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Brewing a success in India
Guido de Boer
CFO United Breweries
UBL: Key facts and figures
10 1.5 18
million hectoliters litre per capita consumption owned breweries, and 10 contract breweries
54% market share, the largest brewer in India
39% share for the Kingfisher brand - it is synonymous with Indian beer 75% owned by Dr Vijay Mallya and Heineken
Source: FY2011 company Information, Industry Reports
India and the Beer opportunity
500 Below 25 year olds as % of total population in 2030 India China Brazil Russia 0% 2% 1% 10% 20% 30% 11% 20% mln India will have the world’s largest population by 2025 In 2030. McKinsey Global Institute (2007) . India will have over 1.000 1.Demographic dividend to be reaped Population increase fuels potential for rapid beer market growth Population in 2030 India China Brazil Russia 0 500 1.5bn inhabitants Net increase in working population of 270 million by 2030 In 2030: 20% of the world’s below 25 year olds will be Indian… …compared with 11% from China Significant growth in the legal drinking age population in India Source: United Nations (2011).
5 24.1 49.5x consumption growth Higher income expected to support significant increase in discretionary spend .5 4.9 Aggregate consumption trillion.Consumption is set for strong growth A significant middle class will emerge supporting increased spending power Household income brackets thousand.9 2. Indian rupees.1 12. 2000 2005 Globals (>1.000) Strivers (500-1.000) Seekers (200-500) Aspirers (90-200) Deprived (<90) 1.4 Beer will become increasingly affordable to a growing number of people in India Increase in number of upper & middle class households of 123m by 2025 Middle and upper class will drive 12. 2000 Number of households million 2005 Globals (>1.1 94.1 93.0 2.000) Seekers (200-500) Aspirers (90-200) Deprived (<90) 1.3 101. Indian rupees.1 8.9 +123m 2025 9.9 91.4 10.6 11.5 33.1 16.2 1.000) Strivers (500-1.5x 2025 14.2 2.
1 64.9 2006 1.1 2007 India 1.8 0.5 PCC in litres 20 CAGR 14% 0.3 2009 1.Beer consumption in India is well below other ‘BRIC’ countries The Indian beer market has grown strongly over the past 5 years from a low base Per Capita Beer Consumption 80 76.5 60 40 34.5 2010 China Brazil Russia 0 2005 Source: Canadean (2011) .2 2008 1.
5% Wine 78% Spirits 5% 8% 22% Note: 2010 data of India versus markets with a similar GDP per capita Beer 87% .Today’s beer consumption is very low India is far below other emerging markets of similar income levels India Per Capita Beer Consumption at comparable GDP Comparable Markets 1.5 liter 20 liter Share of alcohol consumption <0.
000 licensed outlets across the country 1 per 18.Two key reasons High prices & low availability AFFORDABILITY Highest duty in the world Duty not set according to alcohol content Expensive alcoholic beverage AVAILABILITY 65.000 people In China: 1 per 300 people Beer is not the alcoholic beverage of the common man .
2x 0 20 40 60 0.0x 1.5x Russia 8 Russia 0.5x .1x Brazil 18 Brazil 0.Affordability Beer prices in India are very high An Indian has to work up to 7x as long to afford a beer India is the only BRIC where a beer is more expensive than a Big Mac Minutes work for a beer India 51 India Beer relative to Big Mac 1.5x China 7 China 0.0x 0.5x 1.
Based on consumer prices in Tamil Nadu .6x Bagpiper China 0% 20% Excise Duty 40% 60% VAT and other tax 50 100 29 Indicative rates as % of consumer price. so effective rate is lower. VAT is only levied on value added.Affordability Excise is highest among BRICs and drives preference for hard liquor Taxation is significantly higher than other countries Taxation of Beer India Brazil Russia Kingfisher Premium 75 Beer is taxed significantly higher than hard liquor Relative pricing vs spirits per unit of pure alcohol 2.
the Maharashtra government started to issue ‘beer shop’ licenses for outlets that can only sell beer and wine.Availability Case Study: Mumbai Beer shops Number of beer shops has increased sharply… 300 190 215 New Policy established Since the 1970’s no new licenses have been issued for liquor shops In 2006. Percentages depict volume growth rates for FY11 . but not spirits …driving high growth in beer shop volumes 31% Mar10 Mar11 Nov 11 …accelerating growth of the overall market 15% 4% 3% 8% 12% 14% Liquor shops Permit rooms Beer shops Liquor shops Permit rooms Beer shops Industry Source: Company estimates.
A highly regulated market Leveraging the existing framework Excessive State regulation and intervention Route to market Economics. need to have a brewery in each state Pricing India is not homogeneous country 27 uniquely different states Ban on advertising alcohol Difficult to build new brands Requires ability to operating in very different structures .
