India. UBL undisputed leader in beer market

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Thriving on competition, India’s largest beer company, United Breweries (UBL), has not only withstood the challenge of several iconic international beers entering the country in the past five years, it has also upped its market share and widened the gap between its nearest rival, SABMiller India. What’s more, the Bangalore-based brewer now plans to gain the extra edge by entering the super-premium beer category with Heineken this July. According to company claims, UBL currently has over 50% share of India’s beer market, estimated at over 200 million cases, while SABMiller India has around 30%. Estimates by Euromonitor International, the London-based market research company, peg UBL’ market share lower. It say the market share by volume of UBL, whose brands include Kingfisher, UB Export and Kalyani Black Label, grew to 45.4% in 2010 from 43% in 2006, while SABMiller’s share, marketing Haywards, Fosters, Royal Challenge and Knock Out, declined to 31.8% from 36.5% in the same period. UBL’s top brand Kingfisher alone had around 40% market share in 2010.
“Their (UBL’s) market share is expanding every quarter and one reason is that the main competition, SABMiller, is having issues,” says Abneesh Roy, vice-president (research), Edelweiss Securities, adding that the market is a one-horse race now.
Varun Lohchab, director (institutional equities), Religare Capital Markets, agrees, pointing out that the Heineken launch would complete the company’s beer portfolio in all price segments.
Also, Heineken is expected to give global giants Anheuser-Busch InBev and Carlsberg — operating in a relatively premium market now, but one that is expected to grow rapidly because of rising incomes and brand consciousness — a run for their money.
The edge for Heineken would be UBL’s country-wide manufacturing and distribution network in what has traditionally been a difficult market for newcomers, as beer is taxed on a par with spirits, which makes it expensive, besides varying regulations from state to state and a restriction on advertising.
“The point is we understand this market,” says Shekhar Ramamurthy, UBL deputy president, adding, “We see Heineken as being even more premium than Carlsberg and Kingfisher Ultra in terms of prices for the consumer. We are confident it will create a very positive impact.”
This consolidation of strength seems like a good strategy, especially if one considers that the London-headquartered SABMiller has been challenging UBL’s Kingfisher brand over the past decade in the over 5% alcohol content segment by acquiring strong local brands such as Haywards and Knockout, besides the mild beer Royal Challenge from Shaw Wallace. For the record, India’s beer consumption is still minuscule by global standards —per capita consumption is about 1 litre compared to the global average of over 24 litres. More than three-fourths of India’s beer sales are of the strong variety with over 5% alcohol content, with only upmarket towns and cities preferring light beers.
SABMiller, meanwhile, is re-aligning its strategy to soften the blow in Andhra Pradesh, where it is challenging the government-run beverages corporation’s new procurement policy, by focusing on more profitable segments and markets where pricing is not government controlled. SABMiller dominated the Andhra market, but the state’s beverage corporation now places orders based on national market share against share in the state previously.
“At the end of the day, we are there to make profit, not volumes,” says Sundeep Kumar, director (corporate affairs and communications), SABMiller, adding that the company has been adopting that strategy since it entered India in 2000. “We discontinued eight brands for the same reasons because they were not profitable. Our volumes came down, but our profitability went up,” he says, adding that the company’s share is growing in more profitable states such as Maharashtra and Karnataka
However, newer entrants such as the iconic Budweiser beer, which sold about 1.7 million cases in 2010, are also upbeat about making inroads into smaller towns in India. “Currently I think everybody who has a global footprint knows India is the market of the future, no doubt about that,says an official of InBev India International, not wishing to be named. The company, a JV between Anheuser-Busch InBev and the RK Jaipuria Group, handles the marketing of Budweiser, which is currently being brewed at a Hyderabad plant.But for now, UBL is going strong.