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1. Beer Market ‐
Beer Market India
September 2009

2. Executive Summary
 Indian beer market is valued at INR 35 bn with volume sales of 172 mn cases for FY 2008‐09
 The market is expected to grow at an annual rate of 17.2% till 2011
Market  Foreign brewers are eyeing the Indian beer market which is largely untapped and has growth
potential
t ti l
 Drivers:  Challenges:
Drivers & – Huge market potential – Regulatory Environment
Challenges – Rising income levels
Rising income levels – High tax structure
High tax structure
– Entry of international brands
 With current duopoly situation and entry of foreign players, beer industry in India will quickly
witness consolidation
witness consolidation
Trends  Premium beer segment is outpacing the mainstream beer market touching a growth rate of
between 40‐50%
 Emerging new sub‐categories of beer with consumers in India open for experimenting
 Growing demand for barley and evolving contract farming
Growing demand for barley and evolving contract farming
 More than 80% of the market is controlled by two major players United Breweries Limited (48%)
and SABMiller India (35%)
Competition
 With InBev acquiring Anheuser‐Busch, it has potential to emerge as the third major player
 The market is set to flourish with 15 new breweries and 10 international brands in next 3 years
BEER MARKET – INDIA.PPT 2

3. •Market Overview
•Drivers & Challenges
Drivers & Challenges
•Characteristics and Trends
•Competition
•Key Developments
BEER MARKET – INDIA.PPT 3

4. Indian consumers prefer strong lagers which has higher
alcoholic content
Categories of beer
Brewed using bottom‐fermenting yeast that ferments slowly at a low temperature to create a
Lager
smoother, mellow beer
h ll b
Ale Uses top‐fermenting yeast, is a more aromatic and fruity product
Stout Dark and heavy, with roasted unmalted barley and, often caramel malt or sugar
Mild Beer Developed as a sweeter and cheaper alternative to dark ales
Bitter Highly hopped for a more dry and aromatic beer. It is pale in colour but strong
Dark Beer Barley is kilned for a long period of time which creates richer flavours
Fruit Beer Fruit, usually berries, is added either during primary fermentation or later
Wheat Beer
Malted wheat and barley are used for this German style beer
(Weizen)
Indian beer market is dominated by Lager and its various shades
y g
BEER MARKET – INDIA.PPT 4

5. With the global beer market becoming stagnant, the
international firms are focusing on untapped Indian market
Market Overview Market size & growth
• Indian beer market has witnessed a steady growth of
10% over a decade INR bn +17%
48
• India is currently among top three markets in Asia in
India is currently among top three markets in Asia in 50
41
terms of expected growth rates 40 35
• There are 56 units manufacturing beer in India under 30
30
license from the Government
• The market is set to flourish with 15 new breweries 20
and 10 international brands in the next 3 years 10
• Foreign brewers are eyeing the Indian beer market 0
which is largely untapped and has growth potential 2008 2009 2010e 2011e
Growth in per capita beer consumption Segment share (volume ‐ wise, 2009)
Population (mn) Consumption (litres) 172 mn cases
1.163
1.200 1.097 1,5
1.013
Mild beer
900
1,0
10 26%
600
0,5
300
74%
0,0
Strong beer
2000 2005 2010
BEER MARKET – INDIA.PPT 5

6. Southern region is the biggest market for beer in India
Geographic Overview Region wise market share
•Andhra Pradesh and Maharashtra together
account for 40% of the beer sales in India West Others
Central
North East
7%
•Karnataka, Tamil Nadu, Rajasthan, Delhi, 5% 3%
21%
Kerala, and Uttar Pradesh account for other
40% and rest of states account for 20% North (incl Delhi) 18%
•Excise duty varies from state to state and
every state imposes additional taxes and levies
46%
•Movement of beer is restricted from one state South
to other, an export and import license is
to other an export and import license is
required
Top 5 states in beer sales
•Tamil Nadu does not allow sale of alcohol
Andhra Pradesh
manufactured in other states
•Players have to build separate strategies for Maharashtra
each state and build multiple manufacturing Tamil Nadu
capabilities across India Karnataka
Rajasthan
BEER MARKET – INDIA.PPT 6

7. •Market Overview
•Drivers & Challenges
Drivers & Challenges
•Characteristics and Trends
•Competition
•Key Developments
BEER MARKET – INDIA.PPT 7

8. Drivers & Challenges ‐ Summary
Challenges
Drivers
Regulatory Environment
Regulatory Environment
Huge market potential
High tax structure
Entry of international brands
Rising income levels
BEER MARKET – INDIA.PPT 8

