leaders for decades. These brands enjoy high consumer awareness, strong loyalty, and pricing power, allowing Ambev to generate healthy profit margins without requiring significant incremental investments. Beer is also a category where consumers often develop long-term purchasing habits, making strong brands particularly valuable assets. Second, Ambev benefits from substantial economies of scale. As the largest brewer in Latin America, the company spreads its manufacturing, logistics, procurement, and marketing costs across enormous production volumes. Scale not only lowers costs but also strengthens relationships with retailers and suppliers. The company's position within the Anheuser-Busch InBev ecosystem further enhances these advantages through access to global procurement capabilities, operational expertise, and best practices. These scale benefits contribute to strong profitability, which is one of the most important drivers of ROIC. Third, Ambev operates a relatively efficient business model from a capital perspective. While the company owns significant brewing and production assets, it distributes a large portion of its products through exclusive third-party distributors and leverages existing infrastructure across both alcoholic and non-alcoholic beverages. Its long-term agreements with PepsiCo allow the company to generate additional revenue and profit through the same manufacturing and distribution network. This helps increase earnings without requiring proportional increases in invested capital. Fourth, management has long emphasized operational discipline and efficient resource allocation. Ambev is known for its culture of cost control, productivity improvements, and disciplined capital spending. Management recently highlighted that its focus on revenue management, costs, expenses, cash generation, and resource allocation allows the company to reinvest behind its brands and strategic priorities while simultaneously protecting profitability and improving ROIC over time. This focus on efficiency has been a defining characteristic of both Ambev and its parent company, Anheuser-Busch InBev, for many years. Fifth, the company's growing digital ecosystem may further support returns on capital going forward. Platforms such as BEES and Zé Delivery improve customer engagement, increase route density, generate valuable consumer data, and strengthen relationships with retailers and consumers. Because these platforms leverage Ambev's existing distribution network, they have the potential to increase profitability without requiring the same level of capital investment as building new breweries or distribution infrastructure. The decline in ROIC from the mid-to-high 20% range seen between 2016 and 2018 to the high teens and low 20% range in recent years does not appear to reflect a deterioration in the underlying business. Instead, it is largely the result of a more mature business, increased investments in digital capabilities and premiumization, as well as the economic challenges that have affected several Latin American markets. Importantly, despite these headwinds, ROIC never fell below 17%, demonstrating the resilience of the company's business model. Looking ahead, I believe Ambev is well positioned to continue generating high ROIC, although a return to the levels above 25% seen earlier in the decade may be less likely. The company still benefits from all the key drivers that have historically supported strong returns, including dominant brands, unmatched distribution, scale advantages, disciplined management, and a growing digital ecosystem. Management also continues to emphasize profitability and return on capital as key performance metrics. While competition, changing consumer preferences, and macroeconomic volatility may create periodic pressure, the structural advantages of the business suggest that Ambev should be able to maintain ROIC comfortably above the level achieved by most consumer staples companies for many years to come.

