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Canada's Labatt plans $100 million brewery near Havana. (Foreign Investment).

Cerveceria Bucanero S.A., a joint venture between the Cuban government and Canada's Labatt Brewing Co. Ltd., plans to construct a 1.5 million-hectoliter brewery to keep pace with increasing domestic beer consumption--and to be ready for an onslaught of U.S. brands once the embargo is lifted.

The new brewery and its supporting national distribution network will cost at least $100 million. A company official in Toronto told CubaNews that the project, to begin later this year at an undisclosed location on the outskirts of Havana, will more than double Labatt's existing capacity in Cuba.

"We believe we're selling primarily to Cubans, but we also recognize that it's really the inflow of U.S. dollars into the country that will drive the volume," said the official, who asked not to be identified.

Bucanero is a 50-50 venture between Cuban state entity Coralsa and a Labatt subsidiary, Cerbuco Brewing Co. The venture, established May 2, 1997, currently operates a brewery in the eastern province of Holguin. This 1 million-hectoliter facility brews Cristal, Bucanero and Mayabe beer brands as well as Bucanero Malta, a malt-based beverage.

Bucanero employs five Canadian expatriates and 500 Cuban workers at the Holguin brewery and throughout Cuba in its distribution network. The venture reported $50 million in gross sales last year and is profitable.

At present, Bucanero brews 29% of all beer sold in Cuba, with 70% produced in six breweries belonging to the Cuban government. Only 1% of the 2.45 million hectoliters of beer consumed annually in Cuba is imported.

A bottle of Cristal costs 75 cents, compared to $1.15 for Heineken, one of Labatt's chief competitors. Other imported brands sold in Cuba's hard-currency market include Bavaria, Carlsberg and Corona.

Last year, Heineken shipped 200,000 cases of beer to Cuba, up slightly from 2001. The Dutch giant sells directly to Aerocatering, Cimex, ITH, Cubalse and other state agencies.

"The profit margin is pretty high, but distribution costs are also high, since Cuba's infrastructure is not so good," a Heineken official told CubaNews.

Labatt's interest in the Cuban beer industry began with its export program in the late '80s. Its involvement culminated with the formation of Bucanero in 1997.

Last February, the two partners agreed to expand their venture "through investment in the new brewery and an expanded distribution network, in order to have in place the necessary capacity for future demand for Cuban-brewed beer."

At present, Cuba's per-capita beer consumption is 21 liters a year--considerably lower than that of the nearby Dominican Republic (36 liters) and Puerto Rico (64.8 liters), and the Latin American average of 50 liters.

The Labatt official said his company would like to promote Cristal more heavily, but that "broadcast advertising is not permitted in Cuba. The only radio spot we have is on Radio Taino [which targets foreign tourists]. So it's all been point-of-sale."

At present, U.S. firms can export beer to Cuba on a cash-only basis under the Trade Sanctions Reform and Export Enhancement Act of 2000. However, no major brewery has done so, industry sources suggest, because it's not worth the risk of angering Miami's powerful Cuban exile community.

The issue is so sensitive that Mike Torres, a spokesman for the nation's largest brewery, Anheuser-Busch of St. Louis, Mo., politely told CubaNews that his $15 billion conglomerate "prefers not to participate" in this story.
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Title Annotation:brewery for joint venture Cerveceria Bucanero S.A.
Author:Luxner, Larry
Date:Feb 1, 2003
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