9. Young population and low per capita consumption will
boost the beer sales in India
Huge market potential Impact
• The population and current consumption trends are expected to boost the beer sales in India
• Nearly 28% of Indian population live in urban areas which comes close to the population of USA
 Urbanization is happening at a very fast pace and about 40% of the total population is expected to live in
urban areas by 2020
• People in India are relatively younger when compared with global average
 About 50% of the Indian population would be under 30 years even in 2015
• Indian per capita beer consumption is very low compared to global average
Indian per capita beer consumption is very low compared to global average
• In the total alcohol market in India, beer contributes only 4% of revenue
• The low penetration in beer consumption provides a substantial and sustainable growth in
demand for beer in future
Comparison of Per Capita Beer Consumption
C i f P C i B C i
Litres
80.0
80 74.0
60
40
25.0 22.1
20
1.2
0
US Europe China Global Average India
BEER MARKET – INDIA.PPT 9

10. Beer consumption in India is expected to grow with rising
income levels
Rising income levels Impact
• India is one of the most attractive consumer markets in the world with about one‐sixth of the
global population
• The rising income levels has a direct positive impact on beer sales in India
• Also, urban consumers who are more exposed to the western culture socialize with beer
• The growing income levels particularly in the urban earning class is a potential market for beer
manufacturers in India
Per household annual
income (INR ‘000) Aggregate Annual Disposable
Total No. of Household (mn) Income (INR tn)
281 Core target 90
244 3% consumer
consumer
12% 24%
207 2% 1% groups
5% 1% 1% 23%
34% Globals >1000 23%
44% Strivers 500‐1000 44
43% 15%
Seekers 200‐500 9%
34%
33% 24
9% 34%
Aspirers 90‐200
49% 13% 7%
30% Deprived <90 49% 33% 15%
18%
23% 9% 3%
2005 2015 2025 2005 2015 2025
BEER MARKET – INDIA.PPT 10

11. Evolving beer market in India is attracting many major
international brands
Entry of International brands Impact
• India is widely acknowledged as an untapped beer market with huge growth potential
• Many foreign beer manufacturers have entered or plan to enter the Indian beer market with
their product line
• The market is set to flourish with 15 new breweries and 10 international brands in the next 3
years
• With the global markets experiencing low or stagnating growth and focus shifting to India, the
Indian industry is expected to witness fast growth in the coming years
I di i d t i t d t it f t th i th i
International Players Brands
Carlsberg Carlsberg, Tuborg, Palone
Anheuser‐Busch InBev Budweiser, Stella Artois, Beck’s, Hoegaarden, Leffe
Asia Pacific Breweries Tiger, Cannon‐10000, Baron’s
BEER MARKET – INDIA.PPT 11

12. Highly regulated environment is a major challenge faced by
the new players entering Indian market
Regulatory environment Impact
• The Indian brewing industry operates in a highly regulated environment and beer is categorized
with other alcoholic products for licensing and taxation purposes
• Movement of beer among states in India requires an export and an import license
• Export fees is imposed in the state where beer is manufactured and import fees on the state
where it is sold
• Few states like Tamilnadu have strict rules of selling only beer manufactured within the state
• There are many other restrictions on advertising, distribution infrastructure and retailing, varied
tax structures, controlled pricing and licensing
• The retail distribution channels are not completely open for selling beer in India
• Regulations are stiff with respect to selling beer through modern retail chains where as in most
developed nations beer and wine is available in grocery or retail stores
d l d ti b d i i il bl i t il t
• Distribution channel of beer in China is one outlet for every 300 persons. Whereas it is one
outlet for every 21,000 persons in India, thus hindering the ease of accessibility of beer
Leads to • More complexity in operations
Regulatory Environment • Higher costs
• Entry barriers for new entrants
BEER MARKET – INDIA.PPT 12

13. Minority preference for beer in India and high tax structure
are the major challenges for Indian beer industry
High tax structure Impact
• One of the reasons for the low preference for beer is high taxes imposed on beer consumption
• On absolute alcohol basis, beer is taxed higher than spirits in most of the states in India
• There are about 26 different alcohol specific taxes that constitute 50% of the consumer price
which is among the highest in the world
• In India, beer taxes are levied by individual states and taxes are also paid between states
Tax on Beer (base value: tax on hard liquor)
-50 -40 -30 -20 -10 0 10 20 30 40 50 60
%
India 60%
‐50% Global
Tax on hard liquor
BEER MARKET – INDIA.PPT 13