The next numbers are the book value + dividend. In my old format this was known as the equity growth rate. It was the most important of the four growth rates I used to use in my analyses, which is why I will continue to use it moving forward. As you are used to see the numbers in percentage, I have decided to share both the numbers and the percentage growth year over year. To put it simply, equity is the part of the company that belongs to its shareholders – like the portion of a house you truly own after paying off part of the mortgage. Growing equity over time means the company is becoming more valuable for its owners. So, when we track book value plus dividends, we’re essentially looking at how much value is being built for shareholders year after year. Ambev has managed to increase its equity in most years over the past decade, with only a few years showing a decline. Equity grew from 14.337 in 2016 to 16.206 in 2025, representing a modest but consistent creation of shareholder value over time. While the growth rate has not been spectacular, the stability is noteworthy given that the company operates in several emerging markets that have experienced significant economic volatility, currency fluctuations, inflationary pressures, and political uncertainty during the period. One of the primary reasons equity has grown over time is Ambev's consistent profitability. The company has generated strong earnings year after year thanks to its leading market positions, powerful brands, extensive distribution network, and disciplined cost management. A portion of these profits is retained within the business, increasing shareholders' equity and strengthening the balance sheet. The company's ability to consistently earn ROIC well above its cost of capital means that retained earnings generally create value rather than simply accumulating on the balance sheet. Another important factor is the relatively asset-efficient nature of the business. While brewing requires production facilities and distribution infrastructure, Ambev does not need to continuously make massive investments simply to maintain its market position. Much of its competitive advantage comes from brands, scale, distribution relationships, and operational expertise rather than from continually adding large amounts of physical assets. This allows a meaningful portion of earnings to either remain on the balance sheet or be returned to shareholders without harming the long-term growth prospects of the business. The years in which equity declined were generally not the result of a deterioration in the underlying business. Instead, they were often driven by capital allocation decisions, dividend payments, share repurchases, foreign exchange movements, or accounting adjustments. Currency movements have also likely played a role in the fluctuations. Ambev operates across numerous countries but reports in Brazilian reais. Because the company owns assets and subsidiaries throughout Latin America and Canada, exchange rate movements can impact the reported value of equity from year to year. These effects do not necessarily reflect changes in the economic value of the business but can create volatility in reported book value. The relatively modest growth in equity compared to the company's strong profitability is also a reflection of management's capital allocation philosophy. Rather than accumulating large amounts of capital on the balance sheet, Ambev has historically prioritized returning excess cash to shareholders while maintaining financial flexibility. This approach is consistent with the company's focus on return on invested capital and disciplined resource allocation. Management has repeatedly emphasized cash generation, efficient capital deployment, and maximizing long-term shareholder value rather than simply growing the balance sheet. Looking ahead, I would expect equity to continue growing over time, although probably at a moderate pace rather than a rapid one. The company continues to benefit from strong brands, leading market positions, attractive returns on capital, and healthy cash generation. However, Ambev is a relatively mature business, and management is likely to continue returning a substantial portion of earnings to shareholders through dividends. As a result, equity will probably continue to fluctuate from year to year depending on profitability, currency movements, and capital allocation decisions. The important takeaway is not whether equity rises every single year, but rather that Ambev continues to create value for shareholders through a combination of retained earnings and cash returned to investors. Given the company's strong competitive position and disciplined management culture, I believe it is well positioned to continue doing so in the years ahead.

Finally, we will analyze the free cash flow. Free cash flow, in short, refers to the cash that a company generates after covering its operating expenses and capital expenditures. I use levered free cash flow margin because I believe that margins provide a better understanding of the numbers. Free cash flow yield refers to the amount of free cash flow per share that a company is expected to generate in relation to its market value per share. Ambev has historically been a strong generator of free cash flow and has consistently produced positive free cash flow throughout the past decade. This is not surprising given the nature of the business. The company operates in a relatively mature industry with strong brands, leading market positions, and highly predictable consumer demand. While beer consumption can fluctuate somewhat with economic conditions, beverages remain a recurring purchase for consumers, providing Ambev with a stable source of cash generation. The company generated free cash flow of 3.625 in 2025, which was slightly above the level achieved a decade ago and among the stronger results delivered during the period despite operating in a challenging environment characterized by softer industry volumes and currency headwinds. One of the primary reasons Ambev generates strong free cash flow is its attractive profitability. The company owns many of the leading beer brands across Latin America and benefits from significant pricing power, particularly in Brazil where brands such as Skol, Brahma, and Antarctica hold dominant positions. Management highlighted that net revenue per hectoliter increased by 7,5% in 2025, supported by premiumization, stronger brands, and disciplined revenue management. Because the company can grow revenue per unit sold while maintaining cost discipline, a large portion of revenue ultimately flows through to operating cash flow. Another important contributor to free cash flow is Ambev's scale and operational efficiency. As the largest brewer in Latin America, the company benefits from substantial economies of scale in procurement, manufacturing, logistics, and marketing. Management noted that productivity initiatives and operational efficiencies across industrial and logistics operations helped offset cost pressures and contributed to the third consecutive year of EBITDA margin expansion. Consolidated EBITDA margin reached 33,4% in 2025, demonstrating the strength of the company's operating model. These high margins naturally support strong cash generation because a large share of operating profits can be converted into cash. Ambev also benefits from relatively moderate capital requirements. While brewing requires production facilities, packaging lines, and distribution infrastructure, the company does not need to continuously invest massive amounts of capital simply to maintain its competitive position. Capital expenditures were approximately BRL 5 billion in 2025, broadly in line with previous years and modest relative to the operating cash flow generated. This allows the company to convert a significant portion of its earnings into free cash flow. In addition, Ambev leverages existing infrastructure across both alcoholic and non-alcoholic beverages, allowing it to spread investments across a broader revenue base. The company's free cash flow margins have also remained consistently high over time, ranging between approximately 18% and 31% over the past decade. These margins are well above those achieved by many consumer staples companies and reflect the strength of Ambev's business model. Strong brands, efficient operations, scale advantages, disciplined cost management, and a focus on productivity all contribute to the company's ability to turn a large share of revenue into cash. Management has repeatedly emphasized resource allocation, expense governance, and revenue management as key priorities, and these disciplines have helped support both profitability and cash generation over time. The fluctuations in free cash flow from year to year are generally driven by temporary factors rather than structural changes in the business. For example, management noted that operating cash flow in 2025 declined modestly compared to the previous year because softer sales volumes reduced cash generation. Commodity prices, foreign exchange movements, inventory levels, and the timing of customer payments and supplier payments can also affect free cash flow from one year to the next. However, the underlying earnings power of the business has remained remarkably stable throughout the period. Looking ahead, I believe Ambev should continue to be a strong free cash flow generator. The company retains all the characteristics that have historically supported cash generation, including dominant brands, leading market positions, economies of scale, disciplined management, and relatively moderate capital requirements. Management continues to target margin expansion through productivity initiatives, revenue management, premiumization, and operational efficiencies. While commodity costs, particularly aluminum, may create some pressure in the near term, management has expressed confidence in its ability to offset part of these headwinds through efficiency improvements and disciplined execution. As a result, free cash flow will likely fluctuate from year to year, but the underlying cash-generating ability of the business appears intact. Ambev uses its free cash flow according to a clear capital allocation framework. First, the company reinvests in organic growth opportunities, including brand building, digital platforms such as BEES and Zé Delivery, manufacturing improvements, and distribution capabilities. Second, management remains open to selective acquisitions that can strengthen the business and create long-term value. Third, and perhaps most importantly for shareholders, excess cash is returned to investors through dividends and share repurchases. Management has repeatedly emphasized its commitment to balancing investments in future growth with returning excess capital to shareholders over time. This disciplined approach reflects the company's focus on long-term value creation rather than growth for growth's sake. Given Ambev's strong balance sheet, healthy cash generation, and disciplined capital allocation philosophy, I believe shareholders can continue to expect meaningful cash returns alongside ongoing investments to support long-term growth. The free cash flow yield suggests that the shares may be trading at an attractive valuation. However, we will revisit valuation later in the analysis.

