UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 20-F

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended: December 31, 2014

Commission file number: 1565025

AMBEV S.A.

(Exact name of Registrant as specified in its charter)

AMBEV INC.

(Translation of Registrant’s name into English)

Federative Republic of Brazil

(Jurisdiction of incorporation or organization)

Rua Dr. Renato Paes de Barros, 1017, 3^rd floor
04530-001 São Paulo, SP, Brazil
(Address of principal executive offices)
Nelson José Jamel, Chief Financial and Investor Relations Officer
Address: Rua Dr. Renato Paes de Barros, 1017, 3^rd floor, 04530-001, São Paulo, SP, Brazil
Telephone No.: +55 (11) 2122-1200
e-mail: ir@ambev.com.br

(Name, Telephone, E-mail and/or Facsimile number and Address of Company Contact Person)

Securities registered or to be registered pursuant to Section 12(b) of the Act:

Title of each class	Name of each exchange on which registered
American Depositary Shares, evidenced by American Depositary Receipts, each representing 1 (one) common share*, no par value	New York Stock Exchange

* Not for trading, but in connection with the registration of American Depositary Shares, pursuant to the requirements of the Securities and Exchange Commission.

Securities registered or to be registered pursuant to Section 12(g) of the Act: None

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act:
Title of each class	Name of each exchange on which registered
Guaranty for the R$300,000,000 9.500% Notes due 2017 of AmBev International Finance Co. Ltd. by Ambev S.A.	Not applicable
Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report.
15,716,231,115 common shares, without par value
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
		x Yes ¨ No

If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.
					¨ Yes x No
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
					x Yes ¨ No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer x		Accelerated filer ¨	Non-accelerated filer ¨
Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:
U.S. GAAP ¨	International Financial Reporting Standards as issued by the International Accounting Standards Board x				Other ¨
If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow. N/A
				¨ Item 17 ¨ Item 18
If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
				¨ Yes x No

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INTRODUCTION

This annual report on Form 20-F relates to the registered American Depositary Shares, or ADSs, of Ambev S.A., or Ambev, evidenced by American Depositary Receipts, or ADRs, each representing one common share, no par value, of Ambev.

In this annual report, except as otherwise indicated or as the context otherwise requires, the “Company”, “Ambev”, “we”, “us” and “our” refers to Ambev S.A. and its subsidiaries and, unless the context otherwise requires, the predecessor companies that have been merged out of existence with and into it. All references to “Old Ambev” refer to Companhia de Bebidas das Américas – Ambev, our former subsidiary that had common and preferred shares listed on the São Paulo Stock, Commodities and Futures Exchange (BM&FBOVESPA S.A. – Bolsa de Valores, Mercadorias e Futuros), or the BM&FBOVESPA, and common and preferred ADSs listed on the New York Stock Exchange, or the NYSE, and that was merged out of existence with and into us in January 2014. All references to CSD & NANC are to Carbonated Soft Drinks and Non-Alcoholic and Non-Carbonated Soft Drinks. All references to “Brazil” are to the Federative Republic of Brazil, unless the context otherwise requires. All references to the “Brazilian government” are to the federal government of Brazil. All references to percent ownership interests in Ambev do not take into account treasury shares.

PRESENTATION OF FINANCIAL AND OTHER INFORMATION

We prepare our audited consolidated financial statements in accordance with International Financial Reporting Standards, or IFRS, as issued by the International Accounting Standards Board, or the IASB. The financial information and related discussion and analysis contained in this annual report on Form 20-F are presented in reais, except as otherwise specified. Unless otherwise specified, the financial information analysis in this annual report on Form 20-F is based on our consolidated financial statements as of December 31, 2014 and 2013 and for the three years ended December 31, 2014, included elsewhere in this document. Percentages and some amounts in this annual report on Form 20-F have been rounded for ease of presentation. Any discrepancies between totals and the sums of the amounts listed are due to rounding.

Unless otherwise specified, volumes, as used in this annual report on Form 20-F, include both beer (including near-beer) and CSD & NANC volumes. In addition, unless otherwise specified, our volumes refer not only to the brands that we own or license, but also third-party brands that we brew or otherwise produce as a subcontractor, and third-party products that we sell through our distribution network. Our volume figures in this Form 20-F reflect 100% of the volumes of entities that we fully consolidate in our financial reporting. In addition, market share data contained in this annual report on Form 20-F refers to volumes sold.

MARKET DATA

Market information (including market share, market position and industry data for our operating activities and those of our subsidiaries or of companies acquired by us) or other statements presented in this Form 20-F regarding our position (or that of companies acquired by us) relative to our competitors largely reflect the best estimates of our management. These estimates are based upon information obtained from customers, trade or business organizations and associations, other contacts within the industries in which we operate and, in some cases, upon published statistical data. Except as otherwise stated, our market share data, as well as our management’s assessment of our comparative competitive position, has been derived by comparing our sales volumes for the relevant period to our management’s estimates of our competitors’ sales volumes for such period, as well as upon published statistical data, and, in particular the reports published and the information made publicly available by, among others, the local brewers’ associations and the national statistics bureaus in the various countries in which we sell our products.

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CAUTIONARY STATEMENT REGARDING
FORWARD-LOOKING INFORMATION

Some of the information contained in this annual report may constitute forward-looking statements within the meaning of Section 27A of the U.S. Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the U.S. Securities Exchange Act of 1934, as amended, or the Exchange Act. We have based these forward-looking statements largely on our current expectations and projections about future events, industry and financial trends affecting our business.

Many of these forward-looking statements can be identified by the use of forward-looking words such as “anticipate,” “project,” “may,” “believe,” “could,” “expect,” “should,” “plan,” “intend,” “estimate,” “potential,” among others. These statements appear in a number of places in this annual report and include, but are not limited to, statements regarding our intent, belief or current expectations. Forward-looking statements are subject to certain risks and uncertainties that are outside our control and are difficult to predict. These risks and uncertainties could cause actual results to differ materially from those suggested by forward-looking statements. Factors that could cause actual results to differ materially from those contemplated by forward‑looking statements include, among others:

· greater than expected costs (including taxes) and expenses;

· the risk of unexpected consequences resulting from acquisitions, joint ventures, strategic alliances, corporate reorganizations or divestiture plans, and our ability to successfully and cost-effectively implement these transactions and integrate the operations of businesses or other assets that we acquire;

· our expectations with respect to expansion plans, projected asset divestitures, premium growth, accretion to reported earnings, working capital improvements and investment income or cash flow projections;

· lower than expected revenue;

· greater than expected customer losses and business disruptions;

· limitations on our ability to contain costs and expenses;

· local, regional, national and international economic conditions, including the risks of a global recession or a recession in one or more of our key markets, and the impact they may have on us and our customers and our assessment of that impact;

· the monetary and interest rate policies of central banks;

· continued availability of financing;

· market and financial risks, such as interest rate risk, foreign exchange rate risk, commodity risk, asset price risk, equity market risk, inflation or deflation;

· our ability to continue to introduce competitive new products and services on a timely, cost-effective basis;

· the effects of competition and consolidation in the markets in which we operate, which may be influenced by regulation, deregulation or enforcement policies;

· changes in pricing environments and volatility in commodity prices;

iii

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· regional or general changes in asset valuations;

· changes in consumer spending;

· the outcome of pending and future litigation and governmental proceedings and investigations;

· changes in government policies;

· changes in applicable laws, regulations and taxes in jurisdictions in which we operate including the laws and regulations governing our operations, as well as actions or decisions of courts and regulators;

· natural and other disasters;

· any inability to economically hedge certain risks;

· inadequate impairment provisions and loss reserves;

· technological changes;

· our success in managing the risks involved in the foregoing;

· governmental intervention, resulting in changes to the economic, tax or regulatory environment in Brazil or other countries in which we operate;

· the declaration or payment of dividends;

· the utilization of Ambev’s subsidiaries’ income tax loss carry forwards; and

· other factors or trends affecting our financial condition or results of operations, including those factors identified or discussed under “Item 3. Key Information—D. Risk Factors.”

We caution you that forward-looking statements are not guarantees of future performance and involve risks and uncertainties. Forward-looking statements reflect only our current expectations and are based on our management’s beliefs and assumptions and on information currently available to our management. Actual results may differ materially from those in forward-looking statements as a result of various factors, including, without limitation, those identified under “Item 3. Key Information—D. Risk Factors” in this annual report. As a result, investors are cautioned not to place undue reliance on forward-looking statements contained in this annual report when making an investment decision.

Forward-looking statements speak only as of the date they are made, and we do not undertake any obligation to update them in light of new information or future developments or to release publicly any revisions to these statements in order to reflect later events or circumstances or to reflect the occurrence of unanticipated events.

Investors should consider these cautionary statements together with any written or oral forward-looking statements that we may issue in the future.

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ITEM 3. KEY INFORMATION

A. Selected Financial Data

The following financial information of Ambev is only a summary and should be read in conjunction with, and is qualified in its entirety by reference to, our audited consolidated financial statements and related notes which are included elsewhere in this annual report on Form 20-F.

The tables below represent the selected consolidated income statement data for the years ended December 31, 2014, 2013, 2012, 2011 and 2010 and selected consolidated balance sheet data for the years ended December 31, 2014, 2013, 2012 and 2011 that were prepared in accordance with IFRS.

Selected Consolidated Income Statement Data

	Year Ended December 31,
	2014	2013(1)	2012(1)	2011(1)	2010(1)(2)
		(restated)
	(*in R$ million*)
Net sales	38,079.8	35,079.1	32,478.3	27,126.7	25,233.3
Cost of sales	(12,814.6)	(11,572.5)	(10,607.8)	(8,998.5)	(8,682.2)
Gross profit	25,265.2	23,506.6	21,870.5	18,128.2	16,551.1
Sales and marketing expenses	(9,158.8)	(8,059.9)	(7,378.9)	(6,254.1)	(6,038.3)
Administrative expenses	(1,820.0)	(1,748.3)	(1,613.2)	(1,237.3)	(1,204.5)
Other operating income/(expense)	1,629.2	1,761.6	863.6	783.2	624.7
Income from operations before exceptional items	15,915.6	15,460.0	13,742.0	11,420.0	9,933.0
Exceptional items	(89.0)	(29.2)	(50.4)	23.1	(150.8)
Income from operations	15,826.6	15,430.8	13,691.6	11,443.1	9,782.2
Net finance cost	(1,475.4)	(1,561.4)	(893.3)	(521.7)	(317.8)
Share of results of associates	17.4	11.4	0.5	0.5	0.2
Income tax expense	(2,006.6)	(2,481.4)	(2,339.7)	(2,443.1)	(2,004.4)
Net Income	12,362.0	11,399.4	10,459.1	8,478.8	7,460.2
Attributable to:
Equity holders of Ambev	12,065.5	9,557.3	6,345.7	5,146.4	4,516.5
Non-controlling interests	296.5	1,842.1	4,113.4	3,332.4	2,943.7

(1) We have applied retrospectively the predecessor basis of accounting to the acquisition in January 2014 of the control of Cerbuco Brewing Inc., or Cerbuco, the holding company that owns controlling interest in Bucanero S.A., or Bucanero, consistent with the accounting policy for business combination between entities under common control. We have not restated the selected financial data for the years ended December 31, 2011 and 2010 to reflect the effects of this transaction, as the impact of this restatement in those years was not considered to be material.

(2) We have adopted IAS 19R (Employee Benefits) on January 1, 2013, and applied it retrospectively to January 1, 2011. We did not restate the selected financial data for the year ending December 31, 2010 to reflect the adoption of IAS 19R, as such effect was not considered to be material.

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Earnings per Share and Dividend per Share

	Year Ended December 31,
	2014	2013	2012	2011
		(restated)
	*(in R$, unless otherwise indicated)*
Earnings per common share and per ADS(1):
- Basic	0.77	0.75	0.65	0.53
- Diluted	0.76	0.75	0.64	0.52
Dividends and interest on shareholders’ equity per share and per ADS (weighted average)(2):
- Basic (R$)	0.77	0.58	0.58	0.57
- Basic (US$)	0.29	0.25	0.28	0.30
Weighted average number of shares (million shares)(3):
- Basic	15,683	12,678	9,694	9,694
- Diluted	15,820	12,824	9,840	9,833

(1) The calculation of basic earnings per share is based on the net income attributable to equity holders of Ambev and the proportional weighted average number of shares outstanding during the year. Diluted earnings per share is based on the net income attributable to equity holders of Ambev and by adjusting the weighted average number of shares outstanding during the year to assume conversion of all potentially dilutive shares.

(2) Dividend and interest on shareholders’ equity per share information was calculated based on the amount paid during the year net of withholding tax.

(3) Ambev S.A. had 9,694 million common shares outstanding immediately after ABI’s contribution of its Old Ambev common and preferred shares to Ambev S.A. in June 2013. These 9,694 million Ambev S.A common shares were reflected retrospectively in 2012 and 2011 as being outstanding both for purposes of the basic and diluted earnings per share figures shown in this table. Later in 2013, Ambev S.A. issued another 5,969 million common shares in connection with the consummation of Old Ambev’s stock swap merger with Ambev S.A. The Ambev S.A. common shares issued in connection with the referred stock swap merger were considered from their issuance date and, therefore, represented only an additional 2,984 million common shares for purposes of calculating the weighted average number of Ambev S.A. common shares for 2013.

As a preliminary step to the stock swap merger of Old Ambev with Ambev S.A., the filer of this annual report (see “Item 4. Information on the Company—A. History and Development of the Company—Stock Swap Merger of Old Ambev with Ambev S.A.”), our indirect controlling shareholder, Anheuser-Busch InBev N.V./S.A., or ABI, contributed its indirectly held Old Ambev common and preferred shares to Ambev S.A. in June 2013. Prior to such contribution, Ambev S.A. did not conduct any operating activities and had served as a vehicle for ABI to hold a 0.5% interest in Old Ambev’s capital stock. As a result, until such share contribution the results of operations and consolidated financial position of our business operations had been reflected in the consolidated financial statements of Old Ambev. Therefore, for disclosure purposes when presenting the stock swap merger in the registration statement on Form F-4 filed with the SEC in 2013, historical selected financial data for Ambev S.A. capturing the results of operations and consolidated financial position of our business operations (which until then had been under Old Ambev) was prepared retrospectively only as from January 1, 2010. The equivalent financial information for the year ended December 31, 2009 and as of December 31 2010 and 2009 was omitted from that registration statement, as it was neither readily available and nor would it have been possible to prepare it without unreasonable effort or expense, given significant changes in our accounting department personnel and system changes in subsequent periods. As a result, information regarding our financial position as of December 31, 2010 is unavailable in this annual report and in the selected balance sheet data set forth below.

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Selected Consolidated Balance Sheet Data

	As at December 31,
	2014	2013(1)	2012(1)	2011(1)
		(restated)
	*(in R$ million)*
Non-current assets	51,414.8	48,276.2	45,592.5	39,080.2
Property, plant and equipment	15,740.1	14,005.6	12,413.7	10,375.5
Goodwill	27,502.9	27,023.7	26,647.5	23,814.2
Intangible assets	3,754.9	3,214.0	2,936.4	1,912.8
Deferred tax assets	1,392.5	1,647.8	1,428.7	1,447.1
Taxes and contributions receivable	1,161.2	474.1	375.0	377.8
Trade and other receivables	1,742.0	1,797.2	1,492.3	870.5
Other	121.2	113.8	298.9	282.3
Current assets	20,728.5	20,809.0	16,626.2	14,747.2
Inventories	3,411.3	2,835.6	2,505.5	2,238.5
Trade and other receivables	5,300.2	4,749.6	3,799.6	3,309.3
Taxes and contributions receivable	1,581.9	1,397.0	585.2	860.3
Cash and cash equivalents	9,722.1	11,538.2	9,259.3	8,145.7
Investment securities	713.0	288.6	476.6	193.4
Total assets	72,143.3	69,085.2	62,218.7	53,827.4
Shareholders’ equity	43,644.7	44,224.7	37,522.9	33,125.3
Equity attributable to equity holders of Ambev	42,221.6	42,992.5	25,397.9	23,088.1
Non-controlling interests	1,423.1	1,232.2	12,125.0	10,037.2
Non-current liabilities	6,673.8	7,507.8	9,046.8	6,280.1
Interest-bearing loans and borrowings	1,634.6	1,865.2	2,316.2	1,890.2
Employee benefits	1,757.0	1,558.3	1,780.9	1,602.9
Deferred tax liabilities	1,737.6	2,095.7	1,367.6	1,112.0
Taxes and contributions payable	610.9	883.0	779.3	743.0
Trade and other payables	390.5	673.9	2,284.7	453.6
Provisions	543.2	431.7	518.1	478.4
Current liabilities	21,824.8	17,352.7	15,649.0	14,422.0
Interest-bearing loans and borrowings	988.1	1,040.6	837.8	2,212.1
Trade and other payables	17,054.7	13,034.8	11,591.7	9,422.4
Taxes and contributions payable	3,543.7	2,235.2	2,101.5	2,673.6
Provisions	139.2	145.0	137.5	101.6
Bank overdraft	99.1	897.1	980.5	12.3
Total shareholders’ equity and liabilities	72,143.3	69,085.2	62,218.7	53,827.4

(1) We have applied retrospectively the predecessor basis of accounting to the acquisition in January 2014 of the control of Cerbuco, the holding company that owns controlling interest in Bucanero consistent with the accounting policy for business combination between entities under common control. We have not restated the selected financial data for the years ended December 31, 2011 and 2010 to reflect the effects of this transaction, as the impact of this restatement in those years was not considered to be material.

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Other Data

	As at and for the Year Ended December 31,
	2014	2013(1)	2012(1)	2011(1)	2010(1)(2)
		(restated)
	(*in R$ million, except for operating data*)
Other Financial Data:
Net working capital(3)	(1,096.3)	3,456.3	977.2	325.2	N/A
Cash dividends and interest on shareholders’ equity paid	12,059.6	7,333.7	5,619.3	5,491.1	5,005.4
Depreciation and amortization(4)	2,392.5	2,105.1	1,953.1	1,662.1	1,805.6
Capital expenditures(5)	4,493.1	3,810.3	3,017.9	3,200.2	2,286.8
Operating cash flows - generated(6)	15,895.7	15,314.8	14,316.4	12,668.2	10,020.9
Investing cash flows - used(6)	(4,768.0)	(3,811.3)	(5,721.0)	(186.9)	(3,174.3)
Financing cash flows - used(6)	(13,143.8)	(9,506.7)	(7,825.3)	(10,667.7)	(4,836.2)
Other Operating Data:
Total production capacity - Beer – million hl(7)	199.7	194.5	192.6	176.5	163.3
Total production capacity - CSD & NANC - million hl(7)	92.6	85.9	87.0	86.2	83.7
Total beer volume sold - million hl(8)	124.7	120.1	123.7	118.7	119.2
Total CSD & NANC volume sold - million hl(8)	47.0	46.4	47.4	46.3	46.0
Number of employees(9)	51,871	53,581	51,888	46,503	44,924

(1) We have applied retrospectively the predecessor basis of accounting to the acquisition in January 2014 of the control of Cerbuco the holding company that owns controlling interest in Bucanero consistent with the accounting policy for business combination between entities under common control. We have not restated the selected financial data for the years ended December 31, 2011 and 2010 to reflect the effects of this transaction, as the impact of this restatement in those years was not considered to be material.

(3) Represents total current assets less total current liabilities.

(4) Includes depreciation of property, plant and equipment, amortization of intangible assets and impairment losses related to these assets.

(5) Represents cash expenditures for property, plant, equipment and intangible assets.

(6) Operating, investing and financing cash flow data is derived from our consolidated cash flow statements contained in our audited consolidated financial statements.

(7) Represents our available production capacity at year-end; capacity can vary from year to year depending on mix; “hl” is the abbreviation for hectoliters.

(8) Represents our full-year volumes.

(9) Includes all our production- and non-production-related employees.

Exchange Rate Information

Since 1999, the Central Bank has allowed the real/U.S. dollar exchange rate to float freely, and during that period, the real/U.S. dollar exchange rate has fluctuated considerably. In the past, the Central Bank has intervened occasionally to control unstable movements in foreign exchange rates. We cannot predict whether the Central Bank or the Brazilian federal government will continue to let the real float freely or will intervene in the exchange rate market through a currency band system or otherwise. The real may depreciate or appreciate against the U.S. dollar substantially in the future. See “—D. Risk Factors—Risks Relating to Brazil and Other Countries in Which We Operate.”

Since March 2005, all foreign exchange transactions in Brazil started to be carried out through institutions authorized to operate in the consolidated market and are subject to registration with the electronic registration system of the Central Bank. Foreign exchange rates continue to be freely negotiated, but may be influenced by Central Bank intervention.

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The following table sets forth the selling exchange rate, expressed in reais per U.S. dollar, for the periods indicated. The information in the “Average” column represents the average of the exchange rates on the last day of each month during the periods presented.

	*Reais* per U.S. Dollar
Year	High	Low	Average	Period End
2010	1.881	1.655	1.756	1.666
2011	1.902	1.535	1.677	1.876
2012	2.112	1.702	1.955	2.044
2013	2.446	1.953	2.174	2.343
2014	2.740	2.197	2.360	2.656

Source: Central Bank.

	*Reais* per U.S. Dollar
Month	High	Low
September 2014	2.452	2.232
October 2014	2.534	2.391
November 2014	2.614	2.484
December 2014	2.740	2.561
January 2015	2.711	2.575
February 2015	2.881	2.689
March 2015 (until March 17)	3.268	2.865

Source: Central Bank.

We pay cash dividends and make other cash distributions in reais. Accordingly, exchange rate fluctuations may affect the U.S. dollar amounts received by the holders of ADSs on conversion by the depositary of such distributions into U.S. dollars for payment to holders of ADSs. Fluctuations in the exchange rate between the real and the U.S. dollar may also affect the U.S. dollar equivalent of real price of our shares on the BM&FBOVESPA. For further information on this matter see “—D. Risk Factors—Risks Relating to Our Common Shares and ADSs.”

