India: SABMiller thirsts for more, eyes small players for acquisition

India’s 85-90 million cases beer market is set to witness a fresh round of consolidation with SABMiller upping its stake to 99% in its India joint venture Shaw Wallace Breweries, Financial Express posted on June 4. With a 33% share of Indian beer market, SABMiller is now within striking distance of Vijay Mallya’s United Breweries which has a 45% share of the market.


SABMiller is now hungry for more. The company, which entered India in 2000 in a joint venture with UP-based Narang Breweries (and later acquired it), is open to acquiring other smaller players in this segment. “We are open for acquisition, but nothing specific in the pipeline,” he said.

Developing markets are becoming critical battlegrounds for major international brewers up against the local large player, in the fast consolidating global beer business. The SABMiller-United Breweries face-off is likely to unfold in the Indian market in the form of both players wooing smaller manufacturers to come under their fold.

“This is just an extension of the relationship we already had with SWC,” claims Richard Rushton, managing director, Shaw Wallace Breweries Ltd, an affiliate of SABMiller.

“With respect to other things, this acquisition allows us to establish a strong MNC brand and net assets worth Rs 162.80 crore involved in this acquisition. Strategically, we have to travel a long way in this deeply regulated segment,’’ he said.

‘‘Our strategy from day one was to acquire big mainstream brands and become a national player. Today we have brewing capacities in all the major beer consuming states. We have been able to acquire Haywards trademark, Royal Challenge brand and Shaw Wallace distribution. We are No. 1 in the strong beer segment and we are second in malt beer segment,” said Mr Rushton.

‘‘Our market strategy has helped us to acquire one-third of the beer market in India. We are growing at 12% in volume terms every year when the market is growing at 6-7%,” he added.

The company has manufacturing facilities in Maharashtra, Kerala, Andhra Pradesh, Rajasthan, Karnataka and Orissa through 10 breweries.

Beer market in India

One peculiar phenomenon of the Indian beer market is that ‘strong’ beer, where alcohol content is 8% or more, dominates. Meanwhile, mild beer or malt beer, where alcohol content is 4%, sells 35% of the total beer market.

According to industry estimates, total beer market in India is around 85-90 million cases. United Breweries has a larger share with 45 million cases selling every year, while SABMiller has 33% share in the market with 30 million cases.

“The beer market is not seeing much growth. The per capita consumption of beer in India is abysmally low. Against China’s per capita consumption of about 20 litres, Indians consume less than a litre a year,” he said. But Mr Rushton hopes that beer consumption in India too will grow rapidly due to factors like growing affluence and expanding youth adult population.

SABMiller’s India strategy, which is in line with its global strategy, is expected to maintain its No. 2 position in the market. “Our global CEO is expected to visit India shortly. Let him divulge the global strategy. As far as the beer market in India is concerned, it is a decade behind other developing countries,” he concluded.

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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