Debt

Another important aspect to consider is the level of debt. It is crucial to determine whether a business has manageable debt that can be repaid within a period of three years. We assess this by dividing total long-term debt by earnings. After reviewing Ambev’s financials, I found that the company currently has no debt, which is of course excellent. Debt is clearly not a concern when it comes to Ambev. In fact, since 2009, the company has consistently maintained debt levels below one year’s worth of earnings, reflecting both the strength of its business model and its ability to generate significant cash flow. The company’s leading market positions, strong profitability, and disciplined capital allocation have allowed it to fund investments, acquisitions, dividends, and share repurchases without relying heavily on borrowing. Given Ambev’s healthy balance sheet and robust cash generation, I do not expect debt to become a concern in the foreseeable future.

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Risks

Changing consumer preferences is a risk for Ambev because the company operates in a category that is increasingly shaped by long-term shifts in consumer behavior. While Ambev owns some of the strongest beverage brands in Latin America, demand for beer, soft drinks, and other beverages is ultimately determined by consumer tastes and consumption habits. These preferences can evolve over time due to demographic changes, health and wellness trends, and changing lifestyles. Such shifts tend to be gradual and difficult to predict, making them particularly challenging for companies to address. One of the most important trends affecting the beverage industry is the growing focus on health, wellness, and moderation. Consumers are becoming increasingly aware of the health implications of alcohol consumption, sugar intake, and obesity. Younger generations in particular are drinking less alcohol than previous generations and are often more selective about when and why they drink. Many consumers are increasingly seeking beverages that align with healthier lifestyles, including low-alcohol products, alcohol-free alternatives, sports drinks, energy drinks, and functional beverages that offer additional benefits such as vitamins, electrolytes, or other wellness attributes. If these trends continue, demand for traditional beer products could grow more slowly or even decline in some markets over time. Consumption occasions are also evolving. Historically, beer has been closely associated with social gatherings, bars, restaurants, sporting events, and other shared experiences. However, consumer behavior continues to shift as socializing habits change. More consumption is taking place at home or through alternative channels, while younger consumers increasingly prioritize experiences that do not necessarily involve alcohol. Changes in travel patterns, leisure activities, and entertainment preferences can all influence when, where, and how consumers purchase beverages. These shifts may affect both sales volumes and profitability if consumers move away from higher-margin consumption occasions. Another emerging trend is the increasing popularity of GLP-1 medications such as Ozempic and Wegovy. These drugs, which are widely used for weight management and diabetes treatment, have been shown in many cases to reduce appetite and, in some instances, alcohol cravings. While management has stated that it has not observed any meaningful impact on the business so far, it has also acknowledged that this is an emerging trend that requires continued monitoring. The long-term effects remain uncertain, but if adoption continues to expand globally and research increasingly supports reduced alcohol consumption among users, the beverage industry could face a gradual headwind over time. In some markets, cannabis is also becoming a more accepted alternative to alcohol, particularly among younger consumers. As legalization expands and social attitudes continue to evolve, cannabis may increasingly compete with beer and other alcoholic beverages for certain consumption occasions. While the long-term impact remains difficult to quantify, it represents another factor that could influence alcohol demand over time.

