Francisco Sá

Head of Soft Drinks

AgendaSoft Drinks

The Brazilian Soft Drinks Market

Profitability Evolution

AmBev’s Soft Drink Strategy

75

189

246

429

2001 2002 2003 2004

Profitability Evolution

15.4% 29.4%18.5%7.3%EBITDA MarginEBITDA Margin

EBITDACAGR = 79%

Relevance of Soft Drink Business

1932

753408

429

2001 2004

SD

Total

4%4%

12%12%

Profitability Evolution

“Right Fews” Strategy

“Right Fews”“Right Fews”

FewBrandsFew

BrandsFew

ChannelsFew

ChannelsFew

ProgramsFew

Programs

Profitability Evolution

The “Right Fews” StrategyProfitability Evolution

Full integration of soft drinks into beer operation, without deriving focus from beer

COGS advantage to KO Bottlers (avg-13%)

Internal AmBev Costing Exercise conservatively shows the added value for soft drinks to be in Beer Trucks in terms of Cost to Serve….

-16%-16%CSD Cost to Serve (RTM) R$ 17,83 / hlR$ 21,01 / hl

Full Costing: CSD Incremental Approach:

COGS advantage to KO Bottlers (avg-13%)

Total AmBev (ex-beer)

KOF - Brazil Andina - Brazil

2,682,68 2,442,44

2003 / 2004

2,902,90 2,812,81

2003 / 2004

2,962,96 2,852,85

2003 / 2004*R$ per CS

System bigger than KOI Brazil

8 oz csMM’04 AmBev KO

Beer in Brazil

Non-Alc. In Brazil

1,017

336

1501,069

1,353 1,219

The “Right Fews” StrategyProfitability Evolution

Discipline to terminate non- core products focusing on the most profitable SKUs

Consistent price gap policy in relation to market leader

Close relationship with PepsiCo

Leverage pricing expertise developed for beer

Focus on few geographies

Full integration of soft drinks into beer operation, without deriving focus from beer

1% Soft Drink = 0,6% Beer (Brazil)1% Soft Drink = 0,6% Beer (Brazil)

52%

47%

41%

33%25%

0

10

20

30

40

50

60

70

80

Brazil - Beer Brazil Soft Drink China Germany Russia

0%

10%

20%

30%

40%

50%

60%

Market OverviewRelevance of the Brazilian Market

50%

16%

12%

22%51%

49%

2005 YTD

Market Overview

Flavors

Cola

Guaraná

Orange

Lemon

Others

Flavor Segmentation

AmBev’s Guaraná Antarctica is the#1 Guarana Brand

Market Overview

25%

25% 50%22%

78%

Sales Channels Packaging

Channel & Packaging Segmentation

Self Service

Mom& Pop’s

Bars

Single Serve

Multi Serve

32,7% 33,0% 33,2% 32,5%30,2%

50,2% 50,6% 50,2% 50,6% 52,9%

16,9%16,9%16,6%16,4%17,1%

2001 2002 2003 2004 2005 YTD

Coca Cola

Others

Market OverviewShare Evolution

R$2.58

R$1.56

R$2.32

Price for 2L PET OW Bottle

17,5

55,4

27,1

12,1

51,6

36,2

24,7

53,9

24,4

Area 1 Area 2 Area 3

Market OverviewRegional Market Scenarios

AMBEV KO BR BRANDS

18,8%

11,5%

18,5%

14,5%

18,0%

25,0%

Bar M & P SS SS 1-4 SS 5-19 SS +20

Market Share by ChannelMarket Overview

Market OverviewMulti Serve Price Evolution

Price per Liter

0,40

0,60

0,80

1,00

1,20

1,40

ago/03 out/03 dez/03 fev/04 abr/04 jun/04 ago/04 out/04 dez/04 fev/05 abr/05 jun/05

Multi Serve

AmBev Coke Others

93

95

97

99

101

103

105

jul/00 jan/01 jul/01 jan/02 jul/02 jan/03 jul/03 jan/04 jul/04 jan/05

2L OW PET

Market OverviewOW 2L Pet Real Price Evolution

Real Price Index

Soft Drink Strategy

Market Share + ProfitabilityMarket Share + Profitability

StrongBrandsStrongBrands

AvailabilityAvailability PricePrice ExecutionExecutionRTM

Cost to Serve

RTMCost to Serve

PepsiCo RelationshipPepsiCo Relationship

Strong BrandsAmBev Portfolio

Leader in theflavor segment

Second in cola segment

Leader in sportsdrinks

36%

92,0%

8,0%

91,6%

8,4%

2000 2005

DevelopmentAmBev Share

Strong BrandsOpportunity in the Diet / Light Segment

AmBev Diet/LightBrand Equity

A B C D E F G

CC LCC LCC L

CC L

CC LCC LCC L

GA D

GA D

GA DGA DGA D

GA DGA D

K L

PC LPC L

PC L

PC L

PC LCC L LCC L L

CC L L

CC L L

CC L LCC L L

CC L L

PT L

PT LPT L

PT L

PT LPT L

PT L

Strong BrandsKey Brand Indicators

Preference

Consideration

Awareness 100

76

17

11 11

12,4

13

2002 2003 2004 YTD

2005

Strong Brands

Preference

Guaraná Antarctica Pepsi Cola

Preference & Switchers

0

2002

J F M A M J J A S O N D

2003

J F M A M J J A S O N D

2004

J F M A M J J A S O N D

2005

J F M A

Coca Loyal

-

Switchers

AvailabilityGap in Execution

72,0% 74,0% 74,0% 76,0% 78,0%

50,0% 50,0% 52,0%55,0% 53,0%

86,0% 85,0% 84,0% 86,0% 85,0%

2001 2002 2003 2004 2005 YTD

Coverage

Coca Cola

PET 2L

Total

PET 2L

44AmBev # of packs

95Coca Cola # of packs

Convenience

Value

Out of Pocket

Out of Home

BIB

AvailabilityGap in Portfolio

AmBev

CSD

Portfolio

In Home

Stock Up

1

2/3

RoutineImmediate

Consumer Occasion

Purchase OccasionBenefits

-20%

-15%

-10%

-5%

0%

5%

10%

15%

20%

Scenario 1 Scenario 2 Scenario 3

Market Share Contribution Margin

Package Decision based on sales algorithmAvailability

28,2%

27,6%

28,8%

26,5%

29,1%

30,6%

26,3%

29,4%

May 29 June 05 12 June June 19

Simulation Tool

Actual SharePerformance

Estimated SharePerformance

Introduction of a 2.5L PET presentation for Pepsi Cola in the South of Brazil

Availability

Per Capita

Availability

7,26,8

1,0

Mexico Venezuela Brazil

(Annual 8oz servings)

Gatorade Per Capita

Programs focused in executionin the point of sale

Points scored in accordance to the quality of categorymanagement

Outsourced monitoring

Increase refrigeration capacity

ExecutionRelationship Programs

New 2L PET bottle

Best PracticeAlluminum cans

Strong Relationship with PepsicoTrack record of value creation

Non CarbonatedSoft Drinks

Product InnovationPepsi Twist

Strong Relationship with PepsicoTrack record of value creation

Brand innovations adapted to local consumers to boost share with profitability

Improved brand equity indicators with the correct mix of local/global initiatives

Stronger local team structure to support the business

Soft DrinksEBITDA Pool & Share

Total R$ 2.5B

R$ 0.5BAmBev

EBITDA Pool

53%

17%

30%

B Brands

Ambev

Coke

Soft Drinks Market Share