Francisco Sá

Head of Soft Drinks

Agenda Soft 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 Margin EBITDA Margin

EBITDA CAGR = 79%

Relevance of Soft Drink Business

1932

75 3408

429

2001 2004

SD Total

4% 4%

12% 12%

Profitability Evolution

“Right Fews” Strategy

“Right Fews” “Right Fews”

Few Brands Few

Brands Few

Channels Few

Channels Few

Programs Few

Programs

Profitability Evolution

The “Right Fews” Strategy Profitability 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

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 / hl R$ 21,01 / hl

Full Costing: CSD Incremental Approach:

COGS advantage to KO Bottlers (avg-13%)

Total AmBev (ex-beer)

KOF - Brazil Andina - Brazil

2,68 2,68 2,44 2,44

2003 / 2004

2,90 2,90 2,81 2,81

2003 / 2004

2,96 2,96 2,85 2,85

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

150 1,069

1,353 1,219

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 Overview Relevance 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 Overview Share 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 Overview Regional 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 Channel Market Overview

Market Overview Multi 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 Overview OW 2L Pet Real Price Evolution

Real Price Index

Soft Drink Strategy

Market Share + Profitability Market Share + Profitability

Strong Brands Strong Brands Availability Availability Price Price Execution Execution

RTM Cost to Serve

RTM Cost to Serve

PepsiCo Relationship PepsiCo Relationship

Strong Brands AmBev Portfolio

Leader in the flavor segment

Second in cola segment

Leader in sports drinks

36%

92,0%

8,0%

91,6%

8,4%

2000 2005

Development AmBev Share

Strong Brands Opportunity in the Diet / Light Segment

AmBev Diet/LightBrand Equity

A B C D E F G

CC L CC L CC L 

CC L 

CC L CC L CC L 

GA D 

GA D 

GA D GA D GA D GA D 

GA D K L 

PC L PC L PC L 

PC L 

PC L CC L L CC L L 

CC L L 

CC L L 

CC L L CC L L CC L L 

PT L PT L 

PT L PT L 

PT L PT L PT L

Strong Brands Key Brand Indicators

Preference

Consideration

Awareness 100

76

17

Video

Video

Strong Brands Effective Communication

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

Availability Gap 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

4 4 AmBev # of packs

9 5 Coca Cola # of packs

Convenience

Value

Out of Pocket

Out of Home

BIB

Availability Gap in Portfolio

AmBev

CSD

Portfolio

In Home

Stock Up

1

2/3

Routine Immediate

Consumer Occasion

Purchase Occasion Benefits

-20%

-15%

-10%

-5%

0%

5%

10%

15%

20%

Scenario 1 Scenario 2 Scenario 3

Market Share Contribution Margin

Package Decision based on sales algorithm Availability

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 Share Performance

Estimated Share Performance

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

Availability

Per Capita

Availability

7,2 6,8

1,0

Mexico Venezuela Brazil

(Annual 8oz servings)

Gatorade Per Capita

Programs focused in execution in the point of sale

Points scored in accordance to the quality of category management

Outsourced monitoring

Increase refrigeration capacity

Execution Relationship Programs

New 2L PET bottle

Best Practice Alluminum cans

Strong Relationship with Pepsico Track record of value creation

Non Carbonated Soft Drinks

Product Innovation Pepsi Twist

Strong Relationship with Pepsico Track 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 Drinks EBITDA Pool & Share

Total R$ 2.5B

R$ 0.5B AmBev

EBITDA Pool

53%

17%

30%

B Brands Ambev Coke

Soft Drinks Market Share