Sustainability Analysis: Ambev

Julio F. Campos

Originally published in 2018

Recently Ambev presented its product AMA, which is nothing more than bottled water with a sustainability appeal based on the proposal to donate 100% of its profit from the product sale as a Cause Marketing approach (How Cause Marketing is another way to divert attention to the real problem of consumerism and its hidden costs, as keep consumers consuming or “pretending” to aid to solve a problem created by the market itself, won’t be discussed here).

What will be discussed is: a) does a company such as Ambev needs to create a new product to present itself as sustainable?; b) how sustainable it really is when it comes to water, probably the most valuable natural resource today?

AMA

As stated AMA is a brand of bottled water which has 100% of its profit donated to a program aimed to deliver water to isolated communities in Brazil. With a US$0.54 / 500 ml price tag, it fits within market range for bottled waters.  

With a website where the consumer can follow the results of the project, as amount of money raised and number of people affected by it does seem a good initiative (https://www.aguaama.com.br) with roughly US$115.300,00 invested since its start in march/2017 and 3,000 people benefited (about US$12.00/person/month benefited) with water well drilled at tree communities.

So what’s not there?

According to Ambev’s website the original idea behind AMA was:

 “The AMA started at the end of 2015, when the team of sustainability of Ambev began the search for a new project to expand their preservation programs and conscious use of water. After gathering various areas of business and to partner with Yunus Corporate Action Tank, sponsored by Yunus Social Business, which encourages companies to think of businesses that are born to solve a social problem, the idea of creating a bottled water had 100% of the profits invested in access to drinking water.” (http://www.ambev.com.br/imprensa/releases/ambev-lanca-agua-e-reverte-100-do-lucro-para-levar-acesso-agua-potavel-populacao-do-semiarido-brasileiro/ )

Therefore, three questions arise:

1.  How can one company increase its preservation program by increasing the sales of its products? It must be remembered that it’s not just water, but the whole chain (a basic life cycle assessment point the problems), including petrochemical for bottle production and energy for example.

2.  How can one company promote the conscious use of water by creating a new market for water? 

3.  More importantly, does it need a new product to achieve its goals? With a net
profit of about US$ 700,000,000.00 at 2017 first quarter only (http://ri.ambev.com.br/default_pt.asp?idioma=0&conta=28), does it really need a cause marketing to finance a US$115.300,00 project? Costs included (25% for taxes, 45% production and transportation and 5% sales and marketing), AMA profit represent only 25% of the product. Why all these production costs and investment to create a new product that benefits only 3,000 people when just 5% of its quarterly net profit, U$ 35,000,000.00 could help about 90,000 (based on the number of people aided by current AMA project)?

Let's look at that 100% donation of the profits.

The retail price of AMA is around US$ 0.54 and since Carrefour claims to be also donating 50% of its profits from AMA, we can presume that the profit donated by AmBev (25%) is not based on its retail price.

Exactly how much the consumer is actually donating to the project?

Are the consumers aware of it?  According to Brazilian consumers laws, they should be.

As a last interesting point to address.

There is no information on its site about exactly how the project to provide water is developed whatsoever.

However, on an interview, the AmBev sustainability director eplained a part of the project design. It is focused on drilling wells (obviously) but also using solar photovoltaic panels to provide electricity to the water pumping and distribution system.

When asked about those solar panels, which are NOT necessary to pump water into a water tower, which will provide water through simple gravitational power, I got answered that the panels were needed to reduce the pumping electricity bill from the local community.

So, not only the focus population is not the one who needs more the access to water recourses (that would be the isolated communities which have no electricity at all) but also the cost of the chosen technology also limits the number of people that could be benefited by this project.

Photovoltaic panels look good at the marketing folders though...

Conclusion points that not only the new product is irrelevant to do deal with the problem proposed, specially compared to what the company could really achieve without the need to appeal to cause marketing, but also that AMBEV, if indeed compromised with strong sustainability, could have created way more company value without misleading the lay consumer to increase its consume rate believing that the company is doing the best to help someone

Water Sustainability

  

Since water is the core raw matter of the company, let’s just do a brief analysis of its works on water sustainability.

Still, within the cause marketing realm, news came out about spreading how much the company efforts were able to cut down its water demand at its productive process by 41% from 2002 to 2015. (http://exame.abril.com.br/revista-exame/lucro-com-causa/ ).
No one can argue that it’s a pretty incredible achievement. Congratulations. But, let’s see with its corporate and sustainability reports shows about it (http://ri.ambev.com.br/conteudo_pt.asp?idioma=0&conta=28&tipo=43232):

1.  According to 2003 report, in 2003 the water used was 4.88l per bottler litter (4.88l/l) (Due to the absence of a 2002 report, data from 2003 will be used)

2.  According to 2015 report, that volume dropped to 3.14l/l, a 36% cut since 2003.

When not only the water used during the production, but also sold as a component of its products, the following numbers comes up:

	Water for production (l/l times l produced)  (l)	Water sold in products (l)	Total (l)
2003	463,600,000,000.00	95,000,000,000.00	558,600,000,000.00
2015	530,660,000,000.00	169,000,000,000.00	699,660,000,000.00

So, all added up, from 2003 to 2015, due to increase in sales, there was actually a 25% increase in total water use. Indeed Jevons' Paradox does apply.

With an unnecessary new product to promote sustainability, at consumer’s expenses, and not fully disclosed information about water use, it’s up to the reader to conclude by itself about the reliability of the advertised sustainability of the presented case

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