India: Carlsberg A/S will invest in a subsidiary in India

Carlsberg’s proposal to invest US$1 million in a fully-owned subsidiary in India has been approved by the Foreign Investment Promotion Board, The Economic Times communicated on June 3. Through its subsidiary Carlsberg will import beer in bulk and undertake wholesale trading, but would not be permitted to engage in retail trading, according to the same source.

Carlsberg’s proposal was supported by both the department of economic affairs and the commerce and industry ministry, The Economic Times quoted government sources.

India's per capita beer consumption is among the lowest in the world. That is why foreign beer forces are interested in the market's potential. India's beer market is around 85 million cases strong, up from 82 million last year. Of this, strong beer (with alcohol by volume above 5% but lower than 8.75%) comprises a whopping 65 million cases. The remaining 30 million cases is mild beer. Imported brands like Fosters and Castle currently operate at the top end of the mild beer market, which is around 2 million cases strong. Growth has been decent in this premium gulp - around 7% last year - and this is the segment that Carlsberg will likely target.

The total beer market grew about 2-3% last year, mirroring global growth trends. The world's total beer market is estimated to hit 1.5 billion hectolitres by 2005. In India, mild beer has seen flat growth, thanks mostly to cannibalisation by stronger beer.

Thanks to high taxation, beer costs anywhere between Rs 30-50 in India whereas it costs just around Rs 8 a bottle in China. In the West too, a bottle of beer costs the same as mineral water or cola. The steep prices have led to consumers looking for a strong alcohol substitute while buying beer. Hence the preference for strong beers.

The beer skew is also made worse by distribution snags. India has 48,000 beer distribution outlets nationwide whereas Manhattan alone has 22,000. Delhi's 12 million population is served by 600 outlets, Mumbai's 15 million by 2300 outlets while Shanghai's 15 million population is served by 83,000 outlets.

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