Volatility in commodity prices is a risk for Ambev because a significant portion of the company’s costs depends on raw materials and packaging inputs whose prices are determined by global markets rather than by the company itself. These inputs include aluminum for cans, sugar, corn, wheat, barley, hops, PET plastic for bottles, and various forms of energy used throughout the production and distribution process. Because these commodities are traded globally, their prices can fluctuate significantly due to factors such as changes in supply and demand, weather conditions, geopolitical events, trade disputes, currency movements, transportation costs, and broader economic conditions. As a result, Ambev can experience meaningful increases in production costs even when demand for its products remains unchanged. The company is particularly exposed to agricultural commodities. Beer production relies heavily on barley, malt, corn, wheat, and hops, while its non-alcoholic beverage portfolio requires significant quantities of sugar and other agricultural ingredients. The prices of these commodities can be highly volatile because agricultural production depends heavily on weather conditions and crop yields. Droughts, floods, extreme temperatures, and other climate-related events can reduce harvests and create supply shortages, leading to higher prices. Climate change may increase the frequency and severity of such disruptions over time, making agricultural commodity markets potentially more volatile in the future. Packaging materials represent another important source of risk. Aluminum is one of Ambev’s largest input costs because cans remain one of the most popular packaging formats across many of its markets. Aluminum prices can be particularly volatile because production is energy intensive and heavily influenced by global industrial demand. During 2025, aluminum prices experienced significant fluctuations, illustrating how quickly costs can change. PET plastic, glass, paperboard, and other packaging materials are also exposed to changes in raw material prices, energy costs, and supply chain conditions. Although Ambev has invested in some internal production capabilities for glass bottles and aluminum cans, it still remains exposed to broader market conditions for these materials. Commodity price inflation can affect Ambev in several ways. The most direct impact is pressure on profitability. If input costs rise faster than the company can increase prices, margins may decline. While Ambev benefits from strong brands and significant pricing power, management has repeatedly emphasized the importance of keeping its products affordable, particularly in Brazil where accessibility remains critical for many consumers. This means the company cannot always pass higher costs directly to consumers without risking lower volumes or market share losses. As a result, periods of sharp commodity inflation can temporarily reduce profitability even for a market leader like Ambev. Geopolitical developments can further increase commodity-related risks. Trade disputes, tariffs, sanctions, and restrictions on global trade can disrupt supply chains and increase the cost of raw materials. Recent trade tensions involving major economies have demonstrated how quickly commodity markets can become volatile when political decisions affect global trade flows. Because Ambev operates across multiple countries and sources materials from different regions around the world, it remains exposed to these broader geopolitical developments even though they are largely outside of management’s control.