14. •Market Overview
•Drivers & Challenges
Drivers & Challenges
•Characteristics and Trends
•Competition
•Key Developments
BEER MARKET – INDIA.PPT 14

15. Characteristics and Trends ‐ Summary
Rise in barley prices and Increase in merger and
emergence of contract farming acquisition activity
Characteristics
and Trends
New forms of beer being Premium beer market outpacing
introduced in market mainstream beer market
BEER MARKET – INDIA.PPT 15

16. Players are growing inorganically through joint ventures and
acquisitions
• The entry of foreign players will expedite the consolidation of beer market in India
• Setting up a greenfield brewery takes about 18‐24 months, thus companies are looking at joint ventures or acquisitions
Date Deal Type Target company Stake (%) Buyer Value (USD mn)
04‐Aug‐09 Acquisition Rhino Breweries 100% Yuksom Breweries, India 8.38
02 Dec 08
02‐Dec‐08 Merger Balaji Distilleries
Balaji Distilleries 100% United Spirits Ltd, India
United Spirits Ltd, India 83.20
19‐Jan‐08 Acquisition Iceberg Industries Ltd 76% Cobra Beer, India NA
14‐Sep‐07 Acquisition Parag Breweries 52% Carlsberg, Denmark 8.14
28‐Feb‐07 Acquisition Crown Beers Ltd 50% Anheuser‐Busch International, USA NA
Date Deal Type Target company Stake (%) Buyer Seller Value (USD mn)
02‐Feb‐09 Minority stake Kyndal ‐ Lucal NA Lucal Bols Distilleries Kyndal India 1.02
purchase
h Bols JV
B l JV NV, Netherlands
NV N th l d Pvt Ltd
P t Ltd
25‐Jan‐08 Minority stake UB Group 37.49% Carlsberg, Denmark; Scottish & 1530.00
purchase Heineken, Newcastle Plc
Netherlands (S&N)
BEER MARKET – INDIA.PPT 16

17. Premium beer segment is outpacing the mainstream beer
market touching a growth rate of between 40‐50%
Overview Market share of premium beer (volume)
• The Indian beer industry is moving towards premium
category of beer Premium Beer
• Lifestyle changes and increasing western culture in 5%
India are some of the factors driving the premium
segment
• Many domestic and foreign premium brands are
finding the interests of young urban working class
finding the interests of young urban working class
• Premium beers are priced about 30% higher than 95%
regular brands Mainstream Beer
Premium brands in Indian beer market Growth rate of premium beer
United Breweries Kingfisher Premium, UB Premium 0 10 20 30 40 50
Limited Ice, Kalyani Black Label Premium %
Premium
40 50
SABMiller India
SABMiller India Foster’s, Peroni, Royal Challenge
Foster’s Peroni Royal Challenge beer
Cobra 5.0% Premium, Budweiser, Mainstream
Other Premium 15 20
Carlsberg, Stella Artois, Tiger, beer Minimum
Brands
Beck’s Maximum
BEER MARKET – INDIA.PPT 17

18. New sub‐categories of beer are emerging as consumers in
India are now open to experimentation
• With Indian consumers open to experimentation, many multi‐national firms are introducing alcohol‐free and flavoured
beers in the market
• Craft beers, which are available in unique flavours, is expected to penetrate the lager dominated Indian beer industry
• Craft beers are expected to attract women consumers and these new sub categories are estimated to cut 25 30% of market share of
Craft beers are expected to attract women consumers and these new sub‐categories are estimated to cut 25‐30% of market share of
regular lagers
• Cobra beer is bullish on alcohol‐free beer and flavored beer in India. It has rolled out:
Cobra Beer
C b B • C b Li ht L
Cobra Light: Low calories and low carbohydrates; Cobra Zero %: Al h l f
l i dl b h d t C b Z % Alcohol‐free; Cobra Bite:
C b Bit
Flavored beer (Includes Lemongrass, Blood Orange, Sweet Lime and Fresh Ginger flavours)
• The UB group also sees an opportunity for new beer sub‐categories and segments in India
United Breweries
United Breweries • The company plans to cater to different consumer segments in the industry and will launch
The company plans to cater to different consumer segments in the industry and will launch
three new varieties of beer including fruit flavored and low alcohol brands
Dalmia • Dalmia Continental Pvt. Ltd. is the exclusive importer and distributor of Clausthaler, a non‐
Continental
l alcoholic beer from German‐based Radeberger Group
Hema • Hema Connoisseur Collection, has introduced a German premium wheat beer Erdinger
Connoisseur
C i Weissbier in India
BEER MARKET – INDIA.PPT 18