Exchange Controls

There are no restrictions on ownership of the ADSs or the preferred shares or common shares by individuals or legal entities domiciled outside Brazil. However, the right to convert dividend payments, interest on shareholders’ equity payments and proceeds from the sale of preferred shares or common shares into foreign currency and to remit such amounts outside Brazil is subject to exchange control restrictions and foreign investment legislation which generally requires, among other things, that relevant investments be registered with the Central Bank and the Comissão de Valores Mobiliários (the Brazilian Securities Commission), or the CVM.

Restrictions on the remittance of foreign capital abroad could hinder or prevent Banco Bradesco S.A., the custodian of Ambev’s ADS program, or the custodian, or holders who have exchanged Ambev’s ADSs for shares of Ambev, from converting dividend distributions, interest on shareholders’ equity or the proceeds from any sale of shares of Ambev into U.S. dollars and remitting such U.S. dollars abroad. Holders of Ambev ADSs could be adversely affected by delays in or refusal to grant any required governmental approval for conversions of real payments and remittances abroad.

Under Brazilian law relating to foreign investment in the Brazilian capital markets, or the Foreign Investment Regulations, foreign investors registered with CVM, and acting through authorized custodial accounts managed by local agents may buy and sell shares on Brazilian stock exchanges without obtaining separate certificates of registration for each transaction. Foreign investors may register their investment under Law No. 4,131/62, as amended, or Law No. 4,131, or Resolution No. 4,373, dated September 29, 2014, or Resolution No. 4,373, of the Conselho Monetário Nacional (National Monetary Council), or the CMN.

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Law No. 4,131 is the main legislation concerning foreign capital and direct equity investments in Brazilian companies and it is applicable to any amount that enters the country in the form of foreign currency, goods and services. Except for registration of the capital inflow/outflow with the Central Bank, non-resident investors directly investing in equity of Brazilian companies do not need any specific authorization to make such investments.

Portfolio foreign investments are regulated by Resolution No. 4,373 and CVM Instruction No. 325, which is currently being updated by the CVM in order to reflect the provisions of Resolution No. 4,373.

Under Resolution No. 4,373, foreign investors may invest in almost all financial assets and engage in almost all transactions available in the Brazilian financial and capital markets, provided that certain requirements are fulfilled. In accordance with Resolution No. 4,373, the definition of a foreign investor includes individuals, legal entities, mutual funds and other collective investment entities, domiciled or headquartered abroad.

In order to become a Resolution No. 4,373 investor, a foreign investor must:

· appoint at least one representative in Brazil, with powers to perform actions relating to its investment;

· appoint an authorized custodian in Brazil for its investments, which must be a financial institution or entity duly authorized by the Central Bank or CVM;

· appoint a tax representative in Brazil;

· through its representative in Brazil, register itself as a foreign investor with the CVM; and

· through its representative in Brazil, register its foreign investment with the Central Bank.

In addition, an investor operating under the provisions of Resolution No. 4,373 must be registered with the Secretaria da Receita Federal (the Brazilian Internal Revenue Service), or the RFB, pursuant to RFB Normative Instruction No. 1,470 of May 30, 2014, and RFB Normative Instruction No. 1,548 of February 13, 2015.

Pursuant to the registration obtained by Ambev with the Central Bank in the name of The Bank of New York, as depositary for the ADS programs of Ambev, or the Depositary, with respect to the ADSs to be maintained by the custodian on behalf of the Depositary, the custodian and the Depositary will be able to convert dividends and other distributions with respect to the Ambev shares represented by ADSs into foreign currency and remit the proceeds outside Brazil. In the event that a holder of ADSs exchanges such ADSs for Ambev shares, such holder will be entitled to continue to rely on the Depositary’s registration for only five business days after such exchange. After that, such holder must seek to obtain its own registration pursuant to Law No. 4,131 or Resolution No. 4,373. Thereafter, unless any such holder has registered its investment with the Central Bank, such holder may not convert into foreign currency and remit outside Brazil the proceeds from the disposition of, or distributions with respect to, such Ambev shares.

Under current legislation, the Brazilian government may impose temporary restrictions on remittances of foreign capital abroad in the event of a serious imbalance or an anticipated serious imbalance of Brazil’s balance of payments. For approximately six months in 1989 and early 1990, the Brazilian government froze all dividend and capital repatriations held by the Central Bank that were owed to foreign equity investors in order to conserve Brazil’s foreign currency reserves. These amounts were subsequently released in accordance with Brazilian government directives. We cannot assure you that the Brazilian government will not impose similar restrictions on foreign repatriations in the future. See “—D. Risk Factors—Risks Relating to Brazil and Other Countries in Which We Operate” and “—D. Risk Factors—Risks Relating to Our Common Shares and ADSs.”

B. Capitalization and Indebtedness

Not applicable.

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C. Reasons for the Offer and Use of Proceeds

Not applicable.

D. Risk Factors

Before making an investment decision, you should consider all of the information set forth in this annual report. In particular, you should consider the special features applicable to an investment in Brazil and applicable to an investment in Ambev, including those set forth below. In general, investing in the securities of issuers in emerging market countries, such as Brazil, involves a higher degree of risk than investing in the securities of issuers in the United States.

Risks Relating to Brazil and Other Countries in Which We Operate

Economic uncertainty and volatility in Brazil may adversely affect our business.

Our most significant market is Brazil, which has periodically experienced extremely high rates of inflation. Inflation, along with governmental measures to fight inflation and public speculation about possible future measures, has had significant negative effects on the Brazilian economy. The annual rates of inflation, as measured by the Índice Nacional de Preços ao Consumidor (National Consumer Price Index), reached a hyper-inflationary peak of 2,489.1% in 1993. Brazilian inflation, as measured by the same index, was 6.5% in 2010, 6.1% in 2011, 6.2% in 2012, 5.6% in 2013 and 6.2% in 2014. Brazil may experience high levels of inflation in the future. There can be no assurance that recent lower levels of inflation will continue. Future governmental actions, including actions to adjust the value of the real, may trigger increases in inflation. We cannot assure you that inflation will not affect our business in the future. In addition, any Brazilian government’s actions to maintain economic stability, as well as public speculation about possible future actions, may contribute significantly to economic uncertainty in Brazil and may heighten volatility in the Brazilian securities markets and securities issued abroad by Brazilian issuers. It is also difficult to assess the impact that turmoil in the credit markets will have in the Brazilian economy, and as a result on our future operations and financial results.

The Brazilian currency has devalued frequently, including during the last two decades. Throughout this period, the Brazilian government has implemented various economic plans and utilized a number of exchange rate policies, including sudden devaluations and periodic mini-devaluations, during which the frequency of adjustments has ranged from daily to monthly, floating exchange rate systems, exchange controls and dual exchange rate markets. There have been significant fluctuations in the exchange rates between Brazilian currency and the U.S. dollar and other currencies. For example, in 2010, the real appreciated by 4.5% resulting in an exchange rate of R$1.666 per US$1.00 as of December 31, 2010. However, since 2011 the real has been depreciating continuously, having depreciated by 12.5%, 8.9%, 14.6% and 13.4% against the U.S. dollar in 2011, 2012, 2013 and 2014, respectively, closing at R$2.656 per U.S. $1.00 as of December 31, 2014. As of March 17, 2015, the exchange rate was R$3.268 per US$1.00.

Devaluation of the real relative to the U.S. dollar may create additional inflationary pressures in Brazil by generally increasing the price of imported products and requiring recessionary governmental policies to curb aggregate demand. On the other hand, further appreciation of the real against the U.S. dollar may lead to a deterioration of the current account and the balance of payments, as well as dampen export-driven growth. The potential impact of the floating exchange rate and measures of the Brazilian government aimed at stabilizing the real is uncertain. In addition, a substantial increase in inflation may weaken investor confidence in Brazil, impacting our ability to finance our operations through the international capital markets.

Consumption of beer, other alcoholic beverages and soft drinks in many of the jurisdictions in which we operate, including Brazil, is closely linked to general economic conditions, such that levels of consumption tend to rise during periods of rising per capita income and to fall during periods of declining per capita income. Additionally, per capita consumption is inversely related to the sale price of our products. Besides moving in concert with changes in per capita income, consumption of beer and other alcoholic beverages also varies in accordance with changes in disposable income. Any decrease in disposable income resulting from an increase in inflation, income taxes, cost of living, unemployment levels, political or economic instability or other factors would likely adversely affect the demand for beer, other alcoholic beverages and soft drinks, and the recently experienced instability and economic uncertainty in Brazil may lead to such negative impacts on our operations and financial results.

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Devaluation of the real relative to the U.S. dollar may adversely affect our financial performance.

Most of our sales are in reais; however, a significant portion of our debt is denominated in or indexed to U.S. dollars. In addition, a significant portion of our cost of sales, in particular those related to packaging such as cans and bottles made of polyethylene terephthalate, or PET, as well as sugar, hops and malt are also denominated in or linked to U.S. dollars. Therefore, any devaluation of the real may increase our financial expenses and operating costs and could affect our ability to meet our foreign currency obligations. Although our current policy is to hedge substantially all of our U.S. dollar-denominated debt and cost of sales against changes in foreign exchange rates, we cannot assure you that such hedging will be possible or available at reasonable costs at all times in the future.

Volatility in commodities prices may adversely affect our financial performance.

A significant portion of our cost of sales is comprised of commodities such as aluminum, sugar, corn, wheat and PET bottles, the prices of which fluctuated significantly in 2014. An increase in commodities prices directly affects our consolidated operating costs. Although our current policy is to mitigate our exposure risks to commodity prices whenever financial instruments are available, we cannot assure that such hedging will be possible or available at reasonable costs at all times in the future.

Set forth below is a table showing the volatility in prices of the principal commodities we purchase:

Commodity	High Price	Low Price	Average in 2014	Fluctuation
Aluminum (US$/ton)	2,107.00	1,677.00	1,895.95	25.6%
Sugar (US$ cents/pounds)	18.32	13.50	16.34	35.7%
Corn (US$ cents/bushel)	515.75	320.75	415.26	60.8%
Wheat (US$ cents/bushel)	731.75	474.00	587.87	54.4%
PET (US$/ton)	1,299.50	1,008.13	1,214.71	28.9%

Increases in taxes levied on beverage products in Brazil and unfair competition arising from tax evasion may adversely affect our results and profitability.

Increases in Brazil’s already high levels of taxation could adversely affect our profitability. Increases in taxes on beverage products usually result in higher beverage prices for consumers. Higher beverage prices generally result in lower levels of consumption and, therefore, lower net sales. Lower net sales result in lower margins because some of our costs are fixed and thus do not vary significantly based on the level of production. We cannot assure you that the Brazilian government will not increase current tax levels, at both state and/or federal levels, and that this will not impact our business.

In recent years, taxes on the beverage industry were increased at the Brazilian federal and state levels. Federal taxes were increased in October 2012 based on price-to-consumer researches. In addition, in April 2013 an aggregate increase of two percentage points was approved to the rates of the following federal taxes as applicable to beer: (1) the Excise Tax (Imposto sobre Produtos Industrializados), or the IPI Excise Tax, (2) the Social Integration Program Contribution (Programa de Integração Social), or the PIS Contribution, and (3) the Social Security Funding Contribution (Contribuição para Financiamento da Seguridade Social), or the COFINS. Moreover, in 2013 the following five Brazilian states increased their rates for the State Value-Added Tax on the Distribution of Goods and Services (Imposto sobre Circulação de Mercadorias e Serviços), or the ICMS Value-Added Tax, applicable to beer: Minas Gerais, Sergipe, Amazonas, Mato Grosso and the Federal District. In addition, in January 2014, the state government of Bahia increased the ICMS Value-Added Tax rate applicable to beer. No assurance can be given that the Brazilian government, at both state and/or federal levels, will not consider further tax increases on beverages in the future.

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In addition, the Brazilian beverage industry experiences unfair competition arising from tax evasion, which is primarily due to the high level of taxes on beverage products in Brazil. An increase in taxes may lead to an increase in tax evasion, which could result in unfair pricing practices in the industry. The federal government issued regulations requiring the mandatory installation of production (volume) control systems, known as “SICOBE”, in all Brazilian beer and carbonated soft drinks, or CSD, factories in order to assist governments to fight tax evasion in the beverage industry. The installation of this equipment in the production lines has been completed and it covers more than 98% of our total volume. The objective of reducing tax evasion is being achieved for federal taxes. State governments have started using data from the SICOBE in order to identify potential state tax evasion; however this procedure is still being implemented by states and only a few sanctions have been issued to date.

The Brazilian government has exercised, and continues to exercise, significant influence over the Brazilian economy; Brazilian economic and political conditions have a direct impact on our business.

The Brazilian economy has been characterized by significant involvement on the part of the Brazilian government, which often changes monetary, credit and other policies to influence Brazil’s economy. The Brazilian government’s actions to control inflation and affect other policies have often involved wage and price controls, the Central Bank’s base interest rates, as well as other measures, such as the freezing of bank accounts, which occurred in 1990.

Actions taken by the Brazilian government concerning the economy may have important effects on Brazilian corporations and other entities, including Ambev, and on market conditions and prices of Brazilian securities. Our financial condition and results of operations may be adversely affected by the following factors and the Brazilian government’s response to the following factors:

· devaluations and other exchange rate movements;

· inflation;

· investments;

· exchange control policies;

· employment levels;

· social instability;

· price instability;

· energy shortages;

· water rationing;

· interest rates;

· liquidity of domestic capital and lending markets;

· tax policy; and

· other political, diplomatic, social and economic developments in or affecting Brazil.

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Our Latin America South operations are subject to substantial risks relating to its business and operations in Argentina and other countries in which it operates.

We own 100% of the total share capital of Latin America South Investment, S.L., or LASI, the net revenues from which in 2014 corresponded to 18.3% of our consolidated results of operations. LASI is a holding company with operating subsidiaries in Argentina and other South American countries. As a result, LASI’s financial condition and results of operations may be adversely affected by the political instability, fluctuations in the economy and governmental actions concerning the economy of Argentina and the other countries in which its subsidiaries operate and, consequently, affect our consolidated results.

For example, in the early 2000s, Argentina experienced political and economic instability. A widespread recession occurred in 2002, including a 10.9% decrease in real GDP, high unemployment and high inflation. In the past, the Argentine economic and social situation has rapidly deteriorated, and may quickly deteriorate in the future; we cannot assure you that the Argentine economy will not rapidly deteriorate as in the past. Additionally, in 2014 the Argentinean peso underwent a significant devaluation, losing 15.7% of its value relative to the real, impacting the net assets, results and cash flows of our Argentinean operations. The 2014 devaluation of the peso relative to the real, and further devaluations of the peso in the future, if any, may decrease our net assets in Argentina, with a balancing entry in our equity. See “—Risks Relating to Our Operations—Our results of operations are affected by fluctuations in exchange rates.”

In addition, on July 30, 2014 Argentina entered into a selective default of its restructured debt. The full consequences of the default on Argentina’s political and economic landscape, and on our operations there, are still unclear. The devaluation of the Argentine peso, along with inflation and deteriorating macroeconomic conditions in Argentina, could have, and may continue to have, a material adverse effect on our Latin America South operations and their results, as well as in our ability to transfer funds from and within Argentina. If the economic or political situation in Argentina deteriorates, or if additional foreign exchange restrictions are implemented in Argentina, our liquidity and operations, and our ability to access funds from Argentina could be adversely affected.

Risks Relating to Our Operations

We are subject to Brazilian and other antitrust regulations.

We have a substantial share of the beer market in Brazil and thus we are subject to constant monitoring by Brazilian antitrust authorities. In addition, in connection with the 1999 business combination of Companhia Cervejaria Brahma, or Brahma, and Companhia Antarctica Paulista Indústria Brasileira de Bebidas e Conexos, or Antarctica, that shaped most of the Brazilian operations as currently conducted by us, we entered into a performance agreement with the Brazilian antitrust authorities, which required us to comply with a number of restrictions, including the divestment of certain assets. Since July 28, 2008, we have been deemed to have complied with all those restrictions, according to Brazil’s highest antitrust authority, the Conselho Administrativo de Defesa Econômica (Administrative Council for Economic Defense), or the CADE. In addition, since such business combination, we have been involved in a number of other antitrust legal proceedings. For further information on these matters, see “Item 8. Financial Information—A. Consolidated Financial Statements and Other Financial Information—Legal Proceedings—Antitrust Matters.” We cannot assure you that Brazilian antitrust regulation will not affect our business in the future.

Our participation in the Argentine beer market increased substantially following the acquisition of our interest in Quilmes Industrial Société Anonyme, or Quinsa. Our operation in Argentina is subject to constant monitoring by Argentinean antitrust authorities. We cannot assure you that Argentinean antitrust regulation will not affect our business in Argentina in the future, and therefore, impact the benefits that Ambev anticipates will be generated from this investment.

We are subject to regulation on alcoholic and CSD beverages in the countries in which we operate.

Our business is regulated by federal, state, provincial and local laws and regulations regarding such matters as licensing requirements, marketing practices and related matters. We may be subject to claims that we have not complied with existing laws and regulations, which could result in fines and penalties. Recently, the federal government as well as certain Brazilian states and municipalities in which we operate have enacted legislation restricting the hours of operations of certain points of sale, prohibiting the sale of alcoholic beverages at certain points of sale (e.g., highways and sales near schools), prohibiting the sale of CSDs in schools and imposing restrictions on advertisement of alcoholic beverages. The Brazilian Congress is also evaluating proposed regulation imposing hygienic seals on beverage cans, as well as regulation on the consumption, sales and marketing of alcoholic beverages, including beer which, if enacted, may impose restrictions on the advertisement of alcoholic beverage products on television during specified times of the day and the hours of operation of certain points of sale, among other things. In addition, there are legal proceedings pending before Brazilian courts that may lead to restrictions on advertisement of alcoholic beverages. These rules and restrictions may adversely impact our results of operations. For further information, see “Item 4. Information on the Company—B. Business Overview—Regulation” and “Item 8. Financial Information—Legal proceedings—Alcohol Litigation.”

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In addition, there is a global trend of increasing regulatory restrictions with respect to the sale of alcoholic and CSD beverages. Compliance with such regulatory restrictions can be costly and may affect earnings in the countries in which we operate.

Our results of operations are affected by fluctuations in exchange rates.

We have historically reported our consolidated results in reais. In 2014, we derived 36.0% of our net revenues from operating companies that have functional currencies that are not reais (that is, in most cases, the local currency of the respective operating company). Consequently, any change in exchange rates between our operating companies’ functional currencies and reais will affect our consolidated income statement and balance sheet. Decreases in the value of our operating companies’ functional currencies against reais will tend to reduce those operating companies’ contributions in terms of our financial condition and results of operations. For example, in 2014 the Argentinean peso underwent a significant devaluation, losing 15.7% of its value relative to the real. This recent devaluation of the Argentine peso, and further devaluations of this currency in the future, if any, will decrease the value we record in our consolidated financial statements for our net assets in Argentina given that our functional currency is the Brazilian real. The translation of the results of operations and cash flows of our operations in Argentina will also be impacted accordingly.

In addition to currency translation risk, we incur currency transaction risks whenever one of our operating companies enters into transactions using currencies other than their respective functional currencies, including purchase or sale transactions and the issuance or incurrence of debt. Although we have hedge policies in place to manage commodity price and foreign currency risks to mitigate our exposure to currencies other than our operating companies’ functional currencies, there can be no assurance that such policies will be able to successfully or cost-effectively hedge against the effects of such foreign exchange exposure, particularly over the long-term.

If we do not successfully comply with laws and regulations designed to combat governmental corruption in countries in which we sell our products, we could become subject to fines, penalties or other regulatory sanctions, as well as to adverse press coverage, which could cause our reputation and sales to suffer.

Although we are committed to conducting business in a legal and ethical manner in compliance with local and international statutory requirements and standards applicable to our business, there is a risk that our management, employees or representatives may take actions that violate applicable laws and regulations prohibiting the making of improper payments to foreign government officials for the purpose of obtaining or keeping business, including laws relating to the 1997 OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions such as the U.S. Foreign Corrupt Practices Act, or the FCPA.

In addition, on January 29, 2014 the Brazilian government enacted Law No. 12,846/13 imposing strict liability on companies for acts of corruption perpetrated by their employees, or the Brazilian Antibribery Act. According to the Brazilian Antibribery Act, companies found guilty of bribery could face fines of up to 20% of their gross annual income for the previous year or, if gross income cannot be estimated, such fines could range from R$6 thousand to R$60 million. Among other penalties, the Brazilian Antibribery Act also provides for the disgorgement of illegally obtained benefits, the suspension of corporate operations, asset confiscation and corporate dissolution. The adoption of an effective compliance program may be taken into consideration by Brazilian authorities when applying a penalty under the Brazilian Antibribery Act.

Despite the new Brazilian Antibribery Act, Brazil still has a perceived elevated risk of public corruption, which may, to a certain degree, leave us exposed to potential violations of the FCPA or other anti-bribery laws. For example, a number of high profile corporate corruption allegations have surfaced, principally since the beginning of 2014. In that respect, Brazilian authorities currently investigating alleged corruption cases have recently issued a list of companies that had contracted consulting services from a firm part-owned by a former elected government official who has been subject to prosecution. There is no suggestion that these services were illicit or were contracted for purposes of perpetuating an illegal act. We have, in the past, hired the services of this consulting firm and have been cited among these consultant’s clients. We have reviewed our internal control and compliance procedures in relation to these services and have not identified any evidence of misconduct.

