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SAB's Richard M. Rushton and UB's
Vijay Mallya
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As
temperatures soar, Pepsi and Coke are not the only companies slugging
it out for a share of your throat. It's a long, hot summer for
beer majors United Breweries (UB) and South African Breweries
(SAB) too, which are locked in a fierce battle for leadership.
Six years after entering India, SAB, the second largest brewer
in the world, has emerged a strong #2 to the traditional leader
UB in the 100 million cases-a-year market (each case is 12 bottles
of 650 ml each). SAB has a 35 per cent market share compared to
the nearly 50 per cent ub controls. UB's Kingfisher (both Lager
and Strong) brand alone is believed to control a quarter of the
market.
SAB, which entered the Indian market in October
2000 by acquiring Narang Breweries, has been aided by the shift
from mild to strong beers over the years. Strong beers (with an
alcohol content of 6-8 per cent) account for a little over 60
per cent of the market, and that explains why SAB has chosen to
focus on this segment, with acquisitions of brands like Haywards
5000 and Knock Out (SAB now has five main brands, including Castle
Lager, Royal Challenge and Premium Lager). SAB also is sitting
pretty because of the capacities it bought over-including those
of Rochees and Mysore Breweries-as well as the buyout of Shaw
Wallace's beer brands. In the last three years alone, the company
is believed to have made investments of $115 million (Rs 517.5
crore) in acquiring and upgrading breweries. (The company declined
to comment on the cumulative investments made in India till date).
As a part of its efforts to modernise its breweries, SAB has reduced
the number of breweries from 11 to nine by consolidating capacities
to serve target markets. Investments have helped it double its
capacity to 34 million cases in the last three years. SAB is now
bidding for the country's third largest beer player Mohan Meakins
(with its Golden Eagle brand), which has a market share of 9 per
cent. If it does win, it will bring it within striking distance
of UB.
CLOSING IN ON THE KING
How SABMiller has cornered a 35 per cent
share of the beer market |
»
Acquired brands like Haywards 5000 and Knock Out
in the faster-growing strong beer segment
» Has
made investments of $115 million (Rs 517.5 crore) in the past
three years, not just in acquisitions, but in upgrading breweries
too
» Has
consolidated breweries in a bid to focus on key markets
» Bidding
for #3 player, Mohan Meakins, which has a 9 per cent market
share |
An area where UB still leads SAB is on the
margins front. "Industry margins in India are half that of
what it is in most of the world markets," claims Richard
Mark Rushton, the Managing Director of SABMiller India Ltd. UB
is believed to have higher profitability than SAB because of its
dominance in the mild beer category where margins are higher.
Rushton says "Unfortunately, beer is just 4 per cent of the
total volume of alcohol consumed. Internationally, it is around
40 per cent." That may well be an opportunity. Which is why
SAB is planning to invest $125 million (Rs 562.5 crore) over five
years on acquisitions and upgradation. Already global majors like
Anheuser-Busch and Heineken are eyeing the Indian market. Rushton,
however, rules out immediate plans to introduce SAB's world-famous
Miller Lite brand in India. "We believe the market is not
yet ready for a premium beer like Miller Lite." Do you agree?
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