THE new procurement policy for sale of beer in Andhra Pradesh will be based on the market share held by brewers in other states. This development is likely to benefit United Breweries (UB) while reducing the share of orders for the state’s largest selling beer marketer, SAB Miller. South African beer giant SAB Miller and UB together account for 95% of Andhra Pradesh’s beer sales.

The Andhra Pradesh Beverage Corporation (APBCL), will now reduce the share of this “duopoly” to 75% and reserve the remainder for smaller players. This follows the decision by the Andhra Pradesh High Court on Monday this week to not grant a stay on the new policy. SAB Miller’s Indian subsidiary had appealed against nodal state agency APBCL’s new procurement policy for beer dated May 19, 2010.

“It will take at least 2-3 days to arrive at the actual split between the two majors but UB is likely to have an edge over SAB Miller because of the market share they hold in other states,” said a senior APBCL official, on grounds of anonymity.

The new policy is based on market share statistics of brewers across different states in India. It is designed to open doors for other suppliers and to deliver wider consumer choice. APBCL has looked at state such as Tamil Nadu, Rajasthan and Madhya Pradesh for reference as these state governments also control the whole-sale and retail trade of alcoholic beverages.

Unlike in the rest of India where UB dominates the 200 million cases Indian beer industry, in Andhra Pradesh, SAB Miller has the lion’s share of the market at around 60%. This equation is likely to change in favour of UB as a result of this decision. Andhra Pradesh is the biggest beer market in India, and SAB Miller, the makers of Royal Challenge and Knock Out beer, draws 30% of its India volumes from the state. Order books had so far been awarded on the back of market forces or core-consumer franchise for beer brands.

“No corporation uses other states as a benchmark but they base it on local demand. Although the orders placed with SAB Miler in the state will come down in the short run, it remains to be seen whether consumer demand will translate into higher sales for other brewers or if their stocks will stay blocked in warehouses,” said Sundeep Kumar, director corporate affairs and communications for SAB Miller India.

“This is definitely a positive for United Breweries but we have to wait and see how it will be implemented. It will then take at least 2-3 months to impact volumes,” said Shekhar Ramamurthy, deputy president UB. Industry observers, however, said that many brewers have regional brands that are only retailed in certain markets and would not be reflected in the market share of others states.

Incidentally, United Breweries and SAB Miller had locked horns with APBCL demanding a price increase last year. Taken aback by the move during peak summer months, APBCL blocked their supplies for nearly three months. They were finally granted a 9-10% price increase in November. Smaller brewers such as Carlsberg India and Crown beers India, who met consumer’s demand in this period, are those who are also likely to benefit from the policy revision.