Although we have implemented what we understand to be a very robust compliance and anti-corruption program to detect and prevent violations of applicable anti-corruption laws, which includes a strict requirement prohibiting our employees and agents from violating these laws, there remains some degree of risk that improper conduct could occur, thereby exposing us to potential liability and the costs associated with investigating potential misconduct. Another potential fall out from having our name or brands associated with any misconduct is adverse press coverage, which, even if unwarranted or baseless, could damage our reputation and sales. Therefore, if we become involved in any investigations under the FCPA, the Brazilian Antibribery Act or other applicable anti-corruption statutes, our business could be adversely affected.

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Competition could lead to a reduction of our margins, increase costs and adversely affect our profitability.

Globally, brewers compete mainly on the basis of brand image, price, quality, distribution networks and customer service. Consolidation has significantly increased the capital base and geographic reach of our competitors in some of the markets in which we operate, and competition is expected to increase further as the trend towards consolidation among companies in the beer industry continues.

Competition may divert consumers and customers from our products. Competition in our various markets could cause us to reduce pricing, increase capital investment, increase marketing and other expenditures, prevent us from increasing prices to recover higher costs, and thereby cause us to reduce margins or lose market share. Any of the foregoing could have a material adverse effect on our business, financial condition and results of operations. Innovation faces inherent risks, and the new products we introduce may not be successful.

Additionally, the unfair pricing practices in some markets and the lack of transparency, or even certain illicit practices, such as tax evasion and corruption, may skew the competitive environment, with material adverse effects on our profitability or ability to operate.

The ability of our foreign subsidiaries to distribute cash upstream may be subject to various conditions and limitations.

Our foreign subsidiaries’ ability to distribute cash (to be used, among other things, to meet our financial obligations) through dividends, intercompany advances, management fees and other payments is, to a large extent, dependent on the availability of cash flows at the level of such foreign subsidiaries and may be restricted by applicable laws and accounting principles. In particular, 36.0% (R$13.7 billion) of our total net revenues of R$38.1 billion in 2014 came from our foreign subsidiaries. In addition, some of our subsidiaries are subject to laws restricting their ability to pay dividends or the amount of dividends they may pay.

If we are not able to obtain sufficient cash flows from our foreign subsidiaries, this could negatively impact our business, results of operations and financial condition because the insufficient availability of cash at our holding company level may constrain us from paying all of our obligations.

We rely on the reputation of our brands and damages to their reputation may have an adverse effect on our sales.

Our success depends on our ability to maintain and enhance the image and reputation of our existing products and to develop a favorable image and reputation for new products. The image and reputation of our products may be reduced in the future; concerns about product quality, even when unfounded, could tarnish the image and reputation of our products. An event or series of events that materially damages the reputation of one or more of our brands could have an adverse effect on the value of that brand and subsequent revenues from that brand or business. Restoring the image and reputation of our products may be costly or not possible.

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Moreover, our marketing efforts are subject to restrictions on the permissible advertising style, media and messages used. In a number of countries, for example, television is a prohibited medium for advertising beer and other alcoholic products, and in other countries, television advertising, while permitted, is carefully regulated. Any additional restrictions in such countries, or the introduction of similar restrictions in other countries, may constrain our brand building potential and thus reduce the value of our brands and related revenues.

Negative publicity focusing on our products or on the way we conduct our operations may harm our business.

Media coverage and publicity generally can exert significant influence on consumer behavior and actions. If the social acceptability of beer, other alcoholic beverages or soft drinks were to decline significantly, sales of our products could materially decrease. In recent years, there has been increased public and political attention directed at the alcoholic beverage and soft drink industries. This attention is a result of public concern over alcohol-related problems, including drunk driving, underage drinking, drinking while pregnant and health consequences resulting from the misuse of beer (for example, alcoholism), as well as soft-drink related problems, including health consequences resulting from the excessive consumption of soft drinks (for example, obesity). Factors such as negative publicity regarding the consumption of beer, other alcoholic beverages or soft drinks, publication of studies indicating a significant health risk from consumption of those beverages, or changes in consumer perceptions affecting them could adversely affect the sale and consumption of our products and harm our business, results of operations, cash flows or financial condition to the extent consumers and customers change their purchasing patterns.

Key brand names are used by us, our subsidiaries, associates and joint ventures, and licensed to third-party brewers. To the extent that we or one of our subsidiaries, associates, joint ventures or licensees are subject to negative publicity, and the negative publicity causes consumers and customers to change their purchasing patterns, it could have a material adverse effect on our business, results of operations, cash flows or financial condition. As we continue to expand our operations into emerging and growth markets, there is a greater risk that we may be subject to negative publicity, in particular in relation to labor rights and local work conditions. Negative publicity that materially damages the reputation of one or more of our brands could have an adverse effect on the value of that brand and subsequent revenues from that brand or business, which could adversely impact our business, results of operations, cash flows and financial condition.

Demand for our products may be adversely affected by changes in consumer preferences and tastes.

We depend on our ability to satisfy consumer preferences and tastes. Consumer preferences and tastes can change in unpredictable ways due to a variety of factors, such as changes in demographics, consumer health concerns regarding obesity, product attributes and ingredients, changes in travel, vacation or leisure activity patterns, weather, negative publicity resulting from regulatory action or litigation against us or comparable companies or a downturn in economic conditions. Consumers also may begin to prefer the products of competitors or may generally reduce their demand for products of our business segment. Failure by us to anticipate or respond adequately to changes in consumer preferences and tastes could adversely impact our business, results of operations and financial condition.

Seasonal consumption cycles and adverse weather conditions may result in fluctuations in demand for our products.

Seasonal consumption cycles and adverse weather conditions in the markets in which we operate may have an impact on our operations. This is particularly true in the summer months, when unseasonably cool or wet weather can affect sales volumes.

If any of our products is defective or found to contain contaminants, we may be subject to product recalls or other liabilities.

We take precautions to ensure that our beverage products are free from contaminants and that our packaging materials (such as bottles, crowns, cans and other containers) are free from defects. Such precautions include quality‑control programs for primary materials, the production process and our final products. We have established procedures to correct problems detected.

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In the event that contamination or a defect does occur in the future, it may lead to business interruptions, product recalls or liability, each of which could have an adverse effect on our business, reputation, prospects, financial condition and results of operations.

Although we maintain insurance policies against certain product liability (but not product recall) risks, we may not be able to enforce our rights in respect of these policies, and, in the event that a defect occurs, any amounts that we recover may not be sufficient to offset any damage we may suffer, which could adversely impact our business, results of operations and financial condition.

We may not be able to protect our intellectual property rights.

Our future success depends significantly on our ability to protect our current and future brands and products and to defend our intellectual property rights, including trademarks, patents, domain names, trade secrets and know-how. We have been granted numerous trademark registrations covering our brands and products and have filed, and expect to continue to file, trademark and patent applications seeking to protect newly developed brands and products. We cannot be sure that trademark and patent registrations will be issued with respect to any of our applications. There is also a risk that we could, by omission, fail to renew a trademark or patent on a timely basis or that our competitors will challenge, invalidate or circumvent any existing or future trademarks and patents issued to, or licensed by, us.

Although we have put in place appropriate actions to protect our portfolio of intellectual property rights (including trademark registration and domain names), we cannot be certain that the steps we have taken will be sufficient or that third parties will not infringe upon or misappropriate proprietary rights. If we are unable to protect our proprietary rights against infringement or misappropriation, it could have a material adverse effect on our business, results of operations, cash flows or financial condition, and in particular, on our ability to develop our business.

We rely on key third parties, including key suppliers, and the termination or modification of the arrangements with such third parties could negatively affect our business.

We rely on key third‑party suppliers, including third‑party suppliers for a range of raw materials for beer and soft drinks, and for packaging material, including aluminum cans, glass, kegs and PET bottles. We seek to limit our exposure to market fluctuations in these supplies by entering into medium‑ and long-term fixed‑price arrangements. We have a limited number of suppliers of aluminum cans, glass and PET bottles. Consolidation of the aluminum can industry, glass and PET bottle industry in certain markets in which we operate has reduced local supply alternatives and increased the risk of disruption to aluminum can, glass and PET bottle supplies. Although we generally have other suppliers of raw materials and packaging materials, the termination of or material change to arrangements with certain key suppliers, disagreements with suppliers as to payment or other terms, or the failure of a key supplier to meet our contractual obligations or otherwise deliver materials consistent with current usage would or may require us to make purchases from alternative suppliers, in each case at potentially higher prices than those agreed with this supplier, and this could have a material impact on our production, distribution and sale of beer, other alcoholic beverages and soft drinks, and have a material adverse effect on our business, results of operations, cash flows or financial condition.

For certain packaging supplies, raw materials and commodities, we rely on a small number of important suppliers. If these suppliers became unable to continue to meet our requirements, and we are unable to develop alternative sources of supply, our operations and financial results could be adversely affected.

We are exposed to the risk of litigation.

We are now and may in the future be party to legal proceedings and claims (including labor, tax and alcohol-related claims) and significant damages may be asserted against us. See “Item 8. Financial Information—A. Consolidated Financial Statements and Other Financial Information—Legal Proceedings” and note 30 to our audited consolidated financial statements as of and for December 31, 2014, included elsewhere in this annual report, for a description of our material litigation contingencies. Given the inherent uncertainty of litigation, it is possible that we might incur liabilities as a consequence of the proceedings and claims brought against us, including those that are not currently believed by us to present a reasonably possible chance of loss to us.

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Moreover, companies in the alcoholic beverage and soft drink industries are, from time to time, exposed to collective suits (class actions) or other litigation relating to alcohol advertising, alcohol abuse problems or health consequences from the excessive consumption of beer, other alcoholic beverages and soft drinks. As an illustration, certain beer and other alcoholic beverage producers from Brazil and Canada have been involved in class actions and other litigation seeking damages. If any of these types of litigation were to result in fines, damages or reputational damage for us, this could have a material adverse effect on our business, results of operations, cash flows or financial position.

We may not be able to recruit or retain key personnel.

In order to develop, support and market our products, we must hire and retain skilled employees with particular expertise. The implementation of our strategic business plans could be undermined by a failure to recruit or retain key personnel or the unexpected loss of senior employees, including in acquired companies. We face various challenges inherent in the management of a large number of employees over diverse geographical regions. Key employees may choose to leave their employment for a variety of reasons, including reasons beyond our control. The impact of the departure of key employees cannot be determined and may depend on, among other things, our ability to recruit other individuals of similar experience and skill at an equivalent cost. It is not certain that we will be able to attract or retain key employees and successfully manage them, which could disrupt our business and have an unfavorable material effect on our financial position, income from operations and competitive position.

Climate change, or legal, regulatory or market measures to address climate change, may negatively affect our business or operations, and water scarcity or poor quality could negatively impact our production costs and capacity.

There is a growing concern that carbon dioxide and other greenhouse gases in the atmosphere may have an adverse impact on global temperatures, weather patterns and the frequency and severity of extreme weather and natural disasters. In the event that such climate change has a negative effect on agricultural productivity, we may be subject to decreased availability or less favorable pricing for certain agricultural commodities that are necessary for our products, such as barley, hops, sugar and corn. In addition, public expectations for reductions in greenhouse gas emissions could result in increased energy, transportation and raw material costs and may require us to make additional investments in facilities and equipment due to increased regulatory pressures. As a result, the effects of climate change could have a long-term, material adverse impact on our business and results of operations.

We also face water scarcity and quality risks. The availability of clean water is a limited resource in many parts of the world, facing unprecedented challenges from climate change and the resulting change in precipitation patterns and frequency of extreme weather, overexploitation, increasing pollution, and poor water management. We have implemented an internal strategy in order to considerably reduce the use of water in our operative plants, however, as demand for water continues to increase around the world, and as water becomes scarcer and the quality of available water deteriorates, we may be affected by increasing production costs or capacity constraints, which could adversely affect our business and results of operations.

Our operations are subject to safety and environmental regulations, which could expose us to significant compliance costs and litigation relating to environmental issues.

Our operations are subject to safety and environmental regulations by national, state and local agencies, including, in certain cases, regulations that impose liability without regard to fault. These regulations can result in liability which might adversely affect our operations. The environmental regulatory climate in the markets in which we operate is becoming stricter, with greater emphasis on enforcement.

While we have budgeted for future capital and operating expenditures to maintain compliance with environmental laws and regulations, there can be no assurance that we will not incur substantial environmental liability or those applicable environmental laws and regulations will not change or become more stringent in the future.

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We operate a joint venture in Cuba, in which the Government of Cuba is our joint venture partner. Cuba has been identified by the U.S. Department of State as a state sponsor of terrorism and is targeted by broad and comprehensive economic and trade sanctions of the United States. Our operations in Cuba may adversely affect our reputation and the liquidity and value of our securities.

In January 2014, one of our wholly-owned subsidiaries acquired from our indirect controlling shareholder, ABI, a 50% equity interest in Cerveceria Bucanero S.A., or Bucanero, a Cuban company in the business of producing and selling beer. The other 50% equity interest in Bucanero is owned by the Government of Cuba. Bucanero is operated as a joint venture in which we appoint the general manager. Its main brands are Bucanero and Cristal. In contrast to the 124.7 million hectoliters of beer sold by us in 2014, Bucanero sold only 1.3 million hectoliters in that year. Although Bucanero’s production is primarily sold in Cuba, a small portion of its production is exported to, and sold by certain distributors in, other countries outside Cuba (but not the United States). Bucanero also imports and sells in Cuba a quantity of beer products produced by certain of our non-U.S. affiliates that in total represented less than 5,000 thousand hectoliters in 2014.

Cuba has been identified by the United States government as a state sponsor of terrorism, and the U.S. Treasury Department’s Office of Foreign Assets Control and the U.S. Commerce Department together administer and enforce broad and comprehensive economic and trade sanctions based on U.S. foreign policy towards Cuba. Although our operations in Cuba are quantitatively immaterial, our overall business reputation may suffer or we may face additional regulatory scrutiny as a result of our activities in Cuba based on Cuba’s identification as a state sponsor of terrorism and target of U.S. economic and trade sanctions. In addition, there are initiatives by federal and state lawmakers in the United States, and certain U.S. institutional investors, including pension funds, to adopt laws, regulations or policies requiring divestment from, or reporting of interests in, or to facilitate divestment from, companies that do business with countries designated as state sponsors of terrorism, including Cuba. If U.S. investors decide to liquidate or otherwise divest their investments in companies that have operations of any magnitude in Cuba, the market in and value of our securities could be adversely impacted.

In addition, the Cuban Liberty and Democratic Solidarity (LIBERTAD) Act of 1996 (known as the “Helms-Burton Act”) authorizes private lawsuits for damages against anyone who traffics in property confiscated without compensation by the Government of Cuba from persons who at the time were, or have since become, nationals of the United States. Although this section of the Helms-Burton Act is currently suspended by discretionary presidential action, the suspension may not continue in the future. Claims accrue notwithstanding the suspension and may be asserted if the suspension is discontinued. The Helms-Burton Act also includes a section that authorizes the U.S. Department of State to prohibit entry into the United States of non-U.S. persons who traffic in confiscated property, and corporate officers and principals of such persons, and their families. In 2009, ABI received notice of a claim purporting to be made under the Helms-Burton Act relating to the use of a trademark by Bucanero, which is alleged to have been confiscated by the Cuban government and trafficked by ABI through their former ownership and management of this company. Although ABI and we have attempted to review and evaluate the validity of the claim, due to the uncertain underlying circumstances, we are currently unable to express a view as to the validity of such claims, or as to the standing of the claimants to pursue them.

Information technology failures could disrupt our operations.

We increasingly rely on information technology systems to process, transmit, and store electronic information. A significant portion of the communication between our personnel, customers, and suppliers depends on information technology. As with all large systems, our information systems may be vulnerable to a variety of interruptions due to events beyond our control, including, but not limited to, natural disasters, terrorist attacks, telecommunications failures, computer viruses, hacker attacks or other security issues. These or other similar interruptions could disrupt our operations, cash flows or financial condition.

We depend on information technology to enable us to operate efficiently and interface with customers, as well as to maintain in-house management and control. The concentration of processes in shared services centers means that any disruption could impact a large portion of our business. If we do not allocate, and effectively manage, the resources necessary to build and sustain the proper technology infrastructure, we could be subject to transaction errors, processing inefficiencies, loss of customers, business disruptions, or the loss of or damage to intellectual property through security breach. As with all information technology systems, our system could also be penetrated by outside parties with the intent of extracting or corrupting information or disrupting business processes. Such interruptions could disrupt our business and could have a material adverse effect on our business, results of operations, cash flows or financial condition.

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Natural and other disasters could disrupt our operations.

Our business and operating results could be negatively impacted by social, technical or physical risks such as earthquakes, hurricanes, flooding, fire, power loss, loss of water supply, telecommunications and information technology system failures, cyber attacks, political instability, military conflict and uncertainties arising from terrorist attacks, including a global economic slowdown, the economic consequences of any military action and associated political instability.

Our insurance coverage may be insufficient to make us whole on any losses that we may sustain in the future.

The cost of some of our insurance policies could increase in the future. In addition, some types of losses, such as losses resulting from wars, acts of terrorism, or natural disasters, generally are not insured because they are either uninsurable or it is not economically practical to obtain insurance. Moreover, insurers recently have become more reluctant to insure against these types of events. Should a material uninsured loss or a loss in excess of insured limits occur, this could adversely impact our business, results of operations and financial condition.

Risks Relating to Our Common Shares and ADSs

The relative volatility and illiquidity of securities of Brazilian companies may substantially limit your ability to sell our common shares and ADSs at the price and time you desire.

Investing in securities of companies in emerging markets, such as Brazil, involves greater risk than investing in securities of companies from more developed countries, and those investments are generally considered speculative in nature. Brazilian investments, such as investments in our common shares and ADSs, are subject to economic and political risks, involving, among other factors:

· changes in the Brazilian regulatory, tax, economic and political environment that may affect the ability of investors to receive payment, in whole or in part, in respect of their investments; and

· restrictions on foreign investment and on repatriation of capital invested.

The Brazilian securities markets are substantially smaller, less liquid and more concentrated and volatile than major U.S. and European securities markets. They are also not as highly regulated or supervised as those other markets. The relative illiquidity and smaller market capitalization of Brazilian securities markets may substantially limit your ability to sell the Ambev common shares and ADSs at the price and time you desire.

Deterioration in economic and market conditions in other emerging market countries, as well as in developed economies, may adversely affect the market price of our common shares and ADSs.

Economic and market conditions in other emerging market countries, especially those in Latin America, influence the market for securities issued by Brazilian companies as well as investors’ perception of economic conditions in Brazil. Economic crises in emerging markets, such as in Southeast Asia, Russia and Argentina, have historically triggered securities market volatility in other emerging market countries, including Brazil. For example, the recent and abrupt devaluation of the Argentine peso in January 2014 resulted in the depreciation of the currencies of most developing economies, including Brazil, and a drop in the stock indices of the stock exchanges of those countries, including the BM&FBOVESPA. In addition, global financial crisis originating in developed economies, including the subprime debt crisis in the United States and the sovereign debt crisis in Europe, have had an impact on many economies and capital markets around the world, including Brazil, which may adversely affect investors’ interest in the securities of Brazilian issuers such as Ambev. Therefore, the market value of our common shares and ADSs may be adversely affected by events occurring outside of Brazil.

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Our current controlling shareholders will be able to determine the outcome of our most significant corporate actions.

Our two direct controlling shareholders, Interbrew International B.V., or IIBV, and AmBrew S.A., or AmBrew, both of which are subsidiaries of ABI, together with Fundação Antonio e Helena Zerrenner Instituição Nacional de Beneficência, or FAHZ, held in aggregate 71.7% of our total and voting capital stock (excluding treasury shares) as of December 31, 2014.

ABI indirectly holds shares in us representing 61.8% of our total and voting capital stock (excluding treasury shares) as of December 31, 2014. ABI thus has control over us, even though (1) ABI remains subject to the Ambev shareholders’ agreement among IIBV, AmBrew and FAHZ dated April 16, 2013, or the Ambev Shareholders’ Agreement, and (2) ABI is jointly controlled by Messrs. Jorge Paulo Lemann, Marcel Herrmann Telles and Carlos Alberto da Veiga Sicupira, or the Braco Group, and the founding families that were the former controlling shareholders of Interbrew N.V./S.A. (as ABI was then denominated), or the Interbrew Founding Families. For further information on these matters see “Item 4. Information on the Company—A. History and Development of the Company—The InBev-Ambev Transactions” and “Item 7. Major Shareholders and Related Party Transactions—A. Major Shareholders—Ambev’s Major Shareholders—Ambev Shareholders’ Agreement.”

Our controlling shareholders are able to elect the majority of the members of our Board of Directors and Fiscal Council, and generally determine the outcome of most other actions requiring shareholder approval, including dividend distributions, the consummation of corporate restructurings, issuances of new shares, sales of materials assets and bylaw amendments. Under Brazilian Law No. 6,404/76, as amended, or the Brazilian Corporation Law, the protections afforded to non-controlling security holders may differ from, or be less comprehensive than, the corresponding protections and fiduciary duties of directors applicable in the U.S. or other jurisdictions. See “—As a Brazilian company, Ambev is subject to different corporate laws and regulations than those typically applicable to U.S.-listed companies, which may result in Ambev’s shareholders having fewer or less well-defined shareholder rights than the shareholder rights of those companies.”

Our shareholders may not receive any dividends.

According to our bylaws, we generally pay our shareholders 40% of our annual adjusted net income as presented in our parent company (individual) financial statements prepared under IFRS. The main sources for these dividends are cash flows from our operations and dividends from our operating subsidiaries. Therefore, that net income may not be available to be paid out to our shareholders in a given year. In addition, we might not pay dividends to our shareholders in any particular fiscal year upon the determination of the Board of Directors that any such distribution would be inadvisable in view of our financial condition. While the law does not establish the circumstances rendering the payment of dividends inadvisable, it is generally agreed that a company need not pay dividends if such payment threatens its existence as a going concern or harms its normal course of operations. Any dividends not distributed would be allocated to a special reserve account for future payment to shareholders, unless it is used to offset subsequent losses or as otherwise provided for in our bylaws. It is possible, therefore, that our shareholders will not receive dividends in any particular fiscal year.

