BackSABMiller and AB InBev merger likely to lift spirits at India units
The two brewers will be in a better position to handle competition from United Breweries and hold off other beer makers
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Bengaluru/Mumbai: A merger of SABMiller Plc and Anheuser-Busch InBev (AB InBev) will help the two brewers compete more meaningfully in India with leader United Breweries Ltd as well as hold off a challenge from Carlsberg, which has gained significant market share from SABMiller over the past three years.
AB InBev is the owner of brands such as Budweiser, Stella Artois and Hoegaarden, while SABMiller owns Foster’s, Haywards 5000 and Miller High Life in India.
A combination of the two could give a much-needed boost to the fortunes of both companies, analysts said.
SABMiller, which is India’s second largest brewer, has been losing market share to United Breweries and Carlsberg for a large part of the past six years. The company has seen four managing directors in the past eight years and has lagged rivals in launching brands and spotting changing consumer preferences.
For the year ended 31 March, SABMiller India’s loss widened to ₹ 127.36 crore from ₹ 99.73 crore in the previous year while net revenue increased marginally to ₹ 1,939.7 crore, according to its annual report.
On the other hand, while AB InBev has led the growth of pricey strong beer in India with its Budweiser Magnum brand, it is too small to be a threat to United Breweries and Carlsberg. And apart from Budweiser, the appeal of AB InBev’s other brands such as Stella Artois and Hoegaarden is limited to a small customer base.
If a merger between the two companies happens, AB InBev will benefit from the larger bottling infrastructure and wider distribution network of SABMiller India, said Sudip Sinha, Asia lead, beverages, at the Indian arm of financial services company Rabobank.
In February, AB InBev announced it will exit its joint venture in India with RJ Corp., paying anywhere between $100 million and $150 million to the latter, to gain full ownership of its operations in India. The company said it will make additional brand investments and add capacity to expand in India.
While SABMiller has struggled and AB InBev is starting out, United Breweries and Carlsberg, in particular, have gained significant share in an industry that has seen its worst three-year spell because of rising taxes and slowing economic growth.
Carlsberg has emerged as a close No. 3 to SABMiller mainly because of the growing popularity of its Tuborg brand. United Breweries now accounts for 51% of India’s beer sales, according to the company.
In the last financial year, beer sales grew 7-8% to 280 million cases, according to brewers. For a large part of the 2000s, beer sales grew more than 10% every year.
“Times are very tough for SABMiller India and they need a boost because their strategy and brand launches haven’t worked for the most part," said an analyst at a brokerage, who declined to be named. “They need to rethink their approach here, and Budweiser will be a good addition to their portfolio. InBev also has some good premium brands like Hoegaarden, which, if handled well, can open up a new category in India."
SABMiller India declined to comment further than what its parent arm said in response to AB InBev’s proposal.
Last November, SABMiller India appointed Shalabh Seth as managing director, replacing Grant Liversage, who returned to South Africa after less than 18 months in charge of the company.
mihir.d@livemint.com
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