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United Breweries Ltd (UBL) has reiterated its belief in the growth of the Indian beer market despite the tepid consumer sentiment and regulatory hurdles faced by the alcohol beverage sector. However, the company, in which Dutch major Heineken is the largest shareholder, says the growth pattern could prove very difficult to predict.
Heineken presently holds a 38.92% stake in United Breweries Ltd. Speculation has been rife that the Dutch brewer is in talks with Chairman Vijay Mallya and various other entities to secure a larger control over the Indian brewer. The stake of Mallya and his affiliates has fallen to 35.9% in United Breweries from the 37.4% equal stake he held with Heineken earlier. The Indian liquor baron is also under pressure to generate cash to reduce his staggering debt levels across various UB Group companies.
Despite the Indian market being arguably one of the most complicated to operate in in the whole world, global players like Heineken are betting on the country's potential as they grapple with flat, if not falling sales, in their other European markets.
"This year we have no growth in the market to previous years, it was small single digit and then before that we had 2 years with an enormous growth," says Henricus Van Zon, CFO of United Breweries, named in the role by Heineken. "So Indian market will grow into the future - that is I think certain. The question is in what kind of pattern it would grow is very difficult to predict," he told investors.
Of the major beer consuming states in India, United Breweries has grown in almost all but registered a drop in the Western states in India.
"In the Western markets, Maharashtra is down, Mumbai is down, Madhya Pradesh is also down, Goa there is slight growth. So this are the major markets," the company said.
While the South continues to be lucrative with Karnataka holding fort and profitability, United Breweries has been facing acute problems in the key South Indian market in Tamil Nadu as the state's regulations and unfavorable ordering pattern are continuing to hurt the company.
"Excluding Tamil Nadu as a state, our growth would be 6%," the company says. The company said its overall volume growth across the country in the third quarter was only "modest," hurt by Tamil Nadu.
"We are at regular intervals meeting state governments and trying to imbibe in them that there has to be some rationale in duty increase," the company says.
The Northern markets have performed relatively well and the company says its volumes have grown in Uttar Pradesh, Rajasthan and "to some extent in Delhi". In the Eastern markets too, West Bengal and Odisha have registerd an increase in volumes, while Bihar has seen a drop, the company said.
"Overall, it is very clear that our premium products are doing well," it said.
"States where the per case revenue is high, for example, one of those is Karnataka, there has been good volume growth thereby as a mix you would see that revenue is fairly high in comparison to a flat volume growth," it's CFO explains.?
