The global consolidation in beer may have upended the pecking order of players internationally, but the Indian line-up stays put for now. United Breweries (UB), the country’s leading beer maker, is not expected to be shaken off its pedestal anytime soon, analysts tracking the market said. This despite the firm backing it, Heineken, which has a 42 per cent stake in UB, becoming a distant number two globally thanks to the coming together of rivals Anheuser-Busch InBev and SABMiller.
One reason, say analysts, is that the integration of Budweiser owner AB Inbev and SABMiller which has its brands Foster’s and Miller in India is expected to take time. While market sources say that the global consolidation has happened with an eye on emerging markets – SABMiller has a strong presence in Asia and Africa – the full impact will be felt about 8-10 months down the line. “The industry may expect AB Inbev to quickly consolidate in India, given SABMiller’s number two market position here. But integration issues are not easy to sort out. It takes time. 2016 could be spent clearing all these teething problems,” Sandeep Arora, an industry expert, said.
Heineken-backed UB has a market share of 51-52 per cent; SABMiller’s share is 25-27 per cent, and Carlsberg, the third-ranked brewer in India, has a share of around 15 per cent, according to its global president and chief executive officer Cees’t Hart. The numbers for UB and SABMiller have been sourced from the industry.
UB has a portfolio of brands – all under the Kingfisher name – a popular trademark, which was unsuccessfully extended into the aviation space a few years ago. While the aviation story is over with creditors looking to recover their dues from its owner Vijay Mallya, also the chairman of UB, in beer, the brand name remains firmly entrenched in its position.
“UB has virtually straddled the price pyramid with its portfolio of products in beer. Getting past a formidable line-up such as UB’s is not easy,” says Harish Bijoor, chief executive officer, Harish Bijoor Consults, who also tracks alcoholic beverages closely. Even Heineken has been unable to make inroads into India thanks to the domination of UB’s Kingfisher, market sources said.
The reason is the peculiarity of the Indian beer market. It remains a market for strong beer as opposed to the global trend in favour of mild beers. Strong beer refers to the alcohol content, which is between five and eight per cent. Mild beer has alcohol content below 5 per cent.
Unlike Kingfisher, a home-grown brand, most other international majors (barring SABMiller and Carlsberg) have failed to crack the market, experts said. SABMiller too was able to grow thanks to local acquisitions. In June 2001, the firm acquired Mysore Breweries’ Knock Out, a popular brand in the south, and then lay its hands on Shaw Wallace’s beer brands Royal Challenge and Haywards in May 2003. In 2006, the company acquired Foster’s India, then a popular beer brand from the Australian beer maker of the same name.
Kingfisher, Knock Out, Tuborg, Haywards remain among the top beer brands in the country, experts tracking the market said. In terms of volume sales, the Indian beer market is 284-285 million cases-strong. Per capita consumption of beer, however, is not more than 1.9 litres per annum in India, lower than most other beer markets in the world. Growth too has been sluggish mainly on account of the weather and high taxation in the last few years. But this, say experts, does not take away the potential of the market. India remains among the few outposts for international majors where they can play the penetration game thereby pushing up growth. In the West, beer is a mature category, they say.
Most beer majors, in fact, have been eyeing India’s under 30-35 year olds to improve consumption. Also beer remains a largely urban-led category, though it is making inroads into smaller towns and cities, driven mainly by young consumers. In the last few years, most beer majors, experts said, have attempted to trade up as they try to catch young urban consumers. SABMiller and AB InBev are expected to push this initiative further as they come together, market sources said.
With an eye on growth, AB InBev announced it was going solo early this year by exiting its joint venture with Delhi-based Ravi Jaipuria. The world’s largest brewer, maker of Budweiser and Corona, said it would bring more of its international brands to India after the split. At present, AB InBev imports its premium brands such as Stella Artois and Hoegaarden and is bottling Budweiser in India at its two plants in Maharashtra and Telangana.