India: Carlsberg posts flat volume growth in India due to volatile environment
Carlsberg's global chief executive Cees ‘t Hart said India is 'two steps forward, one step back' for the Danish brewer after it posted flat volume growth in the country, where the company has historically expanded in double digits, the Economic Times reported on November 6.
“It’s a volatile environment. We used to say, two steps forward and one step back. The third quarter indeed was one of these quarters that is one step back,” Hart said at an investor call last week. “It was impacted by price and excise tax increase in a couple of states. Therefore, we need to see how that basically impacts further growth.”
India's third-largest brewer has about 18% share, and is among the fastest in terms of boosting market share and revenue growth. Last calendar year, it grew 19% in volumes and 27% by value on a lower base as the industry clambered out of the decline caused by the highway vending ban.
However, Carlsberg’s volume growth fell sharply to 5% during the January-June period due to a stronger base in 2018 and election-related disruptions that restricted supplies, production and dispatches.
The parent company in its long-term strategy, Sail 22, has identified China, India and Vietnam as key drivers for growth. This justifies Carlsberg’s aggressive expansion - it now has eight breweries in India.
The alcoholic beverages industry in India is heavily regulated, with excise and other taxes forming an important source of revenue for state governments. In its latest annual report, Carlsberg said it achieved break-even three years ago in India, and operating profit more than doubled, with a double-digit Ebit margin position in 2019.
"With only 5% alcohol in beer on average, the drink attracts the highest taxation of any beverage in the country. Also, beer pricing ranges from as low as Rs 36 for a Kingfisher beer bottle in Goa to Rs 115 in Madhya Pradesh, indicating how there is a huge price disparity for the same brand," said Rahul Singh, founder of the Beer Cafe chain.
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