Brewers to spend more on promotions
Move aimed at stimulating demand that has been hit by a longer-than-expected monsoon
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Bangalore: India’s brewers are increasing spending on promotions and fast increasing distribution of higher-priced brands to stimulate demand that has been hit by a longer-than-expected monsoon.
Early rain and price increases in some states such as Maharashtra had hurt demand for beer in the summer months of April, May and June, when brewers usually get up to 35-40% of their yearly sales, Mint reported on 16 July.
Last week India’s second largest brewer SabMiller India Ltd, the maker of Foster’s and Haywards beer, reported a drop in beer volumes for the first time in over three years and said revenue for the six months to 30 September rose just 1%.
Beer volumes for entire industry in the first six months rose in the low single digits, according to industry executives. “Things haven’t improved, growth has slowed actually through the year so far. The monsoon has been significantly wetter than usual and that has clearly continued to affect sales,” said Samar Singh Sheikhawat, senior vice-president, marketing at United Breweries Ltd, which controls over half of India’s beer market.
Brewers across the industry have increased promotional spending to boost sales, distributors say. Sheikhawat said that United Breweries, which makes Kingfisher beer, had increased its marketing spending and that the company was betting on its higher-priced brands such as Kingfisher Ultra and Heineken to help offset the drop in volumes.
“When volumes start slowing, you look at value growth. Growth rates of (our premium brands) have been unaffected by the slowdown,” he said. “And typically when there’s a slowdown, the premium items tend to do well.”
India’s brewers sold about 265-270 million cases of 7.8 litres each of beer in the year ended 31 March, an annual increase of over 10%.
This year, however, the growth rate is likely to be much lower and, coupled with rising input and marketing costs, will hurt margins at brewers, according to analysts.
“If volumes remain weak, margins are likely to remain static or they might even drop,” said Jasdeep Walia, an analyst at Kotak Institutional Equities. “The situation in Tamil Nadu (where the government is promoting local brands at the cost of national firms) has also not changed and will continue to impact results, at least at UB.”