Sri Lanka: Sri Lanka's Lion Brewery regrets leaving Indian beer market

Sri Lanka's Lion Brewery regrets leaving the Indian beer market to focus on its home market, a senior company official said, noting that many local firms are reluctant to risk venturing overseas and fear foreign competition, EconomyNext reported on October 12.

Suresh Shah, Executive Director of the Lion Brewery (Ceylon) Ltd., said they understood the risks and complexities of the Indian market when they entered, but withdrew to give priority to investments to grow the home market, recovering after the ethnic war.

The Carson Cumberbatch controlled Lion Brewery withdrew from the Indian beer market in May 2011 having ventured into it in partnership with Carlsberg South Asia Pte Limited. It sold its stake to Carlsberg for 2.1 billion rupees.

“We know it is tough to do business in our region,” Shah told a World Bank forum to launch its new report on regional trade in South Asia which highlights the lack of intra-regional trade and investment.

“We understood the complexity of doing business in India. If we wanted the rewards of a very large market we had to face it. You go in knowing the risks and challenges,” Shah said.

Shah said they went into India knowing the alcohol business in India was extremely complex, more than elsewhere, and would take lot of money to succeed.

“Unfortunately, entering the Indian market involved a lot of cash upfront. We needed to expand capacity in Sri Lanka. So we took the call that we had to first protect the home market. That’s why we got out of it. We will regret it.”

Venturing into overseas markets required taking risks and staying power which many Sri Lankan firms appeared reluctant to do, Shah said.

He noted how global multinationals went into the big Chinese market although the Chinese governing system was very different to their own and markets also complex.

“Everyone who wanted to be big on a global scale are all in China,” Shah said. “A lot of them made losses and are still making losses.

“Nevertheless, they take that risk wanting to be known as global players. A lot of it is also in the mindset.”

Asked if it was apathy on the part of Sri Lanka’s private sector that so few had ventured overseas, Shah replied: “Of course it is. When you can make 100 rupees in Sri Lanka versus making 25 rupees somewhere else, 100 rupees is easy for the making here.

”If you want to take your business overseas you’ve got to be competitive and productive. Many Sri Lankan businesses are unfortunately neither productive nor competitive because we don’t face competition. Sri Lankan businesses need to be competitive for which we need to open our markets. We need to liberalise.”

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