Mumbai: The Rs5,500 crore beer mart in India will soon have a clutch of new players and brands as several global brewers ready their plans for a splash into this fast-growing market, even as domestic players expand capacities and brands.
While global beer makers such as Asia Pacific, Anheuser, Carlsberg and InBev are setting up new breweries in India to launch their international brands and labels specially developed for local tastes, existing players United Breweries, SAB Miller India and Cobra are investing significantly too in capacity expansion and brand-building.
The beer sales in India, which is still season-specific, currently grows at a compound annual growth rate of 15%. The industry estimates that the market is now set to grow more than 25% in the next two years as there is a direct correlation of the growing disposable income among young Indian consumers to the local sales of beer, sccording to Sandeep Kumar, director, SAB Miller India.
“India, which has 60 large breweries owned by four main players, still has one of the lowest per capita consumption of beer in the world at 0.7 litre even as China’s per-capita beer consumption is estimated to be 21 litres per person,” says Kumar adding that “it offers tremendous scope for market growth provided the country has a friendly tax structure.”
Duties and taxes on alcohol beverages, dealt by state governments in India, are among the highest in the world.
The sales tax on beer, which ranges from 15% to 30% in different states, constitutes almost half the retail price per bottle. The largest sold beer brands in the country are priced in the band of Rs55 to Rs70 in India.
“India has been a focus country for SAB Miller apart from other countries like Brazil, Russia and China. This is mainly because of the huge opportunity these countries provide. Countries such as the US and UK are seeing relatively flat growth because the markets there were saturated,” says Kumar.
SAB Miller, which has recently introduced its global brand Peroni in India, is looking at creating newer brands for the domestic market to have an ideal mix in its product portfolio even as it continue focusing on its main brands.
The number of brands will also increase as local players such as United Breweries and SAB Miller expand their product ranges, partly in preparation for the entry of new players Anheuser, Carlsberg and InBev setting up an India presence.
United Breweries or UB, the largest brewer with its flagship brand Kingfisher currently enjoys a 43% share in the 130 million cases a year market. The second largest player SAB Miller with brands such as Royal Challenge, Hayward 5000 and Castle, has close to 37% market share.
New entrants will face many hurdles given that beer is a highly regulated industry. The two most common ways of entering the market is by buying into an existing small manufacturer, or by manufacturing brands through an existing local player with excess capacity, says Timmy Kandhari, executive director, PricewaterhouseCoopers.
The alcoholic beverages industry in India has seen significant consolidation during the last few years. The industry has seen a number of mergers, acquisitions and joint ventures during the last three years, resulting in the industry consolidating around the few large players. Beer makers—as also companies in the ‘Indian made foreign liquor’ segment—have seen their margins expand by more than a tenth during the last two years, according to a recent report prepared by Motilal Oswal, a Mumbai-based brokerage firm.
Kandhari says the beer industry will accelerate growth to above 25% in 2007. “India is one of the fastest-growing beer markets in the world due to the favourable demographics, rising disposable incomes due to rapid economic growth and increasing social acceptance of alcohol consumption,” he says.
In view of the strong growth prospects for the Indian beer market, the major players have significant expansion and acquisition plans for the next few years. United Breweries has tied up contract manufacturing deals with local breweries, and SAB miller plans acquisitions.
Kalyan Ganguly, president, United Breweries, says the India market is a preferred destination for the international brands as the beer markets in the developed world are getting saturated and the growth has come down to just 4% to 5% annually.
“At the same time, since the per capita consumption is quite below in India, there is ample scope for growth,” he added. He said that the company is now planning a fresh investment of about Rs 250 crore for capacity expansion.
Srikant Reddy, managing director, Crown Beers India, which is a new entrant in the local beer market, says the market in the country is set to grow at the rate of 20% to 30% annually.
Crown Beer India was formed as a 50:50 joint venture with Anheuser-Busch. The company has set up a 5-lakh hecta litre brewery in Andhra Pradesh at a cost of Rs100 crore. The company will be launching Anheuser-Busch’s flagship brand Budweiser and another strong beer Amstrong in India.