Brazilian foreign exchange controls and regulations could restrict conversions and remittances abroad of the dividend payments and other shareholder distributions paid in Brazil in reais in respect of the Ambev common shares (including shares underlying the Ambev ADSs).

Brazilian law provides that whenever there is a serious imbalance in Brazil’s balance of payments or reasons to foresee such a serious imbalance, the Brazilian government may impose temporary restrictions on the remittance to foreign investors of the proceeds of their investments in Brazil. For example, for approximately six months in 1989 and early 1990 the Brazilian government froze all dividend and capital repatriations that were owed to foreign equity investors, which were held by the Central Bank in order to conserve Brazil’s foreign currency reserves at the time. These amounts were subsequently released in accordance with Brazilian government directives. Similar measures could be taken by the Brazilian government in the future.

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As a result, the Brazilian government may in the future restrict the conversion and remittance abroad, to ADS holders or holders of Ambev common shares residing outside Brazil, of dividend payments and other shareholder distributions paid in Brazil in reais in respect of the Ambev common shares (including shares underlying the Ambev ADSs). The likelihood that the Brazilian government would impose such restrictions may be affected by the extent of Brazil’s foreign currency reserves, the availability of foreign currency in the foreign exchange markets on the date a payment is due, the size of Brazil’s debt service burden relative to the economy as a whole and other factors. We cannot assure you that the Central Bank will not modify its policies or that the Brazilian government will not institute restrictions or delays on cross-border remittances in respect of securities issued in the international capital markets. For further information on this matter, see “—A. Selected Financial Data—Exchange Rate Information—Exchange Controls.”

If you exchange your Ambev ADSs for the respective Ambev common shares underlying those ADSs, you risk losing some Brazilian tax and foreign currency remittance advantages.

The Ambev ADSs benefit from the foreign capital registration that The Bank of New York Mellon, as depositary of Ambev’s ADS program, or the Depositary, has in Brazil, which permits it to convert dividends and other distributions with respect to the Ambev common shares underlying the Ambev ADSs into foreign currency and remit the proceeds of such conversion abroad. If you exchange your Ambev ADSs for the respective Ambev common shares underlying those ADSs, you will be entitled to rely on the Depositary’s foreign capital registration for only five business days from the date of such exchange. After this five-day period, you will not be able to remit abroad non-Brazilian currency unless you obtain your own foreign capital registration. In addition, gains with respect to Ambev common shares will be subject to a less favorable tax treatment unless you obtain your own certificate of foreign capital registration or register your investment in the Ambev common shares with the Central Bank pursuant to Resolution No. 4,373. For a more complete description of Brazilian restrictions on foreign investments and Brazilian foreign investment regulations, see “Item 10. Additional Information—B. Memorandum and Articles of Association—Restrictions on Foreign Investment” and “—A. Selected Financial Data—Exchange Rate Information—Exchange Controls.” For a more complete description of Brazilian tax regulations, see “Item 10. Additional Information—E. Taxation—Brazilian Tax Considerations.”

As a Brazilian company, Ambev is subject to different corporate laws and regulations than those typically applicable to U.S.-listed companies, which may result in Ambev’s shareholders having fewer or less well-defined shareholder rights than the shareholder rights of those companies.

Ambev’s corporate affairs are governed by its bylaws and the Brazilian Corporation Law, which may differ from the legal principles that would apply to Ambev if the company were incorporated in a jurisdiction in the United States, such as Delaware or New York, or in other jurisdictions outside of Brazil. In addition, shareholder rights under the Brazilian Corporation Law to protect them from actions taken by the board of directors or controlling shareholders may be fewer and less well-defined than under the laws of jurisdictions outside of Brazil.

Although insider trading and price manipulation are restricted under applicable Brazilian capital markets regulations and treated as crimes under Brazilian law, the Brazilian securities markets may not be as highly regulated and supervised as the securities markets of the United States or other jurisdictions outside Brazil. In addition, rules and policies against self-dealing and for the preservation of shareholder interests may be less well-defined and enforced in Brazil than in the United States or other jurisdictions outside Brazil, potentially causing disadvantages to a holder of Ambev ADSs as compared to a holder of shares in a U.S. public company. Further, corporate disclosures may be less complete or informative than required of public companies in the United States or other jurisdictions outside Brazil.

Certain shareholder entitlements may not be available in the U.S. to holders of Ambev ADSs.

Due to certain United States laws and regulations, U.S. holders of Ambev ADSs may not be entitled to all of the rights possessed by holders of Ambev common shares. For instance, U.S. holders of Ambev ADSs may not be able to exercise preemptive, subscription or other rights in respect of the Ambev common shares underlying their Ambev ADSs, unless a registration statement under the Securities Act is effective with respect to those rights or an exemption from the registration requirements thereunder is available.

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Holders of Ambev ADSs may be unable to fully exercise voting rights with respect to the Ambev shares underlying their ADSs.

Under Brazilian law, only shareholders registered as such in the corporate books of Brazilian companies may attend shareholders’ meetings. Because all the Ambev common shares underlying the Ambev ADSs are registered in the name of the Depositary (and not the ADS holder), only the Depositary (and not the ADS holder) is entitled to attend Ambev’s shareholders’ meetings. A holder of Ambev ADSs is entitled to instruct the Depositary as to how to vote the respective Ambev common shares underlying their ADSs only pursuant to the procedures set forth in the deposit agreement for Ambev’s ADS program. Accordingly, holders of Ambev ADSs will not be allowed to vote the corresponding Ambev common shares underlying their ADSs directly at an Ambev shareholders’ meeting (or to appoint a proxy other than the Depositary to do so), unless they surrender their Ambev ADSs for cancellation in exchange for the respective Ambev shares underlying their ADSs. We cannot ensure that such ADS cancellation and exchange process will be completed in time to allow Ambev ADS holders to attend a shareholders’ meeting of Ambev.

Further, the Depositary has no obligation to notify Ambev ADS holders of an upcoming vote or to distribute voting cards and related materials to those holders, unless Ambev specifically instructs the Depositary to do so. If Ambev provides such instruction to the Depositary, it will then notify Ambev’s ADS holders of the upcoming vote and arrange for the delivery of voting cards to those holders. We cannot ensure that Ambev’s ADS holders will receive proxy cards in time to allow them to instruct the Depositary as to how to vote the Ambev common shares underlying their Ambev ADSs. In addition, the Depositary and its agents are not responsible for a failure to carry out voting instructions or for an untimely solicitation of those instructions.

As a result of the factors discussed above, holders of Ambev ADSs may be unable to fully exercise their voting rights.

Future equity issuances may dilute the holdings of current holders of Ambev common shares or ADSs and could materially affect the market price for those securities.

We may in the future decide to offer additional equity to raise capital or for other purposes. Any such future equity offering could reduce the proportionate ownership and voting interests of holders of our common shares and ADSs, as well as our earnings and net equity value per common share or ADS. Any offering of shares and ADSs by us or our main shareholders, or a perception that any such offering is imminent, could have an adverse effect on the market price of these securities.

Our status as a foreign private issuer allows us to follow local corporate governance practices and exempts us from a number of rules under the U.S. securities laws and listing standards, which may limit the amount of public disclosures available to investors and the shareholder protections afforded to them.

We are a foreign private issuer, as defined by the Securities and Exchange Commission, or the SEC, for purposes of the Exchange Act. As a result, we are exempt from many of the corporate governance requirements of stock exchanges located in the United States, as well as from rules under the Exchange Act that impose certain disclosure obligations and procedural requirements for proxy solicitations under Section 14 of the Exchange Act. For example, our officers, directors and principal shareholders are exempt from the reporting and “short-swing” profit recovery provisions under Section 16 of the Exchange Act. Moreover, we are not required to file periodic reports and financial statements with the SEC as frequently or as promptly as U.S. companies whose securities are registered under the Exchange Act. Accordingly, there may be less publicly available information concerning us than there is for U.S. public companies.

In addition, for so long as we remain as a foreign private issuer, we will be exempt from most of the corporate governance requirements of stock exchanges located in the United States. Accordingly, you will not be provided with some of the benefits or have the same protections afforded to shareholders of U.S. public companies. The corporate governance standards applicable to us are considerably different than the standards applied to U.S. domestic issuers. For example, although Rule 10A-3 under the Exchange Act generally requires that a company listed in the United States have an audit committee of its board of directors composed solely of independent directors, as a foreign private issuer we are relying on an exemption from this requirement under Rule 10A-3(c)(3) of the Sarbanes-Oxley Act of 2002 that is available to us as a result of features of the Brazilian Corporation Law applicable to our Fiscal Council. In addition, we are not required under the Brazilian Corporation Law to, among other things:

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· have a majority of our Board of Directors be independent (though our bylaws provide that two of our directors must be independent and, in certain circumstances pursuant to the Brazilian Corporation Law, our minority shareholders may be able to elect members to our Board of Directors, who, as a result, would be deemed independent);

· have a compensation committee, a nominating committee, or corporate governance committee of the Board of Directors (though we currently have a non-permanent Operations, Finance and Compensation Committee that is responsible for evaluating our compensation policies applicable to management);

· have regularly scheduled executive sessions with only non-management directors (though none of our current directors hold management positions); or

· have at least one executive session of solely independent directors each year.

For further information on the main differences in corporate governance standards in the United States and Brazil, see “Item 6. Directors, Senior Management and Employees—C. Board Practices—Differences Between United States and Brazilian Corporate Governance Practices.”

Foreign holders of our ADSs may face difficulties in serving process on or enforcing judgments against us and other persons.

We are organized under the laws of Brazil and most of our directors and executive officers, as well as our independent registered public accounting firm, reside or are based in Brazil. In addition, substantially all of our assets and those of these other persons are located in Brazil. As a result, it may not be possible for foreign holders of our ADSs to expediently effect service of process upon us or these other persons within the United States or other jurisdictions outside or to efficiently enforce against us or these other persons judgments obtained in the United States or other jurisdictions outside Brazil. Because judgments of U.S. courts for civil liabilities based upon the U.S. federal securities laws may only be enforced in Brazil if certain formal and procedural conditions are met (including non-violation of Brazilian national sovereignty, public policy and “good morals”), holders of our ADSs may face greater difficulties in protecting their interests in the context of legal, corporate or other disputes between them and us, our directors and/or our executive officers than would shareholders of a U.S. corporation. In addition, Brazil does not have a treaty with the United States to facilitate or expedite the enforcement in Brazil of decisions issued by a court in the United States.

Judgments of Brazilian courts with respect to our shares will be payable only in reais.

If proceedings are brought in the courts of Brazil seeking to enforce our obligations in respect of our common shares, we will not be required to discharge any such obligations in a currency other than reais. Under Brazilian exchange control limitations, an obligation in Brazil to pay amounts denominated in a currency other than reais may only be satisfied in Brazilian currency at the exchange rate, as determined by the Central Bank, in effect on the date the judgment is obtained, and any such amounts are then adjusted to reflect exchange rate variations through the effective payment date. The then prevailing exchange rate may not afford non-Brazilian investors with full compensation for any claim arising out of, or related to, our obligations under our common shares.

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ITEM 4. INFORMATION ON THE COMPANY

Ambev’s principal executive offices are located at Rua Dr. Renato Paes de Barros, 1017, 3^rd floor, 04530‑001, São Paulo, SP, Brazil, and its telephone number and email are: (5511) 2122-1414 and ir@ambev.com.br.

A. History and Development of the Company

Overview

We are the successor of Brahma and Antarctica, two of the oldest brewers in Brazil. Antarctica was founded in 1885. Brahma was founded in 1888 as Villiger & Cia. The Brahma brand was registered on September 6, 1888, and in 1904 Villiger & Cia. changed its name to Companhia Cervejaria Brahma. However, the legal entity that has become Ambev S.A., the current NYSE-and BM&FBOVESPA-listed company, was incorporated on July 8, 2005 as a non-reporting Brazilian corporation under the Brazilian Corporation Law and is the successor of Old Ambev. Until the stock swap merger of Old Ambev with Ambev S.A. approved in July 2013 (see “—Stock Swap Merger of Old Ambev with Ambev S.A.”), Ambev S.A. did not conduct any operating activities and had served as a vehicle for ABI to hold a 0.5% interest in Old Ambev’s capital stock.

In the mid 1990s, Brahma started its international expansion into Latin America, and since then we have been buying assets in different parts of the continent including the South America, Central America and the Caribbean.

In the late 1990s, Brahma obtained the exclusive rights to produce, sell and distribute Pepsi CSD products throughout Brazil, and since then we have been distributing these products throughout that country. Our PepsiCo franchise agreement for Brazil expires in 2017, and thereafter, will be automatically renewed for additional ten-year terms if certain conditions set forth in that agreement are met. In addition, certain of our subsidiaries have franchise agreements for Pepsi products in Argentina, Bolivia, Uruguay, Peru and the Dominican Republic.

In the early 2000s, we acquired a 40.5% economic interest in Quinsa and the joint control of that entity, which we shared temporarily with Beverages Associates (BAC) Corp., or BAC, the former sole controlling shareholder of Quinsa. This transaction provided us with a leading presence in the beer markets of Argentina, Bolivia, Paraguay and Uruguay, and also set forth the terms for our future acquisition of Quinsa’s full control from BAC. In April 2006, we increased our equity interest in Quinsa to 91% of its total share capital, after which we started to fully consolidate Quinsa upon the closing of that transaction in August 2006.

In August 2004, we and a Belgian brewer called Interbrew S.A./N.V. (as ABI was then denominated) completed a business combination that involved the merger of an indirect holding company of Labatt Brewing Company Limited, or Labatt, one of the leading brewers in Canada, into us. At the same time, our controlling shareholders completed the contribution of all shares of an indirect holding company which owned a controlling stake in us to Interbrew S.A./N.V. in exchange for newly issued shares of Interbrew S.A./N.V. After this transaction, Interbrew S.A./N.V. changed its company name to InBev S.A./N.V. (and, since 2008, to Anheuser-Busch InBev N.V./S.A.) and became our majority shareholder through subsidiaries and holding companies.

Recent Acquisitions in Latin America

In March 2009, Quinsa acquired from SAB Miller plc, 100% of the share capital of Bebidas y Aguas Gaseosas Occidente S.R.L., becoming the exclusive bottler of Pepsi in Bolivia.

We operated in Venezuela until September 2010. In October 2010, we effected a business combination with Cervecería Regional aimed at creating a stronger and more dynamic player in South America’s second largest beer market. Cervecería Regional’s controlling shareholders now own an 85% interest in the combined venture and we own the remaining 15%. As a result, we no longer consolidate in our consolidated financial statements the results of operations of our Venezuelan investment. This combined venture is the second largest brewer in the Venezuelan market after Cervecería Polar.

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On May 11, 2012, we concluded a transaction to form a strategic alliance with E. León Jimenes S.A., which owned 83.5% of Cervecería Nacional Dominicana S.A., or CND, to create the leading beverage company in the Caribbean through the combination of our businesses in the region. Our initial indirect interest in CND was acquired through a cash payment and the contribution of Ambev Dominicana. Separately, we acquired an additional 9.3% stake in CND from Heineken N.V., when we became the owner of a total indirect interest of 51% in CND. During 2012 and 2013, we acquired additional stakes in CND, as provided under the 2012 deal terms for our investment in that entity. As of December 31, 2014, we owned an aggregate 55.0% indirect interest in CND.

In January 2014, one of our wholly-owned subsidiaries acquired from ABI a 50% equity interest in Bucanero, a Cuban company in the business of producing and selling beer. The other 50% equity interest in Bucanero is owned by the Government of Cuba. Bucanero is operated as a joint venture in which we appoint the general manager. Its main brands are Bucanero and Cristal. Although Bucanero’s production is primarily sold in Cuba, a small portion of its production is exported to, and sold by certain distributors in, other countries outside Cuba (but not the United States). Bucanero also imports and sells in Cuba a small quantity of beer products produced by certain of our non-U.S. affiliates that in total represented less than 5,000 hectoliters in 2014.

The InBev-Ambev Transactions

The “InBev-Ambev transactions” consisted of two transactions negotiated simultaneously: (1) in the first transaction, the Braco Group exchanged its Old Ambev shares for shares in Interbrew N.V./S.A. (as ABI was then denominated); and (2) in the second transaction, Old Ambev issued new shares to Interbrew N.V./S.A. in exchange for Interbrew’s 100% stake in Labatt.

Exchange of Shares Between the Braco Group and the Interbrew Founding Families

In March 2004, various entities controlled by the Braco Group entered into a contribution and subscription agreement with Interbrew N.V./S.A. (as ABI was then denominated) and various entities representing the interests of the Interbrew Founding Families to exchange their controlling interest in Old Ambev for newly issued voting shares of Interbrew N.V./S.A., which represented 24.7% of Interbrew N.V./S.A.’s voting shares.

Upon closing of this transaction in August 2004, (1) the Braco Group received approximately 44% of the voting interest in the Stichting Anheuser-Busch InBev (formerly Stichting InBev and Stichting Interbrew), or Stichting, which thereupon owned approximately 56% of Interbrew N.V./S.A.’s common shares, and (2) Interbrew N.V./S.A. received approximately a 53% voting interest and a 22% economic interest in Old Ambev. Such voting interest was subject to our shareholders’ agreement at the time, as amended in connection with the InBev-Ambev transactions. In addition, Interbrew N.V./S.A. changed its legal name to InBev N.V./S.A. (and, since its acquisition of Anheuser-Busch, Inc. in the U.S. in 2008, to Anheuser Busch-InBev N.V./S.A.).

Acquisition of Labatt

Pursuant to the incorporação agreement dated March 3, 2004, Labatt Brewing Canada Holding Ltd., or Mergeco, was merged into Old Ambev by means of an upstream merger (incorporação) under the Brazilian Corporation Law, or the Incorporação. Mergeco held 99.9% of the capital stock of Labatt Holding ApS, or Labatt ApS, a corporation organized under the laws of Denmark, and Labatt ApS owned all the capital stock of Labatt. Upon completion of the Incorporação, Old Ambev held 99.9% of the capital stock of Labatt ApS, and, indirectly, of Labatt. As consideration for the acquisition of Labatt, Old Ambev issued common and preferred shares to Interbrew N.V./S.A. (as ABI was then denominated).

With the consummation of this transaction in August 2004, (1) Labatt became a wholly-owned subsidiary of Old Ambev, and (2) Interbrew N.V./S.A. (as ABI was then denominated) increased its stake in Old Ambev to approximately 68% of common shares and 34% of preferred shares.

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Ownership Structure of InBev N.V./S.A. and Old Ambev Upon Consummation of the InBev-Ambev Transactions

InBev N.V./S.A.

Upon closing the InBev-Ambev transactions, 56% of InBev N.V./S.A.’s voting shares were owned by Stichting, 1% was jointly owned by Fonds Voorzitter Verhelst SPRL and Fonds InBev-Baillet Latour SPRL, 17% were owned directly by entities and individuals associated with the Interbrew Founding Families and the remaining 26% constituted the public float.

The Braco Group became the holder of 44% of Stichting’s voting interests, while the Interbrew Founding Families held the remaining 56% of Stichting’s voting interests. In addition, the Braco Group and entities representing the interests of the Interbrew Founding Families entered into a shareholders’ agreement, providing for, among other things, joint and equal influence over the exercise of the Stichting voting rights in InBev N.V./S.A. (as ABI was then denominated).

Old Ambev

Upon closing of the InBev-Ambev transactions, InBev N.V./S.A. (as ABI was then denominated) became the owner of approximately 68% of Old Ambev’s voting shares, FAHZ retained approximately 16% of such shares, and the remaining shares were held by the public.

Mandatory Tender Offer

Pursuant to the Brazilian Corporation Law, InBev N.V./S.A. (as ABI was then denominated) was required to conduct, following the consummation of the InBev-Ambev transactions, a mandatory tender offer, or the MTO, for all remaining outstanding common shares of Old Ambev. The MTO was completed in March 2005, and InBev N.V./S.A. (as ABI was then denominated) increased its stake in Old Ambev to approximately an 81% voting interest and a 56% economic interest in that company. FAHZ did not tender its Old Ambev shares in the MTO.

Lakeport Acquisition

On February 1, 2007, we announced that our subsidiary Labatt entered into a support agreement with Lakeport Brewing Income Fund, or Lakeport. The transaction was concluded on March 29, 2007, when the holders of trust units tendered their units and all of the conditions of the offer were satisfied. Subsequent to the compulsory acquisition of the non-tendered units, Lakeport became wholly-owned by Labatt and has been fully integrated into Labatt’s business. The Competition Bureau concluded in January 2009 that there was insufficient evidence to establish that the transaction was likely to substantially lessen or prevent competition.

Cintra Acquisition

On April 17, 2007, we closed the acquisition of 100% of Goldensand – Comércio e Serviços Ltda., or Goldensand, the controlling shareholder of Cervejarias Cintra Indústria e Comércio Ltda., or Cintra, a local brewer with presence in the Southeast of Brazil. We subsequently acquired 100% of the capital stock of Obrinvest—Obras e Investimentos S.A. which owned the Cintra brands. On May 21, 2008, we sold to Schincariol Participações e Representações S.A., or Schincariol, the Cintra brands and distribution assets. Following the sale of the brands, the corporate name of Cintra was changed to Londrina Bebidas Ltda., or Londrina, on June 20, 2008. In July 2008, the CADE issued its unrestricted approval of the Cintra acquisition and on April 28, 2009, in order to simplify our corporate structure, our subsidiary Goldensand was merged with and into us.

Stock Swap Merger of Old Ambev with Ambev S.A.