19. Growing demand for barley and evolving contract farming
• Barley accounts for one‐sixth of the cost of making beer
• Increase in domestic consumption and export demand has pushed the barley prices up by 20% from Jan 08 ‐ June 08
• Increase in barley prices has let to 10% increase in cost of beer
• The protein content in barley crop in India is 13‐15% compared to 7‐10% in developed nations
• The high protein content in Indian barley is not suitable for making beer
• Rajasthan is an ideal place where barley can be grown under suitable climatic conditions for having lower protein
content required by the beer industry
 SAB Miller India is encouraging farmers in Rajasthan to cultivate a type of malt barley required by the industry
 The company launched a programme called Saanji Unnati for educating farmers to sow the right type of certified seeds and practices
India’s barley crop consumption break‐up Growth in barley prices (2008)
Price per 100 Kg +20%
Beer and Malt Firms
1,500 1,300
25% 1,200
1,200
900
900
600
75% 300
Fed to Animals 0
Jan 08
Jan-08 May 08
May-08 Jun 08
Jun-08
BEER MARKET – INDIA.PPT 19

20. •Market Overview
•Drivers & Challenges
Drivers & Challenges
•Characteristics and Trends
•Competition
•Key Developments
BEER MARKET – INDIA.PPT 20

21. Indian beer market presents a huge growth potential in
terms of volume, categories and variants
Competition Market share (2009)
• The Indian beer market is dominated by two players
controlling more than 80% of the market Others
• Strong beer is predicted to grow faster as it is 17%
perceived to offer value for money alternative to
spirits
48% UBL
• With InBev acquiring Anheuser‐Busch, it has
potential to emerge as the third major player in the
potential to emerge as the third major player in the
Indian beer market 35%
SabMiller India
• The future of beer market in India looks positive with
the entry of many international players
• Beer sales will increase along with increasing number
Beer sales will increase along with increasing number
Market Share (segment wise)
of brands and sub‐categories in India
• Existing players like UBL and SABMiller are planning 6%
23%
to expand their range of products 30%
40%
p y g g g
• New players like ABInBev, Carlsberg are bringing
their internationally renowned brands to India
• The market is set to flourish with 15 new breweries 70%
30%
and 10 international brands in the next 3 years
SabMiller India
Strong UBL Mild
Others
BEER MARKET – INDIA.PPT 21

22. Major Players (1/5)
Company Snapshot: United Breweries Ltd
Business Highlights
• Brands: Kingfisher Premium, Kingfisher Strong, UB Export Lager, London Pilsner, UB Premium Ice, Kalyani Black Label
Premium
• Joint Venture: 50:50 JV with Scottish & Newcastle of the UK in Millennium Alcobev Pvt Ltd., (MABL); MABL brands
include: Sand Piper Lager, Zingaro Strong Beer, Kalyani Black Label Strong
• Fi
Financials: (FY 2008 09) Th
i l (FY 2008‐09) The company reported a net turnover of INR 17475.7 mn and profit after tax of INR 624.9 mn
t d tt f INR 17475 7 d fit ft t f INR 624 9
Business Strategy
• UBL h
UBL has a manufacturing network of 22 breweries across India
f t i t k f 22 b i I di
• The company enjoys a market share of 48% in the industry and plans to expand its share further
• Kingfisher Strong is the single largest selling beer brand in India, while Kingfisher Premium continued to outperform in
its category
• UBL l
UBL plans to set‐up two new green field breweries at Mallepally in Andhra Pradesh and Nanjangud in Karnataka in
t t t fi ld b i t M ll ll i A dh P d h d N j di K t k i
order to support the revenue growth
BEER MARKET – INDIA.PPT 22

