We estimate healthy double – digit growth

A decade after SAB Miller Plc, among the world’s largest brewing and beverage companies, entered the Indian beer market by acquiring Narang Breweries Ltd, it dropped market share last year as it sat out of Andhra Pradesh – the country’s largest beer market – because of pricing disputes.

The Indian beer market is highly regulated and each state has the power to dictate the retail price of the drink. Now, with the dispute resolved, SAB Miller is keen to regain its numbers in the current year.

As temperatures soar, beer companies are jostling for their share of throat. The Indian beer market is estimated at 191 million cases with an annual turnover of Rs. 3500 crore. The Vijay Mallya owned United Breweries Ltd., the market leader, and SAB Miller control about 80% of the Indian beer market. Industry analysts estimate that SAB Miller, which has invested Rs., 2,500 crore in its India operations, controls one third of the local market, down from around 38% in 2006.

Paolo Lanzarotti is spearheading SABMiller’s battle in India to regain market share. He says he wants to expand the market and improve distribution. Edited excerpts :

Give us a brief overview of the Indian beer market and SAB Miller’s plans.
Indian market…. It’s about as complicated or as complex as you can get. Growth in the market over the last three years has been pretty good, (with) compounded annual growth rates (CAGR) of close to 18-20%. Right now, we estimate (market size) in the order of a 190 million cases. Current growth rates we estimate in the range of 10-11%, so lower than the previous three years but still (a) healthy double-digit growth rate.

…190 million cases is a nice number, it’s a very small number. And at 1.2-1.3 litres per capita, it is way below any other number.

Another number is accessibility …. 18000 people per outlet when compared to 300 people per outlet in Europe, 300 people per outlet in China…. That mentions the opportunity and the issues we have to deal with in the short term.

What’s your current market share ? Have you moved the ball a little bit ?
Last year was a peculiar year for us. I think you are aware of out historically strong position in Andhra Pradesh…. We basically sold no beer in the peak of last year. So last year’s results were clearly impacted by that. We are over that. Last three – four months have been much better. Our shares in the market in Andhra Pradesh specific are back to their historical levels (60%). So, have we nudged closer to 40% in an all-India basis ? No. (We are) in the 30s. On a go-forward basis…. As far as an all-India share number is relevant, then you will see us moving that number forward.

The relative profitability on a state-by-state basis is very, very different. As we go forward, we will be much more focused on a state-by-state approach culminating in an all India number.

What are your main brands ?
There is plenty more work in terms of portfolio development. In India, the core portfolio is Knock Out, Haywards 5000, Royal Challenge, Foster’s Indus Pride, Peroni (Nastro Azzurro)…. Haywards 5000 is the largest selling brand in terms of volume.

Between Haywards 5000 and Knock Out, that’s just over 30% share of the total strong (beer) segment. So if total market is 191 million cases, strong (beer) is 70% of that, and we are 31-32% of that with those two brands.

Like UB launched Kingfisher Blue to address a niche, is SABMiller developing any premium beer in-house?
I’m not going to answer your question. It’d be premature to say anything.

How much is India on (global chief executive officer) Graham Mackay’s radar ?
(India is) absolutely on his radar screen. SABMiller is a disproportionately emerging market or developing market oriented organization. And India is one of the most potentially biggest opportunities in the beer markets that are left. But there’s a lot of work, lot of change and focus that needs to be brought to the table for that potential to actually come to reality.