On July 30, 2013, the minority shareholders of Old Ambev approved a stock swap merger of Old Ambev with us, according to which each and every issued and outstanding common and preferred share of Old Ambev not held by Ambev S.A. (including in the form of ADSs) was exchanged for five newly issued common shares of Ambev S.A. (including in the form of ADSs). As a result of the stock swap merger, Old Ambev became a wholly- owned subsidiary of Ambev S.A., which continued the same operations of Old Ambev. The ratio adopted for the stock swap merger did not result in any ownership dilution in the equity interest held in us by our minority shareholders, including our former non-voting preferred shareholders, who were granted a separate class vote on the transaction without the interference of our controlling shareholder.

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The stock swap merger combined our former dual-class capital structure, comprised of voting common shares and non-voting preferred shares, into a new, single-class capital structure, comprised exclusively of voting common shares. The purpose of this transaction was to simplify our corporate structure and improve our corporate governance, with a view to increasing liquidity for all shareholders, eliminating certain administrative, financial and other costs and providing more flexibility for the management of our capital structure. As a result of the stock swap merger, all shareholders of Old Ambev, including former holders of that company’s non-voting preferred shares, gained access to the same rights and privileges enjoyed by Old Ambev’s common shareholders, including full voting rights and the right to be included in a change-of-control tender offer under the Brazilian Corporation Law that ensures that holders of common stock are offered 80% of the price per share paid to a selling controlling shareholder in a change-of-control transaction.

Upstream Merger of Old Ambev with and into Ambev S.A.

In January 2014, and as a subsequent step of the stock swap merger, an upstream merger of Old Ambev and one of its majority-owned subsidiaries with and into Ambev S.A. was consummated. This upstream merger had no impact on the shareholdings that our shareholders held in us. As a result of this upstream merger, our corporate structure was simplified.

B. Business Overview

Description of Our Operations

We are the largest brewer in Latin America in terms of sales volumes and one of the largest beer producers in the world, according to our estimates. We produce, distribute and sell beer, CSDs and other non-alcoholic and non-carbonated products in 17 countries across the Americas. We are one of the largest PepsiCo independent bottlers in the world.

We conduct our operations through three business segments, as follows:

· Latin America North, which includes our operations in Brazil, where we operate two divisions (the beer sales division and the CSD & NANC sales division), and our HILA-Ex operations, which includes our operations in the Dominican Republic, Saint Vincent, Antigua, Dominica, Cuba and Guatemala (which also serves El Salvador and Nicaragua);

· Latin America South, or LAS, which includes our operations in Argentina, Bolivia, Paraguay, Uruguay, Chile, Peru and Ecuador; and

· Canada, represented by Labatt’s operations, which includes domestic sales in Canada and some exports to the U.S. market.

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The following map illustrates our three business segments as of December 31, 2014:

An analysis of our consolidated net sales by business segment is presented in the table below:

	*Net Sales (in R$ million***) Year Ended December 31,
	2014		2013		2012
	Sales	% of Total	Sales	% of Total	Sales	% of Total
Latin America North	26,470.7	69.5%	23,767.3	67.8%	22,196.8	68.3%
Brazil	24,382.9	64.0%	22,040.8	62.8%	20,977.9	64.6%
Beer Brazil	20,468.7	53.8%	18,407.1	52.5%	17,598.4	54.2%
CSD & NANC	3,914.2	10.3%	3,633.7	10.4%	3,379.5	10.4%
HILA-Ex	2,087.8	5.5%	1,726.5	4.9%	1,218.9	3.8%
Latin America South	6,955.7	18.3%	7,051.7	20.1%	6,250.7	19.2%
Canada	4,653.4	12.2%	4,260.1	12.1%	4,030.8	12.4%
Total	38,079.8	100.0%	35,079.1	100.0%	32,478.3	100.0%

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An analysis of our sales volume by business segment is presented in the table below:

	*Sales Volumes (’000 hl***) Year Ended December 31,
	2014		2013		2012
	Volume	% of Total	Volume	% of Total	Volume	% of Total
Latin America North	125,418.3	73.0%	120,415.4	72.3%	123,643.2	72.2%
Brazil	117,508.9	68.4%	113,148.0	68.0%	117,500.0	68.7%
Beer Brazil	86,903.9	50.6%	82,973.9	49.8%	86,700.0	50.7%
CSD & NANC	30,605.0	17.8%	30,174.1	18.1%	30,800.0	18.0%
HILA-Ex	7,909.4	4.6%	7,267.4	4.4%	6,143.2	3.6%
Latin America South	36,826.4	21.4%	36,917.7	22.2%	38,100.0	22.3%
Canada	9,520.9	5.5%	9,135.2	5.5%	9,400.0	5.5%
Total	171,765.7	100.0%	166,468.3	100.0%	171,143.2	100.0%

Business Strategy

We aim to continuously create value for our stockholders. The main components of our strategy are:

· our people and culture;

· top line growth;

· building strong brands;

· excellence in route to market;

· permanent cost efficiency; and

· financial discipline.

Our People and Culture

We believe highly qualified, motivated and committed employees are critical to our long-term success. We carefully manage our hiring and training process with a view to recruiting and retaining outstanding professionals. In addition, we believe that through our compensation program, which is based both on variable pay and stock ownership, we have created financial incentives for high performance and results. Another core element of our culture is our distinguished managerial capability, which is characterized by (1) a hardworking ethos, (2) results-focused evaluations, (3) the encouragement of our executives to act as owners and not only as managers, (4) leadership by personal example, and (5) appreciation of field experience.

Top Line Growth

We are constantly seeking sustainable growth of our net revenues. For instance, in Brazil we have focused our efforts behind four main commercial strategies:

· Innovation: we seek to expand the beer category and maintain a healthy pipeline of products through innovation in liquids, packaging and route to market to continue connecting with consumers in different consumption occasions;

· Premium: we believe the weight of premium brands volume can grow in the Brazilian beer industry and we are working towards leading this growth through our portfolio of domestic and international premium brands;

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· Regional expansion: we have been investing to expand our presence in the North and Northeast regions of Brazil mainly due to the per capita consumption and market share growth opportunities. We focus on expanding our production capacity and executing our strong brands and route to market capabilities in those faster growing regions of Brazil; and

· Returnable glass bottles: our commercial initiatives are focused on strengthening the on-premise channel (e.g., Nosso Bar franchise, micro events) and reintroducing returnable bottles into the off-premise channel (e.g., Pit Stop formats in supermarkets, 300 ml returnable glass bottle).

Building Strong Brands

We believe that building strong brands that connect and create enduring bonds with our consumers is a fundamental prerequisite to assure the sustainability of our business in the future. Our consumers are the reason for everything we do and we need to understand them, be close to them and connect them to our brands in order to build enduring ties with them. We bring together tradition and modernity in our product portfolio in a clear strategy to create value and insert our brands into the lives of our consumers.

Excellence in Route to Market

Delivering our brands to almost one million points of sale in Brazil is a very complex feature of our business. For several years, one of our main areas of focus has been to increase direct distribution in major cities while still strengthening our third-party distribution system. In Brazil, for instance, instead of operating three legacy, parallel, single-brand systems (each dedicated to one of our major brands: Skol, Brahma and Antarctica), we have been shifting towards a multi-brand network of distributors committed to handling all of our brands. In addition, we are constantly seeking to improve our point of sale execution through new and creative measures. One of our key marketing initiatives was the introduction into the Brazilian market of our custom-made beverage refrigerators designed and built to chill beer and soft drinks to the optimal temperature for on-premise consumption. These refrigerators also work as effective marketing tools, as they are decorated with images related to our core brands.

Permanent Cost Efficiency

Cost control is one of the top priorities of our employees. Each of our departments must comply with its respective annual budget for fixed and variable costs. As a means of avoiding unnecessary expenses, we have designed a management control system inspired on “zero-base budgeting” concepts that requires every manager to build from scratch an annual budget for his/her respective department.

Financial Discipline

Our focus is not only on volumes and operating performance, but also on the disciplined management of our working capital and our cash flow generation. Our objective is to maximize the return to our shareholders through a combination of payments of dividends and interest on shareholders’ equity, while at the same time keeping our investment plans and holding an adequate level of liquidity to accommodate the seasonality of our business and cope with often volatile and uncertain financial market conditions.

Seasonality

Sales of beverages in our markets are seasonal. Generally, sales are stronger during the summer and major holidays. Therefore, in the Southern Hemisphere (Latin America North and Latin America South) volumes are usually stronger in the fourth calendar quarter due to early summer and year-end festivities. In Canada, volumes are stronger in the second and third calendar quarters due to the summer season. This is demonstrated by the table below, which shows our volumes by quarter and business segment:

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	2014 Quarterly Volumes (*as a percentage of annual volumes*)
	1st Quarter	2nd Quarter	3rd Quarter	4th Quarter	2014
Latin America North	24.7%	23.4%	23.0%	28.9%	100%
Brazil	25.0%	23.4%	22.8%	28.8%	100%
Beer Brazil	25.3%	23.3%	22.6%	28.8%	100%
CSD & NANC	24.1%	23.7%	23.3%	29.0%	100%
HILA-Ex	20.5%	24.1%	25.5%	30.0%	100%
Latin America South	27.7%	19.6%	22.7%	30.0%	100%
Canada	18.9%	28.5%	28.7%	24.0%	100%
Total	25.0%	22.9%	23.2%	28.9%	100%

Description of the Markets Where We Operate

Latin America North

Brazil

The Brazilian Beer Market

In 2014, Brazil was one of the world’s largest beer markets in terms of volume, reaching 127.4 million hectoliters, according to our estimates. Beer is predominantly sold in bars for on-premise consumption, in standardized, returnable 600-milliliter glass bottles. The second favored packaging presentation is the 350-milliliter one-way aluminum can, which is predominantly sold in supermarkets for off-premise consumption.

In 2014, according to our estimates, we had a 68.2% share of the Brazilian market in terms of beer sales volumes, mainly through our three major brands, Skol, Brahma and Antarctica. Our closest competitors in Brazil are: Cervejaria Petrópolis with a 12.1% market share; Brasil Kirin with a 9.4% market share; and Heineken, with a 8.5% market share, according to our estimates.

Distribution represents an important feature in this market, as the retail channel is fragmented into almost one million points of sale. Our distribution is structured under two separate branches, comprising (1) our network of exclusive third-party distributors, involving 147 operations, and (2) our proprietary direct distribution system, involving more than 107 distribution centers spanned over most Brazilian regions. We have been focusing on direct distribution in large urban regions, while strengthening our third-party distribution system. See “—Business Overview—Business Strategy.”

Near-Beer

Some of our recent innovations have stretched beyond typical beer consumption occasions, such as Skol Beats Senses, a sweeter beverage with higher alcohol content. These innovations are designed to grow the near-beer category and improve our market share of alcoholic beverage categories other than beer, by addressing changing consumer trends and preferences.

The Brazilian CSD & NANC Markets

The CSD & NANC markets in Brazil are comprised of many different segments, including CSD, bottled water, isotonic beverages, energy drinks and ready-to-drink teas. The CSD segment is the most significant to our business representing approximately 90% of the profits of our CSD & NANC unit.

According to our estimates, the leading CSD flavors in Brazil are (1) cola (with 51.6% of the market), (2) guaraná, (3) orange, and (4) lime. Most CSDs in Brazil are sold in supermarkets in 2-liter non-returnable PET bottles, for in-home consumption. The 350-milliliter one-way aluminum can is also an important packaging format for our business and is mainly sold in supermarkets and restaurants.

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Our main competitor in this market is The Coca-Cola Company. In 2014, according to our estimates The Coca-Cola Company family of brands had a 60.0% market share in the Brazilian CSDs market, while we had an 18.8% market share. In addition to The Coca-Cola Company, we face competition from small regional bottlers that produce what are usually referred to as “B Brands”. The B Brands compete mainly on price, usually being sold at a significantly lower price than our products.

Our main CSD brands are Guaraná Antarctica, the leader in the “non-cola” flavor segment with a 10.3% market share in 2014, and Pepsi Cola with a 4.5% market share in that year, in each case according to our estimates, which is sold under the exclusive production and bottling agreements with PepsiCo. Our CSD portfolio also includes such brands as Gatorade in the isotonic market, H2OH! in the flavored water market, and Lipton Iced Tea in the ready-to-drink tea market, which are also sold under license from PepsiCo, and Fusion and Monster, under license from Monster Energy Company, in the energy drinks market.

Our CSD & NANC products are sold in Brazil through the same distribution system used for beer.

HILA-Ex (Central America and the Caribbean)

Central America

In Guatemala, our most important operation in Central America, the main packaging presentations are the returnable, 12 oz. and 1-liter glass bottles, and the 12 oz. can. Our main competitor in Guatemala is Cerveceria Centro Americana, the market leader. Cerveceria Centro Americana is a private company held by local investors.

In El Salvador, our main packaging presentation is the returnable 1-liter glass bottle. Our main competitor in El Salvador is Industrias La Constancia, a local subsidiary of SAB Miller, which is the market leader.

In Nicaragua, the main packaging presentation is the returnable, 1-liter glass bottle. Our main competitor in Nicaragua is the market leader, which is a joint venture between Guatemala’s Cerveceria Centro Americana and Florida Ice & Farm Co, an investor group from Costa Rica.

In all of these markets, beer is predominantly sold in returnable bottles through small retailers. We sell our Brahva, Brahva Beats, Brahva Light, Extra, Budweiser, Becks, Corona & Stella Artois beer brands in Central America, which are distributed through The Central America Bottling Corporation, or CabCorp, distribution system, jointly with CabCorp’s CSDs portfolio. According to our estimates, the total annual sales volume of these beer markets was 6.3 million hectoliters in 2014.

The Caribbean Beer Market

In Cuba, our main packaging presentation is the 12 oz. can. Our main competitor in Cuba is State Brewery. We currently sell Bucanero, Cristal, Mayabe and Cacique local beer brands in Cuba. According to our estimates, the total annual sales volume of the Cuban beer market was approximately 2.2 million hectoliters in 2014.

In the Dominican Republic, the annual sales volume of the beer market was 3.7 million hectoliters in 2014, according to our estimates. The main packaging presentation in the Dominican beer market is the returnable, 650-milliliter and 1-liter glass bottles, which is predominantly sold in small retail stores. We currently lead the beer market in the Dominican Republic after our acquisition of CND, with leading portfolio brands such as Presidente, Brahma Light, President Light, Bohemia, The One, Corona, Stella Artois and Budweiser.

Our distribution system in the Dominican Republic is comprised mainly of direct distribution operations.

The Caribbean CSD Market

According to our estimates, the annual sales volume of the Dominican CSD market was 5.5 million hectoliters in 2014. The main packaging presentation in the Dominican CSD market is the returnable, half-liter bottle (glass/PET), which is predominantly sold in small retail stores. The Coca-Cola Company, represented by Bepensa, has the leadership of the Dominican CSD Market, followed by Ajegroup (which adopts a low price strategy). We are currently the third player.

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Our main CSD brands in the Dominican Republic are Red Rock, Pepsi-Cola and Seven Up (all of which are marketed under an exclusive bottling agreement with PepsiCo). Our distribution system in the Dominican Republic is comprised of direct distribution operations and third-party distributors.

Latin America South

Argentina

Argentina is one of our most important regions, second only to Brazil in terms of volume.

We serve more than 321,000 points of sale throughout Argentina both directly and through our exclusive third-party distributors.

The Argentine Beer Market

According to our estimates, the annual sales volume of the Argentine beer market was 16.8 million hectoliters in 2014. With a population of approximately 42 million, Argentina is Latin America South’s largest and most important beer market.

Beer consumption in Argentina has grown in recent years, but experienced a slight decrease in 2014, reaching a per capita consumption of 40.0 liters in 2014, which is slightly below the 40.9 liters recorded in 2013. Since 2000, Beer has become the number one selling alcoholic beverage in Argentina in terms of hector hectoliters sold, according to our estimates.

In Argentina, 33.6% of our beer volumes is distributed directly by us and 66.4% is distributed through exclusive third-party distributors. Our main package presentation in Argentina is the one liter returnable glass bottles, which accounts for 91.9% of our sales.

According to our estimates, on-premise consumption represented 15.0% of beer volumes in Argentina in 2014, and supermarkets sales represented 13.9% of beer volumes. The main channels of volume consumption in Argentina are through kiosks and small grocery stores.

Our most important beer brands in Argentina are Quilmes Cristal, Brahma and Stella Artois. We are the leading beer producers in Argentina with 78.1% market share in 2014, according to our estimates. Our main competitor in Argentina is Compañía Cervecerías Unidas S.A. which held an approximate 18.4% market share in 2014 according to our estimates.

The Argentine CSD Market

According to our estimates, in 2014 annual sales volume of the Argentine CSD market was 42.6 million hectoliters. Per capita CSD consumption decreased in Argentina in 2014 with 101.3 liters consumed in 2014 versus 103.1 liters in 2013, both of which were less than the 103.6 liters consumed in 2012. In Argentina, 47.7% of our CSD volume is distributed directly by us and 52.3% is distributed through exclusive third-party distributors. Non-returnable bottles represent 87.3% of our CSD sales in that country.

We are the exclusive Pepsi bottlers in Argentina and our most important CSD brand in that country is Pepsi. We had a 20.8% share of the Argentine CSD market in 2014, according to our estimates, and were second in that market only to The Coca-Cola Company.

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Bolivia

The Bolivian Beer Market

According to our estimates, the annual sales volume of the Bolivian beer market was 3.6 million hectoliters in 2014. The Bolivian market is strongly influenced by macroeconomic trends and governmental, regulatory and fiscal policies.

In Bolivia, 0.9% of our beer volumes is directly distributed by us and 99.1% is distributed through exclusive third-party distributors. Our main package presentation in Bolivia is the 620-milliliter returnable glass bottles, which accounts for 75.9% of our sales.

Our most important beer brands in Bolivia are Paceña, Taquiña and Huari. We are the leading beer producer in Bolivia with a 97.6% market share.

The Bolivian CSD Market

In March 2009, we, through Quinsa, acquired from SAB Miller plc, 100% of Bebidas y Aguas Gaseosas Occidente S.R.L., becoming the exclusive bottler of Pepsi in Bolivia.

According to our estimates, in 2014, the annual sales volume of the Bolivian CSD market was 5.3 million hectoliters. Per capita consumption decreased slightly from 53.7 liters in 2013 to 50.8 liters in 2014. 38.9% of our CSD volumes in Bolivia is directly distributed by us and 61.1% is distributed through exclusive third-party distributors, while 96.9% of our CSD sales in that country are through non-returnable bottles.

Chile

According to our estimates, the annual sales volume of the Chilean beer market was 7.7 million hectoliters in 2014. Beer consumption in Chile has increased every year since 2009. Our most important beer brands in Chile are Becker, Báltica and Stella Artois, where our market share has been growing in the last years.

Paraguay

According to our estimates, the annual sales volume of the Paraguayan beer market was 2.3 million hectoliters in 2014. Our estimate of sale volume in Paraguay does not attempt to account for contraband, an activity for which that country is notorious.

The market for beer in Paraguay has traditionally distinguished itself from those in the southern cone countries in certain respects because (1) beer has not faced significant competition from wine as an alternative alcoholic beverage; (2) the domestic beer market has faced significant competition from imported beer, which accounted for a far higher market share in Paraguay than in neighboring countries; and (3) the seasonality of our products is lower due to warmer conditions throughout the year.

In Paraguay, 69.2% of our beer volumes is directly distributed by us and 30.8% is distributed through exclusive third-party distributors. Our main package presentation in Paraguay is the can, which accounts for 49.4% of our sales.

Our most important beer brands in Paraguay are Brahma and Ouro Fino, with our market share being 89.6% in 2014, according to our estimates. In March 2009, we also became the exclusive distributors of the Budweiser brand in Paraguay.

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Uruguay

The Uruguayan Beer Market

According to our estimates, the annual sales volume of the Uruguayan beer market was 1.0 million hectoliters in 2014. Our Latin America South business unit manages both the beer and CSD businesses in Uruguay out of a facility based in that country.

In Uruguay, 40.8% of our beer volumes is directly distributed by us and 59.2% is distributed through exclusive third-party distributors. Our main package presentation in Uruguay is the 1-liter returnable glass bottle, which accounts for 85.4% of our sales.

Our most important beer brands in Uruguay are Pilsen and Patricia, with our market share being 96.6% in 2014, according to our estimates.

The Uruguayan CSD Market

According to our estimates, in 2014 the annual sales volume of the Uruguayan CSD market was 4.3 million hectoliters. The market growth in 2014 was a result of a recovery in the economy and also of higher market investments coming from A-brands. Per capita consumption reached 113.0 liters in 2014 according to our estimates.

In Uruguay, 44.3% of our CSD volume is directly distributed by us and 55.7% is distributed through exclusive third-party distributors. Non-returnable bottles account for 82.4% of our sales in that country. Our most important brand in Uruguay is Pepsi, with The Coca-Cola Company being our main competitor.

Ecuador

The Ecuadorian Beer Market

According to our estimates, our share of the Ecuadorian beer market in urban centers was approximately 16% in 2014. The main packaging presentation in the Ecuadorian beer market is the returnable, 600-milliliter glass bottle, predominantly sold in small retail stores. The market leader is SABMiller.

Our main beer brands in Ecuador are Brahma and Budweiser, and our distribution system in Ecuador is comprised of direct distribution operations in Guayaquil and Quito, and third-party distributors around the country.

Peru

The Peruvian Beer Market

According to our estimates, our share of the Peruvian beer market in urban centers was approximately 4% in 2014. The main packaging presentation is the returnable, 630-milliliter glass bottle, which is predominantly sold in small retail stores. The market leader is SABMiller.

Our main beer brands in Peru are Brahma Löwenbräu, Corona, and Stella Artois and the distribution system used for our beer business is also used for our CSD sales, and is comprised of direct distribution operations and third-party distributors.