Dependence on Brazil is a risk for Ambev because Brazil is by far the company’s most important market and therefore has a large influence on its overall results. Brazil accounts for more than half of Ambev’s net sales and an even larger share of total volumes, which means that changes in the Brazilian economy, tax system, regulation, consumer demand, or political environment can have a significant impact on the company. It means that the company is more exposed to local risks than a more geographically diversified beverage company. One of the most important risks in Brazil is taxation. Beer and soft drinks are heavily taxed products, and tax rates can change at the federal, state, or municipal level. If taxes on beverages increase, Ambev may need to raise prices for consumers. Higher prices can reduce demand, especially because many consumers in Brazil are price sensitive and still depend on affordability to stay close to the beer and soft drink categories. If Ambev chooses not to pass on the full tax increase, profitability may decline. This creates a difficult balance between protecting margins and keeping products accessible to consumers. Brazil’s tax system is also complex and frequently changing. The country is currently undergoing a major consumption tax reform that will replace several existing taxes with a new system over time. While the goal is to simplify taxation in the long run, the transition period creates uncertainty. Some details, including final tax rates and the impact on certain products, remain difficult to predict. The reform also introduces a new tax on products considered harmful to health or the environment, including alcoholic beverages and sugary drinks. This could directly affect Ambev’s beer and soft drink portfolio. Even if the long-term structure becomes simpler, the transition may increase uncertainty and make planning more difficult. Another issue is that Brazilian tax laws can be open to different interpretations. If Ambev and the tax authorities disagree on how certain rules should be applied, the company may face disputes, penalties, or additional payments. This is particularly relevant in a country where tax regulation is often complex and where past incentives, such as those connected to the Manaus Free Trade Zone, have been subject to changes. These issues do not necessarily threaten the company’s long-term survival, but they can create unexpected costs and reduce predictability for investors. Brazil’s broader economic environment is another important risk. Demand for beer, soft drinks, and other beverages is closely linked to disposable income, employment, consumer confidence, and general economic conditions. When inflation is high, interest rates rise, or economic growth slows, consumers often become more careful with their spending. Even though beverages are everyday products, beer and many non-alcoholic beverages still depend partly on discretionary spending and social occasions. If Brazilian consumers have less money available, they may buy less, trade down to cheaper alternatives, or reduce consumption in bars and restaurants. Political uncertainty can also affect Ambev. Brazil has experienced periods of political tension, changes in economic policy, and uncertainty around elections. Such periods can reduce consumer confidence, weaken investment, increase currency volatility, and create pressure for new fiscal measures. Presidential elections in Brazil have historically been associated with greater market uncertainty, and changes in government priorities can affect tax policy, regulation, and the overall business environment. Because Brazil is Ambev’s largest market, these developments can have a direct effect on the company’s performance. Ambev is also exposed to antitrust scrutiny in Brazil because of its large market share in beer. The company’s dominant position is one of its greatest strengths, but it also means that regulators closely monitor its commercial practices, distribution agreements, pricing behavior, and relationships with customers. Even if Ambev operates with a strong compliance program, the risk of investigations or restrictions remains. Any regulatory action could limit the company’s commercial flexibility, create additional costs, or affect how it competes in the market.

Reasons to invest

The beer portfolio is a reason to invest in Ambev because beer remains the foundation of the company’s business and one of the most attractive consumer categories across its markets. Ambev is the largest brewer in Latin America and holds leading positions in several important beer markets, including Brazil, Argentina, Bolivia, Paraguay, Uruguay, the Dominican Republic, Panama, and Canada. This gives the company a strong platform in a category that is deeply connected to social occasions, local culture, and everyday consumer behavior. While beer volumes can fluctuate from year to year depending on weather, consumer confidence, disposable income, and social occasions, management has emphasized that the long-term fundamentals of the category remain attractive. One of Ambev’s greatest strengths is the depth of its local beer portfolio. In Brazil, the company owns several of the country’s most important beer brands, including Skol, Brahma, Antarctica, Bohemia, Original, and Spaten. These brands do not all serve the same purpose. Instead, they give Ambev a broad portfolio that can address different regions, price points, and consumer preferences. Brazil is a large and diverse country, and beer preferences can vary meaningfully from one region to another. In some regions, Brahma may be the strongest brand, while in others Skol or Antarctica may have greater relevance. This gives Ambev flexibility and reduces dependence on a single brand. The core beer portfolio is especially important because it keeps the category accessible to a broad part of the population. In Brazil, many consumers remain highly price sensitive, and management has emphasized that affordability is critical to keeping consumers close to the beer category. Strong core brands allow Ambev to serve these consumers while maintaining scale, distribution density, and relevance across the country. This matters because the core segment remains the largest and most important part of the beer market. If Ambev can continue protecting and strengthening its core brands, it can defend the foundation of its business while still expanding into faster-growing segments. At the same time, Ambev is not only relying on its traditional mainstream brands. The company has been expanding its premium and super premium portfolio through brands such as Stella Artois, Corona, Budweiser, Michelob Ultra, Original, and Spaten. This is important because premiumization is one of the most attractive growth drivers in the beer industry. As consumers become wealthier or more selective, many are willing to pay more for brands that feel higher quality, more aspirational, or better suited to specific occasions. Management has highlighted that premium and super premium volumes continued to grow strongly, supported by brands such as Stella Artois, Corona, and Original. This allows Ambev to increase revenue per hectoliter and improve its mix over time. Another reason the beer portfolio is attractive is that Ambev combines powerful local brands with globally recognized brands from the Anheuser-Busch InBev system. Local brands such as Brahma, Skol, Antarctica, Quilmes, Presidente, Paceña, Patricia, and Labatt Blue give the company deep cultural relevance in individual markets. Global brands such as Corona, Stella Artois, Budweiser, Michelob Ultra, Beck’s, Hoegaarden, and Leffe help the company compete in more premium segments and appeal to consumers looking for international brands. This combination is difficult for competitors to match because it gives Ambev both local authenticity and global brand power. Management has also emphasized that beer remains loved and culturally relevant across Ambev’s markets. Even though 2025 was a more challenging year in some regions, management described the headwinds as cyclical and occasion driven rather than a sign of a sudden deterioration in beer fundamentals. In other words, the issue was not necessarily that consumers stopped wanting beer, but that the right consumption moments occurred less frequently. This distinction is important because temporary pressure from weather, weak consumer confidence, or fewer social occasions is different from a structural decline in the category.

