SABMiller likely to be back in black this year

14th Mar, 2011
Publication - The Financial Express
 
Bangalore: SABMiller India, the country’s second largest beer company, expects to book profits in the current fiscal after two years of successive losses. It also hopes to increase market share in profitable states and grow in Andhra Pradesh, the largest beer market in India.

“The company is now focusing on states such as Maharashtra, Karnataka and Rajasthan and expects to end this fiscal with a 12% growth in cash profit,” said Sundeep Kumar, director, corporate affairs and communications, SABMiller.

The Indian arm of the London-headquartered beer-maker had posted a loss of R142 crore in 2009-10 largely because of shortage of supplies in Andhra, owing to its standoff with the state government over the price revision issue. It also had to grapple with regulatory issues in Uttar Pradesh in 2009.

While beer companies in Andhra Pradesh witnessed a price increase in early 2010, the state subsequently introduced a new procurement policy that SABMiller is still challenging in court on the grounds of discrimination

The policy under which state-run wholesaler Andhra Pradesh Beverage Corporation procures stock based on a company's national market share benefits rival United Breweries, which announced for 50% share of India's annual beer sales of around 200 million cases in 2009-10.

SABMiller has traditionally dominated the AP market but its national share is around 30%.

"We are happy with the growing share in the more profitable markets and segments which we have been doing. While this has not completely offset the impact of the adverse Andhra procurement policy, it is helping us significantly dilute its impact," said Kumar.

He did not, however, reveal the company's market share in key states. In India, beer and spirit market profitability varies among the states as some allow free pricing while others control retail sales through government-run outlets. According to SABMiller, Karnataka is a profitable state despite its neighbours like Andhra Pradesh and Tamil Nadu selling higher volumes. "I think circumstances like this force you to revisit your thinking," added Kumar. "It also tells you you cannot be dependent on one or two markets given the vagaries of our regulatory environment."