The Peruvian CSD Market

The main packaging presentation in the Peruvian CSD market is the 3-liter one-way PET bottle and 0.5-liter one-way PET bottle, which are predominantly sold in small retail stores. The market leader is The Coca-Cola Company, represented by its local network of bottlers. We also face competition from Ajegroup and other regional brands, which compete mainly on price, usually being sold significantly below the market average.

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Our main CSD brands in Peru are Pepsi-Cola, Seven Up, Concordia, Evervess, Triple Kola and Gatorade, all sold under an exclusive bottling agreement with PepsiCo.

The distribution system in Peru is comprised of direct distribution operations and third-party distributors.

Canada - Labatt

Our Canada business segment is represented by the Labatt operations, which sells domestic and ABI beer brands, and exports the Kokanee beer brand to the United States.

According to our estimates, the annual sales volume in the Canadian beer market was 22.0 million hectoliters in 2014, of which Labatt, the market leader, had a volume share of 42.1%. The main packaging presentation in that country is the returnable, 341-milliliter glass bottle, and the 355-milliliter aluminum can, which is predominantly sold in privately owned and government owned retail stores in addition to privately owned on-trade establishments. Our main competitor in Canada is Molson Coors, but we also compete with smaller brewers, such as Sleeman Breweries Ltd., or Sleeman, and Moosehead Breweries Ltd.

Our main brands in Canada are Budweiser and Bud Light (brewed and sold under license from ABI’s subsidiary Anheuser-Busch, Inc., or Anheuser-Busch), along with Corona, Labatt Blue, Alexander Keith’s, Stella Artois and Kokanee. Our distribution system in Canada is structured in different ways across the country, as further explained below.

Distribution in Ontario

In Ontario, the province with the largest beer consumption in Canada, we own together with Molson and Sleeman a distribution and retail company named Brewers Retail Inc., a company incorporated in 1927, the retail component of which carries out business as The Beer Store, or TBS. TBS and the Liquor Control Board of Ontario, or LCBO, a chain of liquor stores owned by the government of the Province of Ontario, own the exclusive rights to sell beer for off-premise consumption in Ontario. TBS also has the exclusive rights to supply domestic-produced beer to the LCBO.

TBS has been the primary distribution and sales channel for beer in Ontario for more than 80 years. TBS operates on a cost recovery model under which it charges volume-based fees for services it provides to the brewers. The nature of TBS’s business requires compliance with laws and regulations and oversight by the Province of Ontario. The Liquor Control Act and the Liquor License Act are administered by the Minister of Consumer and Business Services, which maintains control of the beverage alcohol sectors through the Liquor Control Board of Ontario and the Alcohol and Gaming Commission of Ontario.

Distribution in Quebec

Quebec is the province in Canada with the second largest beer consumption. In this province there are no exclusive rights for the sales of beer, and both the on-premise and off-premise sales channels are mostly comprised of privately owned stores. The SAQ, a government-operated liquor store, sells a select few beer brands that are not available in the private retail system.

We (as well as our competitors) sell our products in Quebec through a direct sales and distribution system.

Distribution in the Western Provinces

Molson and Labatt are each a shareholder in Brewers Distributors Limited, which operates a distribution network for beer in the four western provinces of British Columbia, Alberta, Manitoba and Saskatchewan, as well as three territories (Yukon, the Northwest Territories and Nunavut). In Alberta, some volume is also sold through a third-party wholesaler. In these Western Provincial markets, there are both privately controlled retail stores (such as in Alberta and British Columbia) and government-controlled retail stores (such as in British Columbia, Manitoba and Saskatchewan).

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Distribution in the Atlantic Provinces

We distribute and sell our products in the Atlantic Provinces (including New Brunswick, Newfoundland, Nova Scotia and Prince Edward Island) through (1) distribution and retail networks controlled by the government in the provinces of Nova Scotia, New Brunswick and Prince Edward Island; and (2) private distributors in Newfoundland.

Exports to the United States

As a result of the U.S. antitrust review of the transaction involving InBev N.V./S.A. (as ABI was then denominated) and Anheuser-Busch, in February 2009 InBev N.V./S.A.’s subsidiary InBev USA, LLC ceased to act as the exclusive importer of Labatt branded beer in the U.S. for Labatt. At that time, KPS Capital Partners, LP, or KPS received from Labatt the perpetual license to brew Labatt branded beer in the United States or Canada solely for sale for consumption in the United States and to use the relevant trademarks and intellectual property to do so. Further, Labatt agreed to continue to brew and supply the Labatt branded beer for KPS on a provisional basis until March 2012. During 2011 and the first quarter of 2012, KPS volumes were phased out to Molson Coors Canada as part of the production agreement signed in August 2010. Separately, in order to ensure that we are adequately compensated, ABI also agreed to indemnify us in connection with certain events related to the perpetual license. See “Item 7. Major Shareholders and Related Party Transactions—B. Related Party Transactions—Ambev and ABI—Licensing Agreements.”

Beer and CSD Production Process

The basic brewing process for most beers is straightforward, but significant know-how is involved in quality and cost control. The most important stages are brewing and fermentation, followed by maturation, filtering and packaging. Although malted barley (malt) is the primary ingredient, other grains such as unmalted barley, corn, rice or wheat are sometimes added to produce different beer flavors. The proportion and choice of other raw materials varies according to regional taste preferences and the type of beer.

The first step in the brewing process is making wort by mixing malt with warm water and then gradually heating it to approximately 75°C in large mash tuns to dissolve the starch and transform it into a mixture, called “mash,” of maltose and other sugars. The spent grains are filtered out and the liquid, now called “wort,” is boiled. Hops are added at this point to give a special bitter taste and aroma to the beer, and help preserve it. The wort is boiled for one to two hours to sterilize and concentrate it, and extract the flavor from the hops. Cooling follows, using a heat exchanger. The hopped wort is saturated with air or oxygen, essential for the growth of the yeast in the next stage.

Yeast is a micro-organism that turns the sugar in the wort into alcohol and carbon dioxide. This process of fermentation takes five to eleven days, after which the wort finally becomes beer. Different types of beer are made using different strains of yeast and wort compositions. In some yeast varieties, the cells rise to the top at the end of fermentation. Ales and wheat beers are brewed in this way. Pilsen beers are made using yeast cells that settle to the bottom.

During the maturation process the liquid clarifies as yeast and other particles settle. Further filtering gives the beer more clarity. Maturation varies by type of beer and can take as long as three weeks. Then the beer is ready for packaging in kegs, cans or bottles.

CSDs are produced by mixing water, flavored concentrate and sugar or sweetener. Water is processed to eliminate mineral salts and filtered to eliminate impurities. Purified water is combined with processed sugar or, in the case of diet CSDs, with artificial sweeteners and concentrate. Carbon dioxide gas is injected into the mixture to produce carbonation. Immediately following carbonation, the mixture is packaged. In addition to these inputs, delivery of the product to consumers requires packaging materials such as PET bottles, aluminum or steel cans, labels and plastic closures.

For information on our production facilities, see “—D. Property, Plant and Equipment.”

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Sources and Availability of Raw Materials

Beer

The main raw materials used in our production are malt, non-malted cereals, hops and water.

Barley and Malt

Malt is widely available and our requirements are met by domestic and international suppliers as well as our own malting facilities. In the case of our beer operations in Brazil, approximately 80% of our malt needs are supplied by our own malting facilities located in the south of Brazil, Argentina and Uruguay.

For the rest of our needs, our most significant malt supplier is Cooperativa Agroindustrial Agraria. Market prices for malt are volatile, and depend on the quality and the level of production of the barley crop across the world, as well as on the intensity of demand.

We purchase barley for our malting facilities directly from South America farmers. Barley prices depend on the quality of the barley crop and on the prices for wheat on the main boards of trade across the world. We enter into future contracts or financials instruments to avoid the impact of short-term volatility in barley and malt prices on our production costs. See “Item 11. Quantitative and Qualitative Disclosures about Market Risk.”

Hops

There are two types of hops used in our beer production: hops used to give beer its distinctive bitter flavor, which we generally import from the United States, and hops used to give beer its distinctive aroma, which we generally import from Europe. The supply of hops is concentrated into a few international companies, namely the Barth-Haas Group, Hopsteiner, Kalsec and HVG.

Non-malted Cereals

Corn syrup is purchased from Ingredion, Cargill and Tereos Syral. Corn is purchased to produce grits in-house in some plants and corn grits and rice are purchased in other plants from local suppliers and are generally widely available.

Water

Water represents a small portion of our raw material costs. We obtain our water requirements from several sources, such as: lakes and reservoirs, deep wells located near our breweries, rivers adjoining our plants and public utility companies. We monitor the quality, taste and composition of the water we use, and treat it to remove impurities and to comply with our high quality standards and applicable regulations. As a result of advances in technology, we have continuously reduced our water consumption per hectoliter produced.

CSDs

The main raw materials used in our production are: concentrate (including guaraná extract), sugar, sweetener, juices, water and carbon dioxide gas. Most of these materials are obtained from local suppliers.

Guaraná Berries

We have a 1,070 hectare farm that provides us with fifteen tons of guaraná seeds (berries) per year, or about 5% of our requirements, with the remainder purchased directly from independent farmers in the Amazon region as well as other guaraná available regions in Brazil. The focus of our own farm is to provide Guaraná seedlings for local producers and promote the sustainable cultivation of Guaraná in the Amazon Region. Approximately 60 thousand seedlings are donated per year.

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Concentrates

We have a concentrate facility in the north of Brazil which produces the concentrates to meet our requirements for the production of our proprietary brand Guaraná Antarctica among others. The concentrate for Pepsi CSD products is purchased from PepsiCo.

Sugar

Sugar is widely available and is purchased by our regional sourcing entity. We enter into derivative instruments to avoid the impact of short-term volatility in sugar prices on our production costs. See “Item 11. Quantitative and Qualitative Disclosures about Market Risk.”

Juices

Orange, lemon and grape are purchased in Brazil from Louis Dreyfus Commodities and Cutrale, in Argentina from San Miguel and in Mexico from Citrojugo.

Other

We buy all of the fruit juice, pulp and concentrate that we use in the manufacture of our fruit-flavored CSDs.

Packaging

Packaging costs are comprised of the cost of glass and PET bottles, aluminum and steel cans, plastic film (shrink and stretch), paper labels, plastic closures, metal crowns and paperboard. We enter into derivative instruments to mitigate the risks of short-term volatility in aluminum prices on our production costs; for further information on this matter see “Item 11. Quantitative and Qualitative Disclosures About Market Risk.” For other materials, we usually set a fixed price for the period in accordance with the prevailing macroeconomic conditions.

In April 2008, we started operating a glass bottle producing facility in Rio de Janeiro. This unit has a yearly production capacity of 100 thousand tons of glass.

Our main aluminum can suppliers are Rexam and Crown. Our main glass bottles suppliers are Verallia (part of St. Gobain group), Owens-Illinois Glass Containers and Vidroporto, and part of our glass bottles needs are being produced internally at our Rio de Janeiro glass bottle facility. We obtain the labels for our beer and CSD primarily from local suppliers; in Brazil, the majority of our requirements are met by a printing house that belongs to FAHZ and is operated by us pursuant to a lease agreement. Plastic closures are principally purchased from America Tampas (former Crown-Cork) and Ravi. PET pre-forms are principally purchased from Plastipak, Lorenpet group (CPR, Centralpet, LEB and Lorenpet), Logoplaste and Amcor. Crown caps in Brazil are mainly sourced from our vertical operation in Manaus (Arosuco), but part of the volume used is produced by Mecesa, Aro and Tapon Corona (Mexico). These producers also supply some of our HILA-Ex operations as well as Allucaps (Mexico), Pelliconi (USA), Tapas Antillanas (Dominican Republic) and Fadesa (Ecuador).

Regulation

All our operations are subject to local governmental regulation and supervision, including (1) labor laws; (2) social security laws; (3) public health, consumer protection and environmental laws; (4) securities laws; and (5) antitrust laws. In addition, regulations exist to (1) ensure healthy and safe conditions in facilities for the production, bottling, and distribution of beverages and (2) place restrictions on beer consumption.

Environmental laws in the countries where we operate are mostly related to (1) the conformity of our operating procedures with environmental standards regarding, among other issues, the emission of gas and liquid effluents and (2) the disposal of one-way packaging.

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Governmental restrictions on beer consumption in the markets where we operate vary from one country to another, and in some instances, from one local region to another. The most relevant restrictions are:

· each country has a minimum legal drinking age that is established by the government; the beer legal drinking age varies from 18 to 21 years;

· some local and federal governments require that retail stores own special licenses for the sale of alcohol; this is the case in some regions of Argentina and Canada;

· some local governments in Canada establish a minimum price for beer sales, which is named Social Reference Price, or SRP. There is a specific SRP for each different packaging presentation. The SRP may vary from one province to another;

· beer sales in the off-premise channel in the Canadian provinces of New Brunswick, Newfoundland, Nova Scotia, Prince Edward Island and Saskatchewan are restricted to specific government-owned stores; and

· beer sales in the off-premise channel in Canada in the Province of Ontario are restricted to two chains of retail stores. One of them is the LCBO, which is government owned, and the other is TBS, jointly owned by Labatt, Molson and Sleeman. The Alcohol and Gaming Commission of Ontario regulates the alcohol industry.

Many governments also impose restrictions on beer advertisement, which may affect, among other issues, (1) the media channels used, (2) the contents of advertising campaigns, and (3) the time and places where beer can be advertised.

Marketing

Our marketing initiatives are concentrated in off-trade and on-trade initiatives. Off-trade initiatives comprise mass media vehicles, such as television, radio, magazines and internet websites. On-trade initiatives include banners, and all types of enhancements to the point of sale, such as branded coolers and decorated furniture.

Licenses

We have a long-term agreement with PepsiCo whereby we have been granted the exclusive right to bottle, sell and distribute certain brands of PepsiCo’s portfolio of CSDs in Brazil, including Pepsi-Cola, Seven Up and Gatorade. The agreements will expire on December 31, 2017, and, thereafter, will be automatically renewed for an additional ten-year term if certain conditions set in that agreement are met. See “Item 10. Additional Information—C. Material Contracts—License Agreements.” We also have agreements with PepsiCo to manufacture, bottle, sell, distribute and market some of its brands in the Dominican Republic and in some regions of Peru. Through our Latin America South operations, we are also PepsiCo’s bottler for Argentina, Uruguay and Bolivia. In 2014, sales volumes of PepsiCo products represented approximately 33% of our total CSD & NANC sales volumes in Brazil, nearly 75% of our total CSD & NANC sales volumes in the Dominican Republic, all of our CSD & NANC sales volumes in Argentina, Peru, Bolivia and Uruguay.

Effective January 1998, Labatt entered into long-term licensing agreements with Anheuser-Busch whereby Labatt was granted the exclusive right and license to manufacture, bottle, sell, distribute and market some of Anheuser-Busch’s brands, including the Budweiser and Bud Light brands, in Canada, including the right to use Anheuser-Busch’s trademarks for those purposes. The agreements expire in January 2098 and are renewable by either party for a second term of 100 years. In 2014, the Anheuser-Busch brands sold by Labatt represented approximately 60% of Labatt’s total sales volumes. According to our estimates, the Budweiser brand is currently the largest selling brand in terms of volume in Canada.

We also have a license agreement with Anheuser-Busch which allows us to exclusively produce, distribute and market Budweiser in Brazil. We also have certain arrangements to sell and distribute Budweiser products in Ecuador, Paraguay, Guatemala, Dominican Republic, El Salvador, Nicaragua, Peru and Uruguay, and Corona in Argentina, Bolivia, Paraguay, Uruguay, Chile, Peru, Guatemala, El Salvador, Panama, Nicaragua and Canada.

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We and ABI are also parties to a 10-year cross-licensing agreement which began in 2005, through which we are allowed to produce, bottle, sell and distribute beer under the brands Stella Artois and Beck’s in Latin America (except Argentina and Cuba) on an exclusive basis, and ABI is allowed to produce, bottle, sell and distribute beer under the brand Brahma in Europe, Asia, Africa, Cuba and the United States on an exclusive basis. Labatt and ABI have an arrangement through which Labatt distributes certain ABI beer brands in Canada, and the Latin America South zone, and ABI has an arrangement through which it distributes Stella Artois in Argentina. In addition, under the Indemnification Agreement between us and ABI, dated November 13, 2008 (see “Item 7. Major Shareholders and Related Party Transactions—B. Related Party Transactions—Ambev and ABI—Licensing Agreements”), ABI has agreed to transfer the distribution in the U.S. of the non-Labatt branded beer to the Anheuser-Busch distribution network.

Taxation

Beer

Taxation on beer in the countries where we operate is comprised of different taxes specific to each jurisdiction, such as an excise tax and a value-added tax. The amount of sales tax charged on our beer products in 2014, represented as a percentage of gross sales, was: 42.8% in Brazil; 21.3% in Canada; 19.3% in Central America; 36.9% in Ecuador; 32.4% in Peru; 42.8% in the Dominican Republic; 25.4% in Argentina; 33.0% in Bolivia; 25.4% in Chile; 16.0% in Paraguay; and 31.1% in Uruguay.

CSD & NANC

Taxation on CSD & NANC in the countries where we operate is comprised of taxes specific to each jurisdiction, such as an excise tax and a value-added tax. The amount of taxes charged on our CSD & NANC products in 2014, represented as a percentage of gross sales, was: 35.4% in Brazil; 13.9% in the Dominican Republic; 25.9% in Peru; between 22.9% and 25.5% in Argentina, depending on the type and flavor of the beverage; 25.0% in Bolivia; and 23.7% in Uruguay.

Changes to Brazilian Taxes on Beverages

In November 2008, the Brazilian Congress approved changes (effective as of January 1, 2009) to the taxable amount and tax rates for (1) the IPI Excise Tax, (2) the PIS Contribution, and (3) the COFINS. Under the previous system, these taxes were paid as a fixed rate per hectoliter by all taxpayers. Under the system approved in 2008, higher priced brands pay higher taxes per hectoliter than lower priced brands based on a consumer price reference table. The taxable amount is calculated through the application of a rate to the consumer price established in the respective consumer price reference table. In recent years, taxes on the beverage industry were increased at the Brazilian federal and state levels. In April 2013, an aggregate increase of two percent was approved with respect to the rates of the IPI Excise Tax, the PIS Contribution and the COFINS on beer sales. In addition, in 2014 the IPI Excise Tax, the PIS Contribution and the COFINS were subject to another aggregate increase of four percent in April and two percent in October with respect to beer sales. In 2014, the state government of Bahia increased the ICMS Value-Added Tax rate applicable to beer. Moreover, in January 2015 the Brazilian Federal government enacted Law No. 13,097, which introduced a new federal taxation model for beer and soft drinks. The law is a result of the combined efforts of the Brazilian federal government and beverage companies with a view to creating a less complex and more predictable tax system for the industry. According to Law No. 13,097, the new tax model will come into force on May 1, 2015. Among other changes, the new set of rules establishes that the IPI Excise Tax, the PIS Contribution and the COFINS are due by manufacturers and wholesalers and shall be calculated based on the respective sales price (ad valorem). Under the previous legislation, the referred taxes were due exclusively by the manufacturer at fixed amounts per liter of beer or soft drink produced (ad rem).

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The following is a list of our principal production facilities as of December 31, 2014:

Latin America North
Plant	Type of Plant
Brazil
Agudos, São Paulo	Beer
Brasília, Federal District	Beer
Curitiba, Paraná	Beer
Equatorial, Maranhão	Beer
Goiânia, Goiás	Beer
Jacareí, São Paulo	Beer
Lages, Santa Catarina	Beer
Natal, Rio Grande do Norte	Beer
Guarulhos, São Paulo	Beer
Uberlândia, Minas Gerais	Beer
Sete Lagoas, Minas Gerais	Beer
Petrópolis, Rio de Janeiro	Beer
Águas Claras, Sergipe	Mixed
Aquiraz, Ceará	Mixed
Camaçari, Bahia	Mixed
Cebrasa, Goiás	Mixed
Cuiabá, Mato Grosso	Mixed
Jaguariéna, São Paulo	Mixed
João Pessoa, Paraíba	Beer
Itapissuma, Pernambuco	Mixed
Nova Rio, Rio de Janeiro	Mixed
Manaus, Amazonas	Mixed
Minas, Minas Gerais	Mixed
Teresina, Piauí	Mixed
Águas Claras do Sul, Rio Grande do Sul	Mixed
Piraí, Rio de Janeiro	Mixed
Curitibana, Paraná	Soft drinks
Contagem, Minas Gerais	Soft drinks
Jundiaí, São Paulo	Soft drinks
Sapucaia, Rio Grande do Sul	Soft drinks
São Paulo, São Paulo	Labels
Manaus, Amazonas	Crown Cap
Campo Grande, Rio de Janeiro	Glass Bottle
Manaus, Amazonas	Concentrate
Maltaria Navegantes, Rio Grande do Sul	Malt
Maltaria Passo Fundo, Rio Grande do Sul	Malt
HILA-Ex
Ambev Centroamerica, Guatemala	Beer
Santo Domingo, Dominican Republic	Beer
Hato Nuevo, Dominican Republic	Soft drinks
Saint Vincent	Mixed
Dominica	Mixed
Cuba	Beer

(1) This malting facility has been leased to third parties for 10 years as from 2007.

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ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS

A. Operating Results

Introduction

The following management’s discussion and analysis of financial condition and results of operations should be read in conjunction with our audited consolidated financial statements included elsewhere in this annual report on Form 20-F. This annual report contains forward-looking statements that involve risks and uncertainties. Our actual results may differ materially from those discussed in the forward-looking statements as a result of various factors including, without limitation, those set forth in “Cautionary Statement Regarding Forward-Looking Information” and the matters set forth in this annual report generally.