Digital capabilities are a reason to invest in Ambev because the company has spent years building a digital ecosystem that strengthens its competitive position, improves execution, deepens customer relationships, and creates new growth opportunities. While Ambev is often viewed as a traditional beverage company, it has increasingly transformed itself into a technology-enabled consumer business that uses data, digital platforms, artificial intelligence, and analytics to improve how it serves both customers and consumers. This digital ecosystem is becoming an increasingly important competitive advantage because it strengthens the core business while simultaneously creating entirely new sources of growth. One of the most important components of this ecosystem is BEES, Ambev’s digital platform for retailers and other business customers. Traditionally, many small stores, bars, restaurants, and convenience shops placed orders through sales representatives or phone calls. BEES digitizes this process by allowing customers to place orders directly through a mobile platform while gaining access to a range of tools, insights, and services. This creates a more efficient ordering experience for customers while reducing costs and improving execution for Ambev. However, BEES is much more than an ordering platform. The system gives Ambev direct access to valuable data about purchasing behavior across hundreds of thousands of points of sale. By analyzing this data, the company can identify which products sell best in different locations, recommend the right assortment for individual customers, and improve promotional effectiveness. Management has emphasized that the platform allows Ambev to benchmark successful stores and share those insights across its customer base, helping retailers improve performance while simultaneously increasing Ambev’s own sales. This creates a powerful alignment of interests because the better Ambev’s customers perform, the better Ambev performs. The platform also strengthens customer relationships and increases switching costs. Once a retailer relies on BEES for ordering, product recommendations, inventory planning, promotions, and access to third-party products, it becomes more integrated into Ambev’s ecosystem. This makes relationships stickier and helps reinforce Ambev’s already strong distribution advantage. In many ways, BEES transforms Ambev from being simply a supplier into becoming a business partner for its customers. Another attractive aspect of BEES is the growth of its marketplace business. In addition to selling Ambev products, the platform increasingly allows customers to purchase products from third-party suppliers. This expands the value of the ecosystem while creating an additional revenue stream for Ambev. As more products and services are added to the platform, BEES becomes more relevant to customers and further strengthens the company's position within the retail value chain. On the consumer side, Ambev has built one of Brazil’s largest convenience platforms through Zé Delivery. Originally launched as a beer delivery service, Zé Delivery has evolved into a major digital platform that connects consumers directly with retailers and beverage products. The platform gives Ambev something that many beverage companies lack: direct access to consumer behavior. Traditionally, beverage companies often rely on retailers to understand consumer preferences. Through Zé Delivery, Ambev can observe purchasing patterns, consumption occasions, pricing sensitivity, and emerging trends in real time. This direct consumer relationship provides valuable insights that can influence marketing, product development, pricing, and innovation. Management has described Zé Delivery as a testing ground where new products, promotions, and concepts can be evaluated quickly before being rolled out more broadly. This creates a faster feedback loop and allows Ambev to make more informed decisions based on actual consumer behavior rather than relying solely on surveys or market research. Zé Delivery is particularly valuable because it attracts younger consumers. A large portion of the platform’s users belong to Generation Z and the millennial generation, which gives Ambev direct access to some of the most important future consumer groups. Understanding how these consumers behave, what they purchase, and how their preferences evolve provides insights that can help the company remain relevant as consumer habits change over time. Beyond the individual platforms themselves, the real value lies in the data generated across the ecosystem. Every interaction through BEES and Zé Delivery produces information that can be analyzed and used to improve decision making. This allows Ambev to allocate marketing resources more efficiently, optimize product assortment, improve promotional effectiveness, and better forecast demand. As artificial intelligence and advanced analytics become more integrated into business operations, the value of these data assets is likely to increase further.

