 "SABMiller-AB InBev merger to take on UB, Carlsberg in India")
Belgian-Brazilian brewer Anheuser-Busch InBev on Wednesday announced the final terms, after months of negotiation, of its $107 billion takeover of SABMiller, its British-South African rival.
AB InBev, the world's largest brewer, gains access to emerging markets through the deal. SABMiller, the world's second-largest beer company, earns 35 per cent of its revenues from Latin America and 34 per cent from Africa. In India,
SABMiller with brands such as Haywards 5000 and Knockout, is ranked number two in the pecking order of beer companies after Heineken-backed United Breweries. Its market share, according to industry sources, is 25-27 per cent. United Breweries has a market share of 51-52 per cent, while Carlsberg, the third-ranked brewer in India, has a share of around 15 per cent.
The combined entity of Sabmiller and AB InBev could put up a strong fight against United Breweries and Carlsberg, analysts said. Danish Carlsberg, which entered India in 2007, has grown quickly on the back of a portfolio of brands like Palone 8, Tuborg Strong and Carlsberg Elephant.
Cees 't Hart, president and chief executive officer of Carlsberg, said in a conference call with analysts this week, "Our Indian business year-to-date grew 41 per cent organically in a market growing by an estimated 3 per cent. The business also delivered a significant earnings improvement and, for the first time, achieved a positive earnings before interest and tax (EBIT) contribution, driven by a combination of volume growth and tight cost control. Tuborg grew 47 per cent, and our total market share was around 15 per cent, the highest level ever.”
According to industry sources, Carlsberg is eying 20 per cent market share led by its beer brands that straddle the price pyramid. United Breweries, in contrast, has the ubiquitous Kingfisher, a strong trademark in the Indian beer market.
In terms of volume sales, the Indian beer market is around 284-285 million (cases or bottles) strong. Per capita consumption of beer, however, is not more than 1.9 litres per annum in India, lower than most other beer markets in the world. Also, India remains a market for strong beer, accounting for 80 per cent of the sales volume in contrast to the global trend of mild beers, the dominant category. In the last few years, most beer majors have attempted to trade up as they try to catch young urban consumers in their quest for growth. SABMiller and AB InBev are expected to push this initiative further as they come together.
AB InBev announced it was going solo early this year by exiting its joint venture with Delhi-based Ravi Jaipuria. The world's largest brewer, maker of Budweiser and Corona, said it would bring more of its international brands to India after the split. At present, AB InBev is importing its premium brands such as Stella Artois and Hoegaarden and is bottling Budweiser in India at its two plants in Maharashtra and Telangana.
MERGER DEAL
- Belgian-Brazilian brewer Anheuser-Busch InBev has acquired its British-South African competetor SABMiller for $107 billion
- The takeover will pave way for Anheuser-Busch InBev to gain access to a number of emerging markets
