Understand the arm wrestling match between Ambev and Heineken at Cade

One arm wrestling between Heineken and Ambev extends throughout the year at Cade (Administrative Council for Economic Defense), whose role is to work to protect free competition in the country.

The dispute between the breweries was motivated by Heineken’s disputes regarding Ambev’s exclusive contracts with bars, restaurants and concert halls.

Cade, on the other hand, adopted restrictions on new such agreements while investigating the case. Next, understand the dispute between the two breweries.

Reason for arm wrestling

An inquiry into the case was initiated by Cade in March. According to the agency, the investigation arose after Heineken claimed that Ambev would be abusing its dominant position in the market through exclusivity contracts in the so-called cold channels.

The cold channels are the points of sale of cold beer for immediate consumption, in the same places, especially bars and restaurants.

Exclusive contracts represent agreements through which a company can provide advantages to prevent the sale of competing products in the same establishment. For example: transferring tables, chairs and refrigerators to commercial points.

It is estimated that around 80% of the market share is in the hands of the two giants. Ambev has in its portfolio from beers like Antarctica, Brahma and Skol to Corona, Beck’s, Stella Artois and Spaten.

The brewery of Dutch origin, in addition to Heineken, also bets on labels such as Eisenbahn, Amstel, Devassa, Sol, Schin and Kaiser.

Definition of constraints

In September, Cade defined preventive restrictions on exclusivity contracts until the end of World Cup on December 18. The measure was valid throughout the national territory.

However, as there was room for demonstrations by the breweries involved, the text underwent changes in October. One of the alterations was the reduction of the area covered by the measure.

The new decision then divided the domestic market into three zones: red, yellow and green.

The red zone, says Cade, is where there was a “worrying market closure index” with exclusivity contracts.

In these places, Ambev is prohibited from signing and renewing agreements. With no deadline, the restriction is valid until the end of the trial, which still has no set date.

The red zone for the brewery comprises commercial points in three capitals: São Paulo, Rio de Janeiro and Brasília (see the detailed list of locations below).

The yellow zone, based on a preliminary analysis of data, gathers places where a market closure of more than 20% may have occurred with exclusivity.

In this classification, new signatures and renewal of existing agreements with Ambev are suspended until December 31, 2022. After auditing preliminary data, locations can be included in the green or red zone, points out Cade.

The yellow zone for Ambev involves points in seven cities: Maceió, Salvador, Fortaleza, Recife, Campinas, Lauro de Freitas (BA) and Campos do Jordão (SP).

The green zone, finally, brings together the other regions of the country. There are currently no direct restrictions in these locations.

Although it questions agreements signed by the competitor, Heineken is also the target of part of the restrictive measures. Cade has set locations in Brasilia in the red zone for the brewery of Dutch origin.

Heineken must also follow the rules of the yellow zone at points in five cities —Salvador, Fortaleza, Recife, Lauro de Freitas and Maceió.

Impact for businesses and consumers

From a marketing point of view, exclusivity contracts are considered a kind of exchange of benefits between breweries and bars or restaurants involved.

“It’s a negotiation, companies don’t force that. They can supply, for example, refrigerators, tables, posters for the outside with the name of the bar or restaurant. They offer a series of advantages”, says professor Ulysses Reis, from Strong Business School.

“It is a negotiation that interests both the establishment and the manufacturers”, he adds.

According to Reis, by blocking the entry of a competitor at the same commercial point, the brewery responsible for the agreement can better plan its deliveries and even spend less on advertising actions, since it has the local domain.

Exclusivity, on the other hand, tends not to be so good for consumers, says Reis.

According to him, bar customers may “lose up” due to the chance of not finding such a wide range of products in a given region.

“This will limit the options for the consumer.”

Red Zone/Ambev

• Sao Paulo: central zone, including Centro Expandido, Centro Histórico, Vila Mariana, Pinheiros, Mooca, Lapa, Sé, República, Itaim Bibi and Ipiranga
• Rio de Janeiro: neighborhoods of São Conrado, Ipanema, Copacabana, Leme, Urca, Botafogo, Flamengo, Aterro do Flamengo, Glória, Lagoa, Jardim Botânico, Barra da Tijuca, Recreio, Grumari, Itanhangá and Joá
• Brasilia: Plano Piloto, South Lake, Botanical Garden, North Lake, Northwest, Southwest, Cruzeiro Novo, Cruzeiro Velho and Octagonal

Yellow Zone/Ambev

• Maceio: Jacintinho and coastline, including Jacintinho, Barro Duro, Serraria, São Jorge, Feitosa, Cruz das Almas, Pescaria, Jacarecica, Ipioca, Guaxuma, Garça Torta and Riacho Doce
• Savior: Historic Center and Waterfront, including Barra, Ondina, Rio Vermelho, Amaralina, Pituba, Historic Center and Cidade Baixa
• Strength: headquarters neighborhoods
• Recife: Centro, including Recife Antigo, Santo Amaro, Boa Vista, Cabanga, Ilha do Leite, Paissandu, Santo Antônio, São José, Soledade, Coelhos and Joana Bezerra Island
• Campinas: central region, including Cambuí, Vila Itapura, Bosque, Botafogo, Guanabara and Vila Industrial
• Lauro de Freitas: the whole city
• Fields of Jordan: the whole city

Red Zone/Heineken

• Brasilia: Plano Piloto, South Lake, Botanical Garden, North Lake, Northwest, Southwest, Cruzeiro Novo, Cruzeiro Velho and Octagonal

Yellow Zone/Heineken

• Savior: Historic Center and Waterfront, including Barra, Ondina, Rio Vermelho, Amaralina, Pituba, Historic Center and Cidade Baixa
• Strength: headquarters neighborhoods
• Recife: Center including Old Recife
• Lauro de Freitas: the whole city
• Maceio: Jacintinho and Litoral, including Jacintinho, Barro Duro, Sawmill, São Jorge, Feitosa, Cruz das Almas, Pescaria, Jacarecica, Ipioca, Guaxuma, Garça Torta and Riacho Doce