Bangalore: Belgium-based brewer InBev SA plans to set up a new plant in Andhra Pradesh, the country’s largest beer market by sales, even as it takes its first locally produced brand, Tennents Super, to the neighbouring state of Karnataka this month.

Karnataka is the first major market that Tennents, a strong beer variety pitted against United Breweries Ltd’s Kingfisher Strong and SABMiller Plc.’s Haywards 5000, is entering since its launch in Madhya Pradesh last week.

New areas: Raja Mukherji, CEO of InBev India, says the implications of the InBev-Anheuser-Busch merger will be clearer by the year-end. Hemant Mishra/Mint

In July, InBev and Anheuser-Busch Companies Inc., the US brewer that owns the Budweiser brand, agreed to combine, creating the world’s largest beer company.

Both companies are present in India on their own—InBev through its joint venture and Anheuser-Busch through a wholly owned subsidiary based in Hyderabad.

Mukherji said the likely implications of the proposed merger for the India operations of both companies is yet to be known. “By the end of this year, I guess there will be clarity," he added.

InBev India has set up a production capacity of 1.9 million cases a year through two contract brewing arrangements at Regent Breweries in Madhya Pradesh and Dasappa and Sons in Bangalore.

India’s beer market is estimated at 158 million cases of 7.8 litres each, three-fourths of which is strong beer, or beer that has alcohol content of more than 5%.

The market is dominated by the Vijay Mallya-led United Breweries and SABMiller India, a unit of SABMiller Plc. Andhra Pradesh is India’s biggest beer market, accounting for 18% of the country’s sales.

InBev sees a potentially lucrative opportunity in the strong beer segment, in which regional brewers such as New Delhi-based Mount Shivalik Industries Ltd, maker of Thunderbolt, and Bhopal-based Som Distilleries and Breweries Ltd, maker of Hunter Extra Strong Beer, claim significant market share in a few pockets.

Mukherji said the company plans to introduce Tennents in north India next when it finds a contract brewing partner or sets up its own brewery.

Even Som Distilleries, a listed company that currently sells around two million cases a year, plans to expand its reach from Madhya Pradesh—where it claims a market share of 30%—to bigger markets in the south and north.

“We plan to have five breweries in the next three years, and we want to become the third largest player in the beer industry," said J.K. Arora, chairman and managing director of Som Distilleries.

Singapore-based Asia Pacific Breweries Ltd sells its international brand Baron’s Strong Brew and a local brand, Cannon 10000, apart from the premium beer Tiger in India.

“A strong beer consumer is generally less urban, but increasingly this difference is blurring because more and more people are starting off drinking strong beer," said Shekhar Ramamurthy, deputy president of United Breweries.

InBev India also aims to compete with upscale beers such as Heineken and Corona through four global brands—Stella Artois, Beck’s, Hoegaarden and Leffe.

The brands are currently imported in 330ml and 500ml bottles and cans. The company has no plans yet to brew them locally.

“It’s too early to even hazard a guess on this. First let us get it correct with the core segment of strong beer," Mukherji said.