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SABMiller Loses to Kingfisher in Battle Over India’s Beer Market: Retail
By Malavika Sharma and Abhay Singh on March 02, 2012 MY- for investors be it Kingfisher or UB it is better because ultimately they are the prestigious brands of India, and will be taken over by some foreign company, so if not kingfisher , UB’s share price is going to jump once some deal is finalized.

Indians sip only two liters of beer a year, just one-twentieth the amount consumed by Chinese and less than one-fortieth by Americans. SABMiller Plc (SAB), Anheuser-Busch InBev NV (ABI) and Carlsberg A/S (CARLB) see that as an opportunity. The global brewers are forming partnerships, introducing new products and marketing milder, pricier brews to young Indians. They have yet to overcome a maze of regulations and United Breweries Ltd. (UBBL), owner of top local brand Kingfisher, in a market expected by Euromonitor International to almost double to $9 billion by 2016. United Breweries so far has beaten back the challenges. It started selling Heineken in India over the past seven months to offer more options against foreign rivals. Changing state regulations have already eaten into London-based SABMiller’s market share and all of the brewers still face some Indian taboos on alcohol consumption. “Everyone fantasizes: Imagine if you had a billion Indian people drinking 50 liters of beer per capita,” said Trevor Stirling, analyst at Sanford C. Bernstein Ltd. in London. “It’s going to be many decades, if ever, before Indian per capita consumption reaches 50 liters.” Emerging markets such as India are important to global brewers as growth slows in the developed world and brands like Budweiser fight competition from craft beers in the U.S. At the same time, the experiences of foreign brewers show how regulations or entrenched competitors are holding back many of the world’s largest companies in the second most populous nation. Retailers such as Wal-Mart Stores Inc. (WMT) faced a setback in December when the government reversed a decision to allow their entry into a market dominated by local mom-and-pop stores. India also bans advertising of alcoholic drinks, which can make it harder for brewers to introduce consumers to new names.

Supplying British Troops
United Breweries traces its roots to British soldiers’ love for beer. In 1915, a Scotsman named Thomas Leishman bought five breweries in southern India to form United Breweries. The company transported its beer in barrels on bullock carts, serving British troops. Vittal

the company said in its 2010 annual report. higher-priced varieties like Kingfisher Ultra. to reach young. “When we were going to launch Kingfisher Ultra two years ago. labor requirement. urban consumers. based in Bangalore. What was considered a barrier for beer doesn’t exist anymore.” United Breweries benefits from 28 breweries spread across the country’s 28 states. in India. forcing companies to open distilleries and breweries in each state where they want to sell their products cost-effectively. according to London-based Euromonitor. New Beers United Breweries. chief executive officer of Copenhagenbased Carlsberg. is seeking new funds after grounding planes and cutting flights because of a cash shortage. eliminating any scale efficiency.” Still. Kingfisher has held its own in the beer market helped by the introduction of new products. Its market share was still hurt by regulatory disputes in the states of Andhra Pradesh and Uttar Pradesh. said in an e-mail. every state has their own system in terms of taxation. which impose taxes on imports and exports. consumers’ greater affluence and increasing social acceptance of beer will “ensure sustained growth” for the industry in India. The success of the brewing business contrasts with United Breweries parent UB Group’s money-losing Kingfisher Airlines Ltd.Mallya. marketing director of SABMiller India. “The biggest challenge is. “The movement of beer across state borders is inefficient.” Regulatory Disputes SABMiller also added brands.” said Joergen Buhl Rasmussen. Kingfisher or the mainstream beers are close to 90 or 95 rupees. “But today. which has reported more than 10 straight quarterly losses.” Derek Hugh Jones. increased its beer market share to 57 percent in 2011 from 43 percent in 2006. The sale and distribution of alcohol in India is controlled by state governments. said in an interview in August when the company introduced Heineken in India. he said. In the same period. and snapped up distillers and brewers on the cheap when the Indian government briefly threatened prohibition in the 1970s. (KAIR) The airline. father of present chairman Vijay Mallya. “That does make India not very efficient to operate. and excise duty increases in other states. such as Miller High Life. That tops the 13 that SABMiller uses and Carlsberg’s five. “The single greatest challenge that any brewer faces is regulation. which entered the country in 2007.”Samar Singh Sheikhawat. vice president of marketing at United Breweries. including milder. we used to wonder who would buy a 100-rupee ($2) beer. SABMiller’s share dropped to 24 percent from 37 percent. bought United Breweries in 1947. .

with an alcohol content that can go as high as 8 percent.” said Stirling. “You have a reasonably high proportion of a Muslim population who won’t drink alcohol. and 105. Abhay Singh in New Delhi at To contact the editors responsible for this story: Stephanie Wong at swong139@bloomberg. Euromonitor estimates India’s beer market will grow to “Also. has raised prices as many as four times since starting in 2009 and still has customers flying to its brewery. including Carlsberg Elephant and Tuborg Strong.4 percent share in 2011.6 in Germany. by Sheikhawat’s estimate. from other cities. Carlsberg’s Rasmussen said the potential to raise per capita purchases makes the country “a very attractive market to be in over time.Religious Taboos Per capita consumption of beer in India at 1. Indian drinkers are largely still partial to stronger beers like Kingfisher Strong. The economy has grown at an average annual pace of more than 8 percent for the last four years. As much as 80 percent of the beer sold in India’s beer industry is “strong. One of the largest.6 liters is a fraction of 35. based on Euromonitor estimates. Stronger Tastes One factor in the new brew battles: the strength of the beer. Microbreweries are springing up in India as well. Carlsberg has introduced stronger brews. 75.9 billion rupees ($9 billion) from 257 billion rupees in 2011. Anheuser-Busch InBev. on the top floor of an upscale mall.S. which entered India in 2007. you won’t drink alcohol. held percent.5 in China.6 in the U. called Rockman’s Beer Island. if you’re a devout Hindu. The New Delhi suburb of Gurgaon has several. Belgium-based company that sells its Budweiser beer. had a 4.” with alcohol content of six to eight percent.” Social norms are changing and beer consumption picking up as India’s young adults have more money to spend and travel around the world. To contact the reporters on this story: Malavika Sharma in New Delhi at msharma52@bloomberg. the Leuven.” . United Breweries’ stable of brands includes Kingfisher Strong and Draught as well as milder variants such as Ultra. Frank Longid at flongid@bloomberg.

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