000 GDP per Capita (in USD.000 $15.India is at the start of the growth curve Income growth will drive per capita beer consumption Demographics will fuel further market growth UBL expects to grow volume at an average annual rate of 15% over the next five years By the end of 2015. PPP) Source: Canadean (2011). India is expected to reach 3 liter per capita Beer consumption versus income level 80 Brazil Per Capita Beer consumption Russia Mexico 60 40 Vietnam China Colombia 20 Philippines Kenya Nigeria India 0 $0 $5. World Bank (2011). Company forecasts .000 $20.000 $10.
Capitalising on UBL’s strengths for growth .
UBL’s leadership is undisputed Market leading position in India Strong market position will continue to drive economies of scale and superior returns All time high market share of over 54% UBL is more than two times its nearest competitor AB-Inbev 1% Carlsberg Others 4% 10% Mt Shivalik 4% M Meakins 4% SAB 23% UBL 54% On a brand basis the leadership is even more apparent 50% 40% 30% 20% 10% 0% All-India market share FY11 .
What is this leading position resulting from? UBL’s Competitive Advantages UBL has been able to achieve its market leadership by leveraging four competitive advantages: Brands People Manufacturing footprint Route-toMarket .
2 has only 172k fans On a global basis. No. Kingfisher is the most liked alcohol brand after Heineken Leaving all global beers such as Budweiser and Corona. and renowned spirits as Smirnoff and Bacardi well behind it Brands in green are part of UBL portfolio .The strength of the Kingfisher Brand is unparalleled Iconic brand – KINGFISHER is synonymous with beer for Indian consumers No other beer brand comes close: All-India market share Mild Beer FY11 Kingfisher Royal Challenge Fosters UB Export London Pilsner Budweiser Kalyani Sandpiper Tuborg Golden Eagle 0% Brand Equity among young consumers: >6x 20% 40% 60% Kingfisher is India’s most liked beer brand by far.
2 Relative share 170+ PRICE INDEX Super Premium 65% Corona 0.But it is not only Kingfisher… …UBL leads across all segments Mumbai mild beer portfolio Q2FY12 Key brand Segment share No.96x 100 Mainstream 70% Fosters 0.25x 135 Premium 49% Carlsberg 0.19x .23x 80 Economy 81% Golden Eagle 0.
Investing behind the brand Leveraging aspirational properties in fashion and sports Cricket: Indian Premier League Football: Kingfisher East Bengal Formula One: Force India Fashion: Kingfisher swimsuit calendar .
IPS segment is still a very small part of the overall market . Delhi. 4. Bangalore. 3. Strong focus on digital media Set benchmarks at every touch-point .Heineken Building brand equity for the future Selective launch in key metros: Mumbai.Quality over quantity K2 bottles World class PoS materials Leveraging UBL strengths in market 2. Kolkata and Goa Gradual roll-out based on: 1. Perfect execution Targeted Distribution Premium Visibility Cold & Fresh Stock management Driving awareness & be part of the conversation.
Manufacturing network across all major states UBL brewery footprint Unique brewery footprint In line with the requirements of a complex regulatory framework 18 owned breweries and 10 contract breweries Closeness to market a critical success factor Freight costs Import and export duties Freshness Owned breweries Contract breweries Ability to manage contract brewers in key states .
provides significant benefits Most distributors have been UB Group partners for multiple decades The best distributors and trade partners aligned with UB Group .with 60% share in spirits and 54% in beer .Best Route to Market In distribution… India has 27 states that have distinctly different routes to market Ability to manage this complexity is one of UBL’s core strengths Established distributor relationships Group scale .
Best Route to Market …as well as in retail freshness Cold stock Fastest selling brands Leadership in cold chain management Point of sale visibility Must stock brands provides portfolio benefits Economies of scale .
People Most experienced management in the industry Customer facing management has been with the group for 20+ years Very low churn rate Strong background in dealing with regulatory environment and market complexities Very difficult for foreign entrants to replicate Chairman’s added value Dr Vijay Mallya provides significant added value as ambassador for the industry’s interests and is a member of parliament .
UBL has a proven track record .
Exceptional volume growth UBL volumes increased five fold in less than a decade UBL Sales volumes In Million Hectoliters 12 10 8 6 4 5x 2 0 FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 .
0 1.0 2.0 0.0 2.0 1.0 3.5 0.0 2006 2007 2008 2009 2010 2011 All amount are in Rs bln.0 0.Continued outstanding performance Performance highlights FY2006-2011 Sales up with an average 32% y-o-y EBITDA exceeds Rs 4 billion 40 30 20 10 0 2006 2007 2008 2009 2010 2011 EBIT has quadrupled since FY2006 5.5 1.0 1.0 2006 2007 2008 2009 2010 2011 Net Profit has grown with 54% CAGR 4.0 3. for year ending 31 March 2006 2007 2008 2009 2010 2011 .0 2.0 4.
Closing remarks .
In Summary… Indian beer market growth opportunity unparalleled in the world UBL is the clear market leader with strong segment leadership positions UBL expects to grow volume at a CAGR of 15% over the next 5 years A superior route-to-market and manufacturing footprint provides consumer reach and scale benefits Strong fundamentals in place to continue strong profit growth .
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