Heineken, Freedom, and Population Growth
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How Heineken took over the Americas
Does more freedom = economic prosperity or vice versa?
Latin America will soon surpass this region’s population
Make sure you check out the comment of the week at the bottom!
Beer Industry 🍺
In 13 years, Heineken has multiplied by 9x the amount of beer it sells in the Americas. The biggest jump in a single year for that segment happened when the company bought Cervecería Cuauhtémoc Moctezuma in 2010 for $7.7B. Has the investment paid off? Heineken reported revenues of $7.3B for the Americas segment last year, and it now represents 37% of Heineken’s total beer sold globally. The company's impressive sales have been fueled by iconic brands like Tecate, Dos Equis, Lagunitas IPA, and most recently, Amstel Ultra.
Amstel Ultra was Heineken's clever invention; using one of its European brands in Mexico, it capitalized on the growing demand for low-carb beer alternatives. Through crisp branding and powerful marketing campaigns (with none other than Rafael Nadal, for example), Amstel Ultra has skyrocketed in popularity. In fact, many people in the country confuse Amstel Ultra for Michelob's Ultra, the more recognized brand worldwide. Last year, the company reported it reached 100M liters of Amstel Ultra sold and an expansion plan into 12 new countries. It also plans to expand its Amstel Ultra Hard Seltzers line, which was launched in Mexico and New Zealand in late 2020.
In 2017, Heineken made yet another bet, this time for $704M, on Latin America's potential by acquiring Brasil Kirin. It was then a subsidiary of Japanese Kirin Holdings, which itself had already consolidated several brands in the Brazilian market. The mastery coming out of Belgium and the Netherlands in operating hundreds of beer brands is quite remarkable. AB Inbev (Belgian) is the largest beer company in the world, and Heineken (Dutch) is the second. Both companies are at the forefront of beer innovation. They have maintained relevancy in a fast-paced, competitive industry by following a similar playbook: enter a market through an acquisition (interestingly, Mexico is a critical one for both), experiment with new product lines, adapt quickly to trends, and expand what works into other markets.
The Human Freedom Index (HFI) is a broad measure of human freedom, defined as the absence of coercive constraint. Developed by the Cato Institute and the Fraser Institute, the 2021 annual index measures 82 indicators of personal and economic freedom in areas such as religion regulation, rule of law, movement, size of government, security and safety, trade, and expression.
Even though Human Freedom and income per capita seem correlated, that is not 100% the case. If we categorize all countries’ income per capita (adjusted by Purchasing Power Parity) by freedom quartiles, this is the average GDP per Capita that we get, sorted by freedom:
Interestingly, countries in the 4th quartile have a higher income than countries in the 3rd quartile. Our chart illustrates that trend: Even though Bolivia and Guatemala earn significantly less money than the MENA region on average, they enjoy more freedoms than people in the Middle East. In general, out of the 11 world regions, LatAm ranks #6 in freedom (behind North America, Western Europe, Oceania, Eastern Europe, and East Asia).
Latin America will overtake Europe as the World's third-most populous region in 2038 (after Asia and Africa). How come? Since 1974, Europeans have not had enough children to reach the population replacement rate of 2.1—the average number of children born per woman needed for a population to replace itself from one generation to the next, without migration.
But, there's more. We were surprised to learn that since 2014, Latin America has also fallen below the minimum replacement rate. LatAm women are now reproducing at a rate of 1.85, and European women at 1.49. This is according to the latest UN World Population Prospects report, which came out last month. Here are some of the other main takeaways from the UN report, per OWID:
World population will pass 8B this year
It will also peak at 10.4B in 2086
India's population will surpass China next year
Covid-19 caused 15M excess deaths in 2020-21
Global fertility rate is now 2.3 births per woman and will keep declining
So, what does this mean? It depends on who you ask, with both sides causing controversy. Evidence shows that as countries develop, women have fewer children. Elon Musk, among others, says that this crisis is not getting enough attention and that governments should work on reversing the trend (especially if humanity expands beyond Earth).
What is evident is that lower fertility rates and longer life worldwide create an aging population. And while this trend has been evident in the developed World, it appears that it is reaching developing countries sooner rather than later.
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