Beyond traditional beer is a reason to invest in Ambev because the company is expanding its portfolio into categories that address changing consumer preferences and create new growth opportunities beyond its core beer business. While traditional beer remains the foundation of Ambev, consumers are increasingly looking for more variety, more convenience, lower alcohol options, sugar-free alternatives, and beverages that fit different occasions. Ambev has recognized this shift and is using its brands, distribution network, and consumer insights to build a broader beverage portfolio that can remain relevant as tastes evolve. One important area is non-alcoholic beer. This category is still relatively underdeveloped in many Latin American markets compared to more mature beer markets, which gives Ambev meaningful room for growth. Non-alcoholic beer allows the company to extend beer into occasions where alcohol may not be suitable, such as weekday lunches, driving occasions, work-related events, or more health-conscious social settings. It also helps Ambev serve consumers who still enjoy the taste and identity of beer but want to reduce alcohol consumption. Brands such as Corona Cero, Budweiser Zero, Brahma 0.0%, and Skol Zero Zero give Ambev several ways to participate in this trend. The launch of Skol Zero Zero is a good example of how Ambev is adapting its core beer brands to new consumer needs. Rather than simply offering another alcohol-free beer, Skol Zero Zero combines zero alcohol with zero sugar, making it relevant for consumers who are focused on both moderation and health. Management has highlighted that non-alcoholic beer continued to grow strongly, with Corona Cero delivering particularly strong growth and Skol Zero Zero gaining traction in the regions where it has been introduced. This matters because it shows that Ambev can use its existing brand equity to enter new occasions without starting from scratch. Another important area is Beyond Beer, which includes products that sit between traditional beer and other alcoholic beverages. These products help Ambev reach consumers who may not enjoy the taste of traditional beer or who want sweeter, lighter, or more flavorful drinks. Brands such as Beats, Brutal Fruit, and Flying Fish are designed to address unmet consumer needs and create new consumption occasions. Flying Fish, for example, targets consumers who may not like the bitterness of traditional beer but still want a refreshing alcoholic beverage. This gives Ambev a way to recruit new consumers into its ecosystem while expanding the role beer-related products can play. Ready-to-drink beverages are another attractive opportunity. In markets such as Canada, brands like Mike’s, NÜTRL, and Cutwater have helped Ambev participate in the growth of canned cocktails and flavored alcoholic beverages. These categories appeal to consumers who want convenience, portability, and consistent taste without having to mix drinks themselves. They are also well suited to at-home consumption, outdoor occasions, parties, and casual social gatherings. As consumer preferences become more fragmented, ready-to-drink products give Ambev another way to compete for drinking occasions that may otherwise move away from traditional beer. Ambev is also building growth opportunities in non-alcoholic beverages. Guaraná Antarctica remains one of the company’s most important brands in Brazil, and management has highlighted that the brand reached record levels of brand equity. The success of Guaraná Zero is particularly important because consumers are increasingly looking for soft drinks with less sugar. If a zero-sugar version can maintain the taste and emotional appeal of the original brand, it can attract health-conscious consumers without weakening the core product. Ambev’s broader non-sugar portfolio, including Guaraná Zero, Pepsi Black, and H2OH!, gives the company exposure to this growing trend. Ambev’s distribution network makes these innovations more powerful. Many smaller beverage companies can create interesting products, but they often struggle to scale them. Ambev can place new products in supermarkets, bars, restaurants, convenience stores, small retailers, and digital channels across its markets. Platforms such as BEES and Zé Delivery also allow the company to test new products, identify consumer preferences, and scale successful launches more quickly. This gives Ambev an advantage because innovation is not only about creating new products but also about getting them into the hands of consumers efficiently.

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Valuation

Now it is time to calculate the share price. I perform three different calculations that I learned at a Phil Town seminar. If you want to make the calculations yourself for this or other stocks, you can do so through the tools page on my website, where you have access to all three calculators for free.