We have prepared our audited consolidated financial statements as of December 31, 2014 and 2013 and for the three years ended December 31, 2014 in reais and in accordance with IFRS as issued by the IASB.

The financial information and related discussion and analysis contained in this item are in accordance with IFRS as issued by the IASB. The amounts are in million reais, unless otherwise stated.

Critical Accounting Policies

The SEC has defined a critical accounting policy as a policy for which there is a choice among alternatives available, and for which choosing a legitimate alternative would yield materially different results. We believe that the following are our critical accounting policies. We consider an accounting policy to be critical if it is important to our financial condition and results of operations and requires significant or complex judgments and estimates on the part of our management.

The preparation of financial statements in conformity with IFRS requires us to use estimates and adopt assumptions that affect the reported amounts of assets and liabilities, revenues and expenses and accounting disclosures. Actual results may differ from those estimated under different variables, assumptions or conditions. note 3 to our audited consolidated financial statements includes a summary of the significant accounting policies applied in the preparation of these financial statements. In order to provide an understanding about how management forms its judgments about future events, including the variables and assumptions underlying the estimates, and the sensitivity of those judgments to different variables and conditions, we have included below a brief discussion of our more significant accounting policies.

Accounting for Business Combinations and Impairment of Goodwill and Intangible Assets

We have made acquisitions that generated a significant amount of goodwill and other intangible assets, including from the acquisition of Labatt, Quinsa and Cerveceria Nacional Dominicana, or CND.

Under IFRS, the excess of the consideration paid, the amount of any non-controlling interests in the acquiree (when applicable), and the fair value, at the acquisition date, of any previous equity interest in the acquiree over the fair value of the net identifiable asset acquired at that date is recorded as goodwill. IFRS 3 “Business Combinations” does not permit that goodwill and intangible assets with indefinite useful lives be amortized but they should be tested annually for impairment. Our intangible assets with definite useful lives are amortized over the estimated useful lives of these assets.

Management uses judgment to identify tangible and intangible assets and liabilities, valuing such assets and liabilities and in determining their remaining useful lives. We generally engage third-party valuation firms to assist in valuing the acquired assets and liabilities. The valuation of these assets and liabilities is based on the assumptions and criteria which include in some cases estimates of future cash flows discounted at the appropriate rates. The use of different assumptions used for valuation purposes including estimates of future cash flows or discount rates may result in different estimates of value of assets acquired and liabilities assumed.

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We test our goodwill and other long-lived assets for impairment annually and whenever events and circumstances indicate that the undiscounted cash flows estimated to be generated by those assets are less than the carrying amount of those items. Our cash flow estimates are based on historical results adjusted to reflect our best estimate of future market and operating conditions. Our estimates of fair values used to determine the resulting impairment loss, if any, represent our best estimate based on forecasted cash flows, industry trends and reference to market rates and transactions. Impairments can also occur when we decide to dispose of assets. Reporting units are not expected to be at risk as a reasonable change in assumptions should not trigger an impairment.

Predecessor Basis of Accounting

As a preliminary step to the stock swap merger of Old Ambev with us in 2013, ABI contributed to the Company (i.e., Ambev S.A.) the common and preferred shares indirectly held by it in Old Ambev through other vehicles. For accounting purposes, this preliminary step comprised of ABI’s contribution, to the Company, of its indirectly-held Old Ambev common and preferred shares was treated as a business combination between entities under common control. See “Item 4. Information on the Company—A. History and Development of the Company—Stock Swap Merger of Old Ambev with Ambev S.A.”. We have applied retrospectively the predecessor basis of accounting to our January 2014 intra-group acquisition of the control of Cerbuco, the holding company that owns controlling interest in Bucanero, a leading company in the Cuban business beer, consistent with the accounting policy for business combination between entities under common control. IFRS 3 (Business Combinations) is the accounting pronouncement that is applicable to business combinations. However, business combinations between entities under common control have not been addressed by IFRS. In fact, the above mentioned accounting pronouncement explicitly excludes from its scope business combinations between entities under common control.

Therefore, in the absence of guidance in the Conceptual Framework for Financial Reporting, IAS 8 (Accounting Policies, Changes in Accounting Estimates and Errors) indicates that management may consider (1) recent technical positions assumed by other accounting standard-setting bodies that use a similar conceptual framework to the IASB to develop accounting pronouncements or (2) other accounting literature and generally accepted accounting practices, in either case to the extent not in conflict with the sources described in IAS 8. In that context, for purposes of accounting for the above mentioned contribution of ABI’s Old Ambev shares to us prior to the stock swap merger, management decided to observe the predecessor basis of accounting, which is an accounting alternative for business combinations between entities under common control that is applied by generally accepted accounting practices in other countries, including the U.S. and U.K.

Under the predecessor basis of accounting, when accounting for a transfer of assets between entities under common control, the entity receiving the net assets or the equity interests shall initially record the transferred assets and liabilities at their book value at the transfer date. If the book values of the transferred assets and liabilities are different from the historical cost of those assets and liabilities recorded by the controlling entity of the entities under common control, the financial statements of the acquirer shall reflect such transferred assets and liabilities at the cost that was originally recorded by the controlling entity of the entities under common control.

Pension and other Post-Retirement Benefits

Post-employment benefits include pension benefits, dental and health care. We manage defined benefit and defined contribution plans for employees of our companies located in Brazil and in our subsidiaries located in the Dominican Republic, Argentina, Bolivia and Canada. Usually, pension plans are funded by payments made both by us and our employees, taking into account the recommendations of independent actuaries. We maintain funded and unfunded plans.

Defined Contribution Plans

A defined contribution plan is a pension plan under which we pay fixed contributions into a fund. We have no legal or constructive obligations to pay further contributions if the fund does not hold sufficient assets to pay all employees for the benefits relating to employee service in the current and prior periods.

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The contributions of these plans are recognized as an expense in the period they are incurred.

Defined Benefit Plans

Defined benefit plans define an amount of pension benefit that an employee will receive on retirement, usually dependent on one or more factors such as age, years of service and compensation.

For defined benefit plans, expenses are assessed separately for each plan using the projected credit unit method. The projected credit unit method takes into account each period of service as giving rise to an additional unit of benefit to measure each unit separately. Under this method, the cost of providing pensions is charged to the income statement during the period of service of the employee. The amounts charged to the income statement consist of current service cost, interest cost, past service costs and the effect of any settlements and curtailments. The obligations of the plan recognized in the balance sheet are measured at the present value of the estimated future cash outflows using a discount rate equivalent to the government’s bond rates with maturity terms similar to those of the obligation and the fair value of plan assets.

Past service costs result from the introduction of a new plan or changes to an existing plan. They are recognized immediately in the income statement, at the earlier of when; (i) the settlements / curtailments occur, or (ii) we recognize related restructuring or termination costs, unless those changes are conditioned to the employee’s continued employment, for a specific period of time (the period in which the right is acquired). In such case, the past services costs are amortized using the straight-line method during the period in which the right was acquired.

Actuarial gains and losses consist of the effects of differences between the previous actuarial assumptions and what has actually occurred, and the effects of changes in actuarial assumptions. Actuarial gains and losses are fully recognized in the “carrying value adjustments” line item of our balance sheet.

Re-measurements, comprising of actuarial gains and losses, the effect of the asset ceiling and the return on plan assets, both excluding net interest, are recognized in full in the period in which they occur in the statement of comprehensive income. Re-measurements are not reclassified to profit or loss in subsequent periods.

When the amount of the defined benefit obligation is negative (an asset), we recognize those assets (prepaid expenses), to the extent of the value of the economic benefit available to us either from refunds or reductions in future contributions.

Share-Based Payments

We have different share grant and share option programs for management and other members appointed by the Board of Directors to acquire Ambev common shares. The fair value of these share options is estimated at the grant date using an option pricing model that is most appropriate for the respective option. Based on the expected number of options that will be exercised, the fair value of the options granted is recognized as an expense over the vesting period with a credit to shareholders’ equity. When the options are exercised, our shareholders’ equity is increased by the amount of the proceeds received by us.

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Contingencies

The preparation of our financial statements requires our management to make estimates and assumptions regarding contingencies which affect the valuation of assets and liabilities at the date of the financial statements and the revenues and expenses during the reported period.

We disclose material contingent liabilities unless the possibility of any loss arising is considered remote, and material contingent assets where the inflow of economic benefits is probable. We discuss our material contingencies in note 30 to our financial statements.

Under IFRS, we record a provision for a loss contingency when it is probable that a future event will confirm that a liability has been incurred at the date of the financial statements, and the amount of the loss can be reasonably estimated. In particular, given the uncertain nature of Brazilian tax legislation, the assessment of potential tax liabilities requires significant management judgment. By their nature contingencies will only be resolved when one or more future events occur or fail to occur – and typically those events may occur a number of years in the future.

Total provisions including contingencies, restructuring and other provisions related to such matters, recorded on our balance sheet as of December 31, 2014, 2013 and 2012 totaled R$682.4 million, R$576.7 million and R$655.6 million, respectively. For further details, see note 26 to our audited consolidated financial statements.

Deferred and Current Income Taxes

We recognize deferred tax effects of tax loss carry forwards and temporary differences between the financial statement carrying amounts and the tax basis of our assets and liabilities. We estimate our income taxes based on regulations in the various jurisdictions where we conduct business. This requires us to estimate our actual current tax exposure and to assess temporary differences that result from different treatment of certain items for tax and accounting purposes. These differences result in deferred tax assets and liabilities, which we record on our balance sheet. We regularly review the deferred tax assets for recoverability and will only recognize these if we believe that it is probable that there will be sufficient taxable profit against any temporary differences that can be utilized, based on historical taxable income, projected future taxable income, and the expected timing of the reversals of existing temporary differences.

The carrying amount of a deferred tax asset is reviewed at each balance sheet date. We reduce the carrying amount of a deferred tax asset to the extent that it is no longer probable that sufficient taxable profit will be available to allow the benefit of part or all of that deferred tax asset to be utilized. Any such reduction is reversed to the extent that it becomes probable that sufficient taxable profit will be available.

Accounting for Derivatives

Ambev uses derivative financial instruments in order to mitigate against risks related to foreign currency, interest rates and commodity prices. Ambev’s financial risk management policy forbids the use of derivative financial instruments for speculative purposes. Derivative instruments that, although contracted for hedging purposes, do not meet all hedge accounting criteria defined in the International Accounting Standard 39 Financial Instruments: Recognition and Measurement, or the IAS 39, are recognized at fair value in the income statement.

Derivative financial instruments are recognized initially at fair value. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value of derivative financial instruments may be obtained from quoted market prices or from pricing models that take into account current market rates.

Subsequent to initial recognition, derivative financial instruments are remeasured taking into account their fair value on the financial statements date. Depending on the type of instrument, whether cash flow hedging or fair value hedging, the changes in their fair value are recognized in the income statement or in equity.

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The concepts of cash flow, net investment hedge accounting and fair value hedge accounting are applied to all instruments that meet the hedge accounting requirements defined in IAS 39, e.g., the maintenance of the documentation required and the effectiveness of the hedge.

Cash Flow Hedge Accounting

When a derivative financial instrument hedges the exposure in cash flows of a recognized asset or liability, the foreign currency risk of a firm commitment or a highly probable forecasted transaction, the effective part of any resulting gain or loss on the derivative financial instrument is recognized directly in equity (hedging reserves). When the firm commitment in foreign currency or the forecasted transaction results in the recognition of a non-financial asset or a non-financial liability, the cumulative gain or loss is removed from equity and included in the initial measurement of the asset or liability. When the hedge relates to financial assets or liabilities, the cumulative gain or loss on the hedging instrument is reclassified from equity into the income statement in the same period during which the hedged risk affects the income statement (e.g., when the variable interest expense is recognized). The ineffective part of any gain or loss is recognized immediately in the income statement. When a hedging instrument or hedge relationship is terminated but the hedged transaction is still expected to occur, the cumulative gain or loss (at that point) remains in equity and is reclassified in accordance with the above policy when the hedged transaction occurs. If the hedged transaction is no longer probable, the cumulative gain or loss recognized in equity is recognized into the income statement immediately.

Net Investment Hedge Accounting

When a foreign currency liability hedges a net investment in a foreign operation, exchange differences arising on the translation of the liability to the functional currency are recognized directly in other comprehensive income (translation reserves).

When a derivative financial instrument hedges a net investment in a foreign operation, the portion of the gain or the loss on the hedging instrument that is determined to be an effective hedge is recognized directly in other comprehensive income (translation reserves), while the ineffective portion is reported in the income statement.

Investments in equity instruments or derivatives linked to and to be settled by delivery of an equity instrument are stated at cost when such equity instrument does not have a quoted market price in an active market and for which other methods of reasonably estimating fair value are clearly inappropriate or unworkable.

Fair Value Hedge Accounting

When a derivative financial instrument hedges the variability in fair value of a recognized asset or liability, any resulting gain or loss on the hedging instrument is recognized in the income statement. The hedged item is also stated at fair value in respect of the risk being hedged, with any gain or loss being recognized in the income statement. We will discontinue fair value hedge accounting when the object of coverage expires, is sold, terminated or exercised.

Should these instruments be settled only on their respective maturity dates, any effect between the market value and estimated yield curve of the instruments would be totally eliminated. Had we adopted the same criterion to recognize our financial liabilities at market value, we would have recorded an additional loss, before income taxes, of R$12.5 million on December 31, 2014 (as compared to a loss of R$11.6 million on December 31, 2013, and R$28.6 million on December 31, 2012), as follows:

Financial Liabilities	Book Value	Market Value	Difference
	(*in R$ million*)
International financing (other currencies)	369.1	369.1	-
BNDES/FINEP/EGF	1,768.0	1,768.0	-
2017 notes	281.6	294.1	(12.5)
Tax incentives	181.9	181.9	-
Financial Leasing	22.0	22.0	-
Total	2,622.6	2,635.1	(12.5)

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Exceptional Items

Exceptional items are those that in management’s judgment need to be disclosed by virtue of their size or incidence. In deciding whether an event or transaction is special, management considers quantitative as well as qualitative factors such as the frequency or predictability of occurrence, and the potential for variation of impact on profit or loss. These items are disclosed on the face of the consolidated income statement or separately disclosed in the notes to the financial statements. Transactions which may give rise to exceptional items are principally restructuring activities, impairments, and gains or losses on disposal of assets and investments.

Taxes

Income Taxes

Income taxes in Brazil are comprised of federal income tax and social contribution on profits (which is an additional federal income tax). Our aggregate weighted nominal tax rate applicable for the years ended December 31, 2014, 2013 and 2012 was 32.0%, 33.0% and 32.1%, respectively. For the years ended December 31, 2014, 2013 and 2012, our IFRS effective tax rate was 14.0%, 17.9% and 18.2%, respectively.

The major reasons for the differences between the effective tax rates and the nominal statutory rates have been: (1) benefits arising from tax-deductible payments of interest on shareholders’ equity without an interest charge in pre-tax income, (2) tax saving from goodwill amortization and (3) increased income from companies with an average tax rate of less than the Brazilian average rate of 34%, all of which was partially offset by a reduction in certain income tax incentives enjoyed by us.

Tax Losses Available for Offset

Part of the tax benefit corresponding to the tax losses carry forward of some subsidiaries located abroad was not recorded as an asset, as management cannot determine whether realization is probable. The tax loss carry forward related to these unrecognized deferred tax assets were equivalent to R$2.1 billion on December 31, 2014, with an average expiration period of five years.

Tax losses and negative bases of social contribution in Brazil have no expiration date. However, the annual offset is limited to 30% of pre-tax income.

Year Ended December 31, 2014 Compared to Year Ended December 31, 2013

In the periods discussed below, we conducted our operations through three business segments as follows:

·	Latin America North, which includes our operations in Brazil, where we operate two divisions (the beer sales division and the CSD & NANC sales division), and our HILA-Ex operations, which includes our operations in the Dominican Republic, Saint Vincent, Antigua, Dominica, Guatemala (which also serves El Salvador and Nicaragua) and, starting in 2014, Cuba.
·	Latin America South, which includes our operations in Argentina, Bolivia, Paraguay, Uruguay, Chile, Ecuador and Peru.
·	Canada, represented by Labatt’s operations, which includes domestic sales in Canada and some exports to the U.S. market.

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The table below sets forth certain of our operating highlights for the years presented:

	Consolidated Financial Highlights
	2014	2013	% Change
	(in R$ million, except volume amounts, percentages and per share amounts)
Sales volume—’000 hectoliters	171,765.7	166,468.3	3.2%
Net sales	38,079.8	35,079.1	8.6%
Net revenue per hectoliter—R$/hl	221.7	210.7	5.2%
Cost of sales	(12,814.6)	(11,572.5)	10.7%
Gross profit	25,265.2	23,506.6	7.5%
Gross margin (%)	66.3%	67.0%	-
Sales and marketing expenses	(9,158.8)	(8,059.9)	13.6%
Administrative expenses	(1,820.0)	(1,748.3)	4.1%
Other operating income/(expenses)	1,629.2	1,761.6	(7.5)%
Exceptional items	(89.0)	(29.2)	204.8%
Income from operations	15,826.6	15,430.8	2.6%
Operating margin (%)	41.6%	44.0%	-
Net income	12,362.0	11,399.4	8.4%
Net margin (%)	32.5%	32.5%	-

Margin Analysis

The following table sets forth certain line items of our income statement expressed as percentages of net sales for the years ended December 31, 2014 and 2013:

	Year Ended December 31,
	2014	2013
	*(%)*	*(%)*
Net sales	100.0	100.0
Cost of sales	(33.7)	(33.0)
Gross profit	66.3	67.0
Sales and marketing expenses	(24.1)	(23.0)
Administrative expenses	(4.8)	(5.0)
Other operating income/(expenses)	4.3	5.0
Exceptional items	(0.2)	(0.1)
Income from operations	41.6	44.0

Selected Financial Data by Business Segment

The following table sets forth selected financial data by business segment, and business operations of Latin America North, for the years ended December 31, 2014 and 2013:

	Year Ended December 31,
	2014					2013
	Brazil(1)	HILA-Ex(1)	LAS	Canada	Total	Brazil(1)	HILA-Ex(1)	LAS	Canada	Total
	(*in R$ million*)
Net sales	24,382.9	2,087.8	6,955.7	4,653.4	38,079.8	22,040.8	1,726.5	7,051.7	4,260.1	35,079.1
Cost of sales	(7,833.2)	(974.3)	(2,607.3)	(1,399.8)	(12,814.6)	(6,911.8)	(815.4)	(2,605.1)	(1,240.2)	(11,572.5)
Gross profit	16,549.7	1,113.5	4,348.4	3,253.6	25,265.2	15,128.9	911.1	4,446.6	3,019.9	23,506.6
Sales, marketing and administrative expenses	(7,055.9)	(596.9)	(1,676.4)	(1,649.5)	(10,978.7)	(6,205.4)	(520.1)	(1,671.7)	(1,411.0)	(9,808.2)
Other operating income/ (expenses)	1,623.9	(3.0)	11.6	(3.3)	1,629.2	1,775.4	(7.4)	(12.3)	5.9	1,761.6
Exceptional items	(11.6)	(38.6)	(28.8)	(10.0)	(89.0)	(6.3)	(6.4)	(9.9)	(6.6)	(29.2)
Income from operations	11,106.1	475.0	2,654.8	1,590.8	15,826.6	10,692.7	377.2	2,752.7	1,608.2	15,430.8

(1) The Latin America North business segment is comprised of Brazil and HILA-Ex.

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Net Sales

Net sales increased by 8.6% in 2014, to R$38,079.8 million from R$35,079.1 million in 2013, as shown in the tables set forth below:

	Net Sales Year Ended December 31,
	2014		2013		% Change
	Sales	% of Total	Sales	% of Total
	(*in R$ million, except percentages*)
Latin America North	26,470.7	69.5%	23,767.3	67.8%	11.4%
Brazil	24,382.9	64.0%	22,040.8	62.8%	10.6%
Beer Brazil	20,468.7	53.8%	18,407.1	52.5%	11.2%
CSD & NANC	3,914.2	10.3%	3,633.7	10.4%	7.7%
HILA-Ex	2,087.8	5.5%	1,726.5	4.9%	20.9%
Latin America South	6,955.7	18.3%	7,051.7	20.1%	(1.4)%
Canada	4,653.4	12.2%	4,260.1	12.1%	9.2%
Total	38,079.8	100.0%	35,079.1	100.0%	8.6%

	Sales Volumes Year Ended December 31,
	2014		2013		% Change
	Volume	% of Total	Volume	% of Total
	(*in thousand of hectoliters, except percentages*)
Latin America North	125,418.3	73.0%	120,415.4	72.3%	4.2%
Brazil	117,508.9	68.4%	113,148.0	68.0%	3.9%
Beer Brazil	86,903.9	50.6%	82,973.9	49.8%	4.7%
CSD & NANC	30,605.0	17.8%	30,174.1	18.1%	1.4%
HILA-Ex	7,909.4	4.6%	7,267.4	4.4%	8.8%
Latin America South	36,826.4	21.4%	36,917.7	22.2%	(0.2)%
Canada	9,520.9	5.5%	9,135.2	5.5%	4.2%
Total	171,765.7	100.0%	166,468.3	100.0%	3.2%

	Net Revenue per Hectoliter Year Ended December 31,
	2014	2013	% Change
	(*in R$, except percentages*)
Latin America North	211.1	197.4	6.9%
Brazil	207.5	194.8	6.5%
Beer Brazil	235.5	221.8	6.2%
CSD & NANC	127.9	120.4	6.2%
HILA-Ex	264.0	237.6	11.1%
Latin America South	188.9	191.0	(1.1)%
Canada	488.8	466.3	4.8%
Total	221.7	210.7	5.2%

Latin America North Operations

Brazilian Operations

Total net sales from our Brazilian operations increased by 10.6% in 2014, to R$24,382.9 million from R$22,040.8 million in 2013.

Our net sales of beer in Brazil increased by 11.2% in 2014, to R$20,468.7 million from R$18,407.1 million in 2013 mainly as a consequence of our 4.7% Brazilian beer sales volume increase driven by industry expansion and market share gains, along with a 6.2% increase in net revenue per hectoliter in 2014, reaching R$235.5 in that year. The increase in net revenue per hectoliter in 2014 resulted mainly from (1) our price increases, (2) the increased weight of direct distribution of beer sold in Brazil, which provides us with more revenue per hectoliter on a constant package mix when compared to third-party distribution arrangements, and (3) increased participation of premium brands in the mix of products sold, all of which was partially offset by higher sales taxes.

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Our net sales of CSD & NANC in Brazil increased by 7.7% in 2014, to R$3,914.2 million from R$3,633.7 million in 2013. The main driver that contributed to this growth was a 6.2% increase in net revenues per hectoliter in 2014, reaching R$127.9 in that year, mainly as a result of our price increases and the increased direct distribution of CSD & NANC sold in Brazil, which provides us with more revenue per hectoliter on a constant package mix when compared to third-party distribution arrangements. Our increase in net sales of CSD & NANC in Brazil is also partly explained by a 1.4% increase in our Brazilian CSD & NANC sales volume mainly driven by market share gains.

HILA-Ex Operations

Net sales from our HILA-Ex operations increased by 20.9% in 2014, to R$2,087.8 million from R$1,726.5 million in 2013. The main reason for this increase was a strong volume growth of our brands in the region (+8.8%) coupled with a net revenue per hectoliter growth of 11.1%, driven by revenue management initiatives and a positive impact from currency translation, reaching R$264.0 in 2014.

Latin America South Operations

Net sales from our Latin America South operations decreased by 1.4% in 2014, to R$6,955.7 million from R$7,051.7 million in 2013, due to a (i) 0.2% volume decline, (ii) a 1.1% decrease in net revenue per hectoliter and (iii) a negative impact from currency translation given the devaluation of the Argentinean peso relative to the real in 2014.

Canada Operations

Net sales from our Canadian operations increased by 9.2% in 2014, to R$4,653.4 million from R$4,260.1 million in 2013. This result was mainly due to a positive impact from currency translation and the 4.2% volume growth, which was driven by the addition of Corona and other Modelo brands to our portfolio. The distribution of such brands started in March 2014.

Cost of Sales

Cost of sales increased by 10.7% in 2014, to R$12,814.6 million from R$11,572.5 million in 2013. As a percentage of our net sales, total cost of sales increased to 33.7% in 2014 from 33.0% in 2013.

The table below sets forth information on cost of sales per hectoliter for the periods presented:

	Cost of Sales per Hectoliter Year Ended December 31,
	2014	2013	% Change
	(*in R$, except percentages*)
Latin America North	70.2	64.2	9.4%
Brazil	66.7	61.1	9.1%
Beer Brazil	70.9	64.2	10.5%
CSD & NANC	54.6	52.6	3.7%
HILA-Ex	123.2	112.2	9.8%
Latin America South	70.8	70.6	0.3%
Canada	147.0	135.8	8.3%
Total	74.6	69.5	7.3%

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Latin America North Operations

Brazilian Operations

Total cost of sales for our Brazilian operations increased by 13.3% in 2014, to R$7,833.2 million from R$6,911.8 million in 2013. On a per hectoliter basis, our Brazilian operations’ cost of sales increased by 9.1% in 2014, to R$66.7 from R$61.1 in 2013.

Cost of sales for our Brazilian beer operations increased by 15.8% in 2014, to R$6,162.4 million from R$5,323.7 million in 2013. On a per hectoliter basis, cost of sales for our Brazilian beer operations increased by 10.5% in 2014, to R$70.9 from R$64.2 in 2013, mainly driven by (1) higher depreciation, as a result of increased investments in property, plant and equipment, (2) unfavorable currency hedges and (3) the negative impact from packaging mix, all of which were partially offset by procurement savings and our commodities hedges.

Cost of sales for our Brazilian CSD & NANC segment increased 5.2% in 2014, to R$1,670.8 million from R$1,588.1 million in 2013. The cost of sales per hectoliter increased 3.7% in 2014, totaling R$54.6 from R$52.6 in 2013, impacted by currency hedges, which was partially offset by procurement savings and our commodities hedges.

HILA-Ex Operations

Cost of sales for our HILA-Ex operations increased 19.5% in 2014, to R$974.3 million from R$815.4 million in 2013. On a per hectoliter basis, our cost of sales per hectoliter for our HILA-Ex operations increased by 9.8% in 2014, to R$123.2 from R$112.2 in 2013 due to inflation of certain raw materials and packaging costs, which were also impacted by a negative currency effect.

Latin America South Operations

Cost of sales for our Latin America South operations increased by 0.1% in 2014, to R$2,607.3 million from R$2,605.1 million in 2013. On a per hectoliter basis, cost of sales for our Latin America South operations increased by 0.3% in 2014, to R$70.8 from R$70.6 in 2013, mainly driven by higher inflation in Argentina and unfavorable currency hedges, all of which were almost fully offset by the benefit from our commodities hedges and the translation impact of currency devaluation in Argentina, in each case as compared to 2013.

Canada Operations

Cost of sales for our Canadian operations increased by 12.9% in 2014, to R$1,399.8 million from R$1,240.2 million in 2013. Cost of goods sold per hectoliter increased 8.3% in the year to R$147.0 from R$135.8 in 2013, mainly explained by the incremental costs from Corona and other Modelo brands distribution. Currency translation and unfavorable currency hedges also contributed to an increase of costs; nonetheless, such costs were partially offset by lower pricing of commodities hedges.

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Gross Profit

As a result of the foregoing, gross profit increased by 7.5% in 2014, to R$25,265.2 million from R$23,506.6 million in 2013. The table below sets forth the contribution of each business segment to our consolidated gross profit:

	Gross Profit
	2014			2013
	Amount	% of Total	Margin	Amount	% of Total	Margin
	(*in R$ million, except percentages*)
Latin America North	17,663.2	69.9%	66.7%	16,040.1	68.2%	67.5%
Brazil	16,549.7	65.5%	67.9%	15,128.9	64.4%	68.6%
Beer Brazil	14,306.3	56.6%	69.9%	13,083.3	55.7%	71.1%
CSD & NANC	2,243.4	8.9%	57.3%	2,045.6	8.7%	56.3%
HILA-Ex	1,113.5	4.4%	53.3%	911.1	3.9%	52.8%
Latin America South	4,348.4	17.2%	62.5%	4,446.6	18.9%	63.1%
Canada	3,253.6	12.9%	69.9%	3,019.9	12.8%	70.9%
Total	25,265.2	100.0%	66.3%	23,506.6	100.0%	67.0%

Sales, Marketing and Administrative Expenses

Our sales, marketing and administrative expenses increased by 11.9% in 2014, to R$10,978.7 million from R$9,808.2 million in 2013. An analysis of sales and marketing and administrative expenses for each business segment is set forth below.

Latin America North Operations

Brazilian Operations

Total sales, marketing and administrative expenses in Brazil increased by 13.7% in 2014, to R$7,055.9 million from R$6,205.4 million in 2013.

Sales, marketing and administrative expenses for our Brazilian beer operations increased 15.0% in 2014, to R$6,221.8 million from R$5,408.3 million in 2013. The principal drivers for the increase in these expenses for our Brazilian beer operations were higher sales and marketing expenses, related mainly to the 2014 FIFA World Cup held in Brazil, higher distribution costs due to increased direct distribution of beer sold in Brazil and higher depreciation, as a result of higher investments in property, plant and equipment.

Sales, marketing and administrative expenses for the CSD & NANC segment in Brazil increased by 4.7% in 2014, to R$834.1 million from R$797.1 million in 2013, mainly as a result of higher distribution costs and higher depreciation, as a result of higher investments in property, plant and equipment.

HILA-Ex Operations

Sales, marketing and administrative expenses for our HILA-Ex operations increased by 14.7% in 2014, to R$596.9 million from R$520.3 million in 2013, mainly as a result of currency translation effect and higher sales and marketing expenses, which were driven by investments to support the strong volume growth of our brands in the region. This increase was partially offset by lower administrative expenses, as we continued to capture synergies in the Dominican Republic.

Latin America South Operations

Sales, marketing and administrative expenses for our Latin America South operations increased by 0.3% in 2014, to R$1,676.4 million from R$1,671.7 million in 2013, primarily driven by higher transportation and labor costs, caused mainly by heightened inflation in Argentina, which was partially offset by the translation impact of currency devaluation in Argentina.

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Canada Operations

Sales, marketing and administrative expenses for our Canadian operations increased by 16.9% in 2014, to R$1,649.5 million from R$1,411.0 million in 2013, as a result of higher distribution and sales and marketing expenses partially offset by lower administrative expenses, which were also impacted by a negative currency translation.

Other Operating Income (Expense)

Other net operating income decreased by 7.5% in 2014, to R$1,629.2 million from R$1,761.6 million in 2013, mainly explained by the R$300.0 million one-time gain related to the recovery of restricted funds recorded in the fourth quarter of 2013, which was partially offset by a growth of government grants related to state long-term ICMS Value-Added Tax incentives.

Exceptional Items

Exceptional items amounted to a R$89.0 million expense in 2014, representing a 204.8% increase in the R$29.2 million expense recorded in 2013. Such increase is explained mainly by an impairment of fixed assets during 2014.

Income from Operations

As a result of the foregoing, income from operations increased by 2.6% in 2014, to R$15,826.6 million from R$15,430.8 million in 2013.

Net Finance Cost

Our net financial cost decreased by 5.5% in 2014, to R$1,475.4 million from R$1,561.4 million in 2013. This result is mainly explained by better results with non-derivative instruments, which were partially offset by (1) higher net interest expenses including a non-cash accretion expense in connection with the put option associated with our investment in CND and (2) higher losses on derivative instruments related to foreign currency variation expenses.

Our total year-end indebtedness decreased by R$283.1 million in 2014, while our cash and cash equivalents less bank overdrafts and current investment securities decreased by R$1,490.8 million in that year, reflecting our strong cash distribution in 2014. Our year-end net cash position decreased by R$1,207.7 million in 2014.

Income Tax Expense

Our consolidated income tax and social contribution on profits decreased by 19.1% in 2014, to R$2,006.6 million from R$2,481.4 million in 2013. The effective tax rate in 2014 was 14.0%, compared to 17.9% in the previous year. Such decrease in our effective tax rate in 2014 was primarily due to higher deductible interest on shareholders’ equity.

Net Income

As a result of the foregoing, net income increased by 8.4% in 2014, to R$12,362.0 million from R$11,399.4 million in 2013, mainly driven by a higher operational results and a lower effective tax rate in 2014.

Year Ended December 31, 2013 Compared to Year Ended December 31, 2012

In the periods discussed below, we conducted our operations through three business segments as follows:

· Latin America North, which includes our operations in Brazil, where we operate two divisions (the beer sales division and the CSD & NANC sales division), and our HILA-Ex operations, which includes our operations in the Dominican Republic, Saint Vincent, Antigua, Dominica and Guatemala (which also serves El Salvador and Nicaragua).

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· Latin America South, which includes our operations in Argentina, Bolivia, Paraguay, Uruguay, Chile, Ecuador and Peru.

· Canada, represented by Labatt’s operations, which includes domestic sales in Canada and some exports to the U.S. market.

The table below sets forth certain of our operating highlights for the years presented:

	Consolidated Financial Highlights
	2013	2012	% Change
	(in R$ million, except volume amounts, percentages and per share amounts)
Sales volume—’000 hectoliters	166,468.3	171,143.2	(2.7)%
Net sales	35,079.1	32,478.3	8.0%
Net revenue per hectoliter—R$/hl	210.7	189.8	11.0%
Cost of sales	(11,572.5)	(10,607.8)	9.1%
Gross profit	23,506.6	21,870.4	7.5%
Gross margin (%)	67.0%	67.3%	-
Sales and marketing expenses	(8,059.9)	(7,378.9)	9.2%
Administrative expenses	(1,748.3)	(1,613.2)	8.4%
Other operating income/(expenses)	1,761.6	863.6	104.0%
Exceptional items	(29.2)	(50.4)	(42.1)%
Income from operations	15,430.8	13,691.5	12.7%
Operating margin (%)	44.0%	42.2%	-
Net income	11,399.4	10,459.1	9.0%
Net margin (%)	32.5%	32.2%	-

Margin Analysis

The following table sets forth certain line items of our income statement expressed as percentages of net sales for the years ended December 31, 2013 and 2012:

	Year Ended December 31,
	2013	2012
	*(%)*	*(%)*
Net sales	100.0	100.0
Cost of sales	(33.0)	(32.7)
Gross profit	67.0	67.3
Sales and marketing expenses	(23.0)	(22.7)
Administrative expenses	(5.0)	(5.0)
Other operating income/(expenses)	5.0	2.7
Exceptional items	(0.1)	(0.2)
Income from operations	44.0	42.2

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Selected Financial Data by Business Segment

The following table sets forth selected financial data by business segment, and business operations of Latin America North, for the years ended December 31, 2013 and 2012:

	Year Ended December 31,
	2013					2012
	Brazil(1)	HILA-Ex(1)	LAS	Canada	Total	Brazil(1)	HILA-Ex(1)	LAS	Canada	Total
	(*in R$ million*)
Net sales	22,040.8	1,726.5	7,051.7	4,260.1	35,079.1	20,977.9	1,218.9	6,250.7	4,030.8	32,478.3
Cost of sales	(6,911.8)	(815.4)	(2,605.1)	(1,240.2)	(11,572.5)	(6,409.8)	(603.9)	(2,449.7)	(1,144.4)

		Page

INTRODUCTION		i
PRESENTATION OF FINANCIAL AND OTHER INFORMATION		i
MARKET DATA		i
CURRENCY TRANSLATION		ii
TRADEMARKS		ii
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION		iii
PART I		1
ITEM 1.	IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS	1
ITEM 2.	OFFER STATISTICS AND EXPECTED TIMETABLE	2
ITEM 3.	KEY INFORMATION	3
ITEM 4.	INFORMATION ON THE COMPANY	24
ITEM 4A.	UNRESOLVED STAFF COMMENTS	45
ITEM 5.	OPERATING AND FINANCIAL REVIEW AND PROSPECTS	46
ITEM 6.	DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES	70
ITEM 7.	MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS	84
ITEM 8.	FINANCIAL INFORMATION	94
ITEM 9.	THE OFFER AND LISTING	104
ITEM 10.	ADDITIONAL INFORMATION	109
ITEM 11.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	131
ITEM 12.	DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES	136
PART II		138
ITEM 13.	DEFAULT, DIVIDENDS ARREARAGES AND DELINQUENCIES	138
ITEM 14.	MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS	139
ITEM 15.	CONTROLS AND PROCEDURES	140
ITEM 15T.	CONTROLS AND PROCEDURES	142
ITEM 16A.	AUDIT COMMITTEE FINANCIAL EXPERT	143
ITEM 16B.	CODE OF BUSINESS CONDUCT	144
ITEM 16C.	PRINCIPAL ACCOUNTANT FEES AND SERVICES	145
ITEM 16D.	EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES	147
ITEM 16E.	PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS	148
ITEM 16F.	CHANGE IN REGISTRANT S CERTIFYING ACCOUNTANT	151
ITEM 16G.	CORPORATE GOVERNANCE	152
ITEM 16H.	MINE SAFETY DISCLOSURE	153
PART III		154
ITEM 17.	FINANCIAL STATEMENTS	154
ITEM 18.	FINANCIAL STATEMENTS	155
ITEM 19.	EXHIBITS	156

Latin America South
Plant	Type of Plant
Huachipa, Peru	Mixed
Sullana, Peru	Soft Drinks
Guyaquil, Ecuador	Beer
Cympay, Uruguay	Malt
Musa, Uruguay	Malt
Malteria Pampa, Argentina	Malt
Quilmes, Argentina	Beer
Corrientes, Argentina	Mixed
La Paz, Bolivia	Beer
Santa Cruz, Bolivia	Beer
Cochabamba, Bolivia	Beer
Huari, Bolivia	Beer
Tarija, Bolivia	Beer
Santiago, Chile	Beer
Minas, Uruguay	Beer
Ypane, Paraguay	Beer
Zarate, Argentina	Beer
Mendoza, Argentina	Mixed
Montevideo, Uruguay	Mixed
Cordoba, Argentina	Soft Drinks
Trelew, Argentina	Soft Drinks
Buenos Aires South, Argentina	Soft Drinks and Juices
Tucuman, Argentina	Soft Drinks
Tres Arroyos, Argentina	Malt
Llavallol, Argentina(1)	Malt
Acheral, Argentina	Beer
Coroplas, Argentina	Crown Cap
FPV, Paraguay	Bottles
Sacaba, Bolivia	Soft Drinks
El Alto, Bolivia	Soft Drinks
Enalbo, Bolivia	Cans

INTRODUCTION

PRESENTATION OF FINANCIAL AND OTHER INFORMATION

MARKET DATA

CURRENCY TRANSLATION

TRADEMARKS

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION

PART I

ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS

ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE

ITEM 3. KEY INFORMATION

Selected Consolidated Income Statement Data

Earnings per Share and Dividend per Share

Selected Consolidated Balance Sheet Data

Other Data

Exchange Rate Information

Exchange Controls

Risks Relating to Brazil and Other Countries in Which We Operate

Economic uncertainty and volatility in Brazil may adversely affect our business.

Devaluation of the real relative to the U.S. dollar may adversely affect our financial performance.

Volatility in commodities prices may adversely affect our financial performance.

Increases in taxes levied on beverage products in Brazil and unfair competition arising from tax evasion may adversely affect our results and profitability.

The Brazilian government has exercised, and continues to exercise, significant influence over the Brazilian economy; Brazilian economic and political conditions have a direct impact on our business.

Our Latin America South operations are subject to substantial risks relating to its business and operations in Argentina and other countries in which it operates.

Risks Relating to Our Operations

We are subject to Brazilian and other antitrust regulations.

We are subject to regulation on alcoholic and CSD beverages in the countries in which we operate.

Our results of operations are affected by fluctuations in exchange rates.

Competition could lead to a reduction of our margins, increase costs and adversely affect our profitability.

The ability of our foreign subsidiaries to distribute cash upstream may be subject to various conditions and limitations.

We rely on the reputation of our brands and damages to their reputation may have an adverse effect on our sales.

Negative publicity focusing on our products or on the way we conduct our operations may harm our business.

Demand for our products may be adversely affected by changes in consumer preferences and tastes.

Seasonal consumption cycles and adverse weather conditions may result in fluctuations in demand for our products.

If any of our products is defective or found to contain contaminants, we may be subject to product recalls or other liabilities.

We may not be able to protect our intellectual property rights.

We rely on key third parties, including key suppliers, and the termination or modification of the arrangements with such third parties could negatively affect our business.

We are exposed to the risk of litigation.

We may not be able to recruit or retain key personnel.

Climate change, or legal, regulatory or market measures to address climate change, may negatively affect our business or operations, and water scarcity or poor quality could negatively impact our production costs and capacity.

Our operations are subject to safety and environmental regulations, which could expose us to significant compliance costs and litigation relating to environmental issues.

Information technology failures could disrupt our operations.

Natural and other disasters could disrupt our operations.

Our insurance coverage may be insufficient to make us whole on any losses that we may sustain in the future.

Risks Relating to Our Common Shares and ADSs

The relative volatility and illiquidity of securities of Brazilian companies may substantially limit your ability to sell our common shares and ADSs at the price and time you desire.

Deterioration in economic and market conditions in other emerging market countries, as well as in developed economies, may adversely affect the market price of our common shares and ADSs.

Our current controlling shareholders will be able to determine the outcome of our most significant corporate actions.

Our shareholders may not receive any dividends.

Brazilian foreign exchange controls and regulations could restrict conversions and remittances abroad of the dividend payments and other shareholder distributions paid in Brazil in reais in respect of the Ambev common shares (including shares underlying the Ambev ADSs).

If you exchange your Ambev ADSs for the respective Ambev common shares underlying those ADSs, you risk losing some Brazilian tax and foreign currency remittance advantages.

As a Brazilian company, Ambev is subject to different corporate laws and regulations than those typically applicable to U.S.-listed companies, which may result in Ambev’s shareholders having fewer or less well-defined shareholder rights than the shareholder rights of those companies.

Certain shareholder entitlements may not be available in the U.S. to holders of Ambev ADSs.

Holders of Ambev ADSs may be unable to fully exercise voting rights with respect to the Ambev shares underlying their ADSs.

Future equity issuances may dilute the holdings of current holders of Ambev common shares or ADSs and could materially affect the market price for those securities.

Foreign holders of our ADSs may face difficulties in serving process on or enforcing judgments against us and other persons.

Judgments of Brazilian courts with respect to our shares will be payable only in reais.

ITEM 4. INFORMATION ON THE COMPANY

Overview

Recent Acquisitions in Latin America

The InBev-Ambev Transactions

Exchange of Shares Between the Braco Group and the Interbrew Founding Families

Acquisition of Labatt

Ownership Structure of InBev N.V./S.A. and Old Ambev Upon Consummation of the InBev-Ambev Transactions

InBev N.V./S.A.

Old Ambev

Mandatory Tender Offer

Lakeport Acquisition

Cintra Acquisition

Stock Swap Merger of Old Ambev with Ambev S.A.

Upstream Merger of Old Ambev with and into Ambev S.A.

Description of Our Operations

Business Strategy

Our People and Culture

Top Line Growth

Building Strong Brands

Excellence in Route to Market

Permanent Cost Efficiency

Financial Discipline

Seasonality

Description of the Markets Where We Operate

CAUTIONARY STATEMENT REGARDING
FORWARD-LOOKING INFORMATION