The first is called the Margin of Safety price, which is calculated based on earnings per share (EPS), estimated future EPS growth, and estimated future price-to-earnings ratio (P/E). The minimum acceptable rate of return is 15%. I chose to use an EPS of 0,18, which is from 2025. I have selected a projected future EPS growth rate of 9%. Finbox expects EPS to grow by 9% a year in the next five years. Additionally, I have selected a projected future P/E ratio of 18, which is twice the growth rate. This decision is based on Ambev's historically higher price-to-earnings (P/E) ratio. Finally, our minimum acceptable rate of return has already been established at 15%. After performing the calculations, we determined the sticker price (also known as fair value or intrinsic value) to be $1.90. We want to have a margin of safety of 50%, so we will divide it by 2. This means that we want to buy Ambev at a price of $0,95 (or lower, obviously) if we use the Margin of Safety price.

The second calculation is known as the Ten Cap price. The rate of return that a company owner (or stockholder) receives on the purchase price of the company essentially represents its return on investment. The minimum annual return should be at least 10%, which I calculate as follows: The operating cash flow last year was 4.463, and capital expenditures were 838. I attempted to analyze their annual report to calculate the percentage of capital expenditures allocated to maintenance. I couldn't find it, but as a rule of thumb, you can expect that 70% of the capital expenditures will be allocated to maintenance purposes. This means that we will use 587 in our calculations. The tax provision was 627. We have 15.593 outstanding shares. Hence, the calculation will be as follows: (4.463 – 587 + 627) / 15.593 x 10 = $2,89 in Ten Cap price.

The final calculation is called the Payback Time price. It is a calculation based on the free cash flow per share. With Ambev's Free Cash Flow Per Share at $0,23 and a growth rate of 9%, if you want to recoup your investment in 8 years, the Payback Time price is $2,76.

Conclusion

I believe that Ambev is an intriguing company with great management. It has built its moat through its brand portfolio, distribution network, scale advantages, exclusive partnerships, and digital ecosystem. The company has consistently achieved a high ROIC, which is a trend that I expect to continue moving forward. Ambev has also consistently delivered high free cash flow margins thanks to its strong brands, efficient operations, and disciplined capital allocation. Changing consumer preferences is a risk for Ambev because demand for beer and other beverages is heavily influenced by evolving consumer tastes, health trends, and lifestyle choices. As consumers increasingly seek healthier options, drink less alcohol, experiment with alternative beverages, or shift consumption habits, Ambev may face slower growth in its traditional categories if it fails to adapt quickly enough to these long-term changes. Volatility in commodity prices is a risk because many of the raw materials and packaging inputs used to produce its beverages, such as aluminum, barley, sugar, corn, and PET plastic, are subject to unpredictable price fluctuations that are outside the company's control. If these costs rise significantly and Ambev is unable to fully offset them through price increases, productivity improvements, or hedging activities, its profit margins and earnings could come under pressure. Dependence on Brazil is a risk because the country represents the majority of the company's sales and profits, making performance highly sensitive to Brazilian economic conditions, consumer spending, taxation, regulation, and political developments. Changes in tax policies, economic slowdowns, inflation, regulatory actions, or political uncertainty could therefore have a disproportionate impact on Ambev's growth and profitability. Its beer portfolio is a reason to invest because the company owns a unique combination of dominant local brands and globally recognized premium brands, giving it strong positions across different regions, price points, and consumer segments. This broad portfolio allows Ambev to benefit from both the resilience of its core beer brands and the faster growth of premium and super premium categories while maintaining leadership in a category that remains deeply embedded in the culture and social habits of its markets. Its digital ecosystem is another reason to invest because platforms such as BEES and Zé Delivery strengthen customer relationships, improve execution, and provide valuable data on both retailers and consumers. These platforms create new growth opportunities, increase switching costs, and enable Ambev to make better decisions through data, analytics, and artificial intelligence, helping the company operate more efficiently and stay closer to evolving consumer preferences. Beyond traditional beer is also a reason to invest because the company is successfully expanding into fast-growing categories such as non-alcoholic beer, ready-to-drink beverages, flavored alcoholic drinks, and zero-sugar soft drinks, allowing it to reach new consumers and participate in more consumption occasions. This diversification makes Ambev less dependent on traditional beer volumes while positioning the company to benefit from evolving consumer preferences and long-term growth trends across the broader beverage industry. I believe there are many things to like about Ambev, and buying shares at the Payback Time price of $2,76 could prove to be a good long-term investment.

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