23. Major Players (2/5)
Company Snapshot: SABMiller India
Business Highlights
• Brands: Haywards 5000, Haywards 2000, Haywards Black, Foster’s, Indus Pride, Peroni, Royal Challenge, Knock Out
• SABMiller India is a subsidiary of SABMiller PLC registered in India as SKOL Breweries Limited
• Financials: (FY 2007‐08) The company reported a net turnover of INR 10860 mn and profit after tax of INR 344 mn
Business Strategy
• SABMill h 10 b
SABMiller has 10 breweries located strategically across India to serve the beer markets efficiently
i l t d t t i ll I di t th b k t ffi i tl
• The company has a market share of 35% and stands in the second position
• The company has invested about INR 1250 mn in the past two years for upgrading the breweries to global standards
• SABMiller has leveraged its global expertise in packaging, pricing, occasion and product gaps which were improved
based on consumer insights
b d i i ht
• SABMiller plans to bring the iconic Dutch premium beer Grolsch to India. SABMiller Plc has acquired the brand for USD
1.2 bn in 2007
BEER MARKET – INDIA.PPT 23

24. Major Players (3/5)
Company Snapshot: Asia Pacific Breweries Ltd (APB)
Business Highlights
• Brands: Tiger, Cannon‐10000, Baron’s Strong Brew
• Joint Ventures
 APB Aurangabad Ltd: 76:24 JV with Vijay Chougle for a brewery of 5 mn cases capacity
 APB – Pearl Pvt Ltd: 67:33 JV with CK Jaipuria for a brewery of 6 mn cases capacity
Business Strategy
• APB l
APB plans to acquire a brewery in Rajasthan to expand to North India, it also plans to establish presence in Haryana
t i b i R j th t d t N th I di it l l t t bli h i H
and Punjab
• By 2010, APB plans to reach a capacity of 20 mn cases of beer per annum
• APB launched Tiger and Cannon‐10000 brands in West Bengal and plans to launch Baron’s soon
• Th
The company is looking for mergers, acquisitions, contract packaging tie‐ups with other companies to expand its
i l ki f i iti t t k i ti ith th i t d it
presence in India
BEER MARKET – INDIA.PPT 24

25. Major Players (4/5)
Company Snapshot: Cobra Beer India Pvt Ltd
Business Highlights
• Brands: Cobra 5.0% Premium, King Cobra, Cobra Light, Cobra Zero%
• Cobra Beer India Pvt Ltd operates as a wholly‐owned subsidiary of Cobra Beer Ltd
• Cobra Beer India is said to be independent after the Joint venture of Cobra Beer with UK‐based Molson Coors
Business Strategy
•C b b
Cobra beer has four licensing agreements with:
h f li i t ith
 Mount Shivalik group of Rajasthan
 Impala Breweries in Goa
 Manav Breweries in Uttar Pradesh
 Iceberg Breweries in Bihar
• Cobra beer finds huge potential for diet and fruit beers in India. Its flavored beer brand Cobra Bite includes natural fruit
extracts and is available in sweet lime, apple and lemongrass flavors
BEER MARKET – INDIA.PPT 25

26. Major Players (5/5)
Company Snapshot: InBev India
Business Highlights
• Brands: Tennents Super, Beck’s, Stella Artois, Hoegaarden, Leffe
• Anheuser‐Busch (AB) was acquired by InBev in 2008 and formed ABInBev India; currently operates using trading name
InBev India
• InBev operates in India through a 49:51 joint venture with soft drink bottler RKJ Group
• AB started operations in India through a 50:50 joint venture with Crown Beers International initially but later AB
purchased the remaining ownership from Crown Beer India Ltd
Business Strategy
• InBev India has a production capacity of 1.9 mn cases a year through two contract brewering arrangements:
 Regent Breweries in Madhya Pradesh
 Dasappa and Sons Bangalore
p y g y g p y;
• InBev plans to introduce Tennents brand in North India either by finding a contract brewer or by setting up a brewery;
took management control of Kool Brewery in July 2008
• ABInBev India launches Budweiser beer in North India in August 2009. It has received a good response in the Southern
states and Maharashtra
• The company expects to cross 2.9 mn cases in sales of Budweiser beer by December 2009
BEER MARKET – INDIA.PPT 26

27. •Market Overview
•Drivers & Challenges
Drivers & Challenges
•Characteristics and Trends
•Competition
•Key Developments
BEER MARKET – INDIA.PPT 27

28. Key Developments
Date Development
Jul 2009 SABMiller has chosen “Shoppingtrip360 “, a retail solution from Infosys Technologies for evaluating its in‐
store marketing campaigns
Jun 2009 Carlsberg India plans to set‐up breweries in South India to brew its three brands Carlsberg, Tuborg and
Palone. The company expects to capture 10% of market share in a year
Mar 2009 United Breweries Group plans to sell 37.5% stake in United Breweries Limited to its partner Heineken NV.
This does not involve selling of kingfisher brand
Sep 2008
S 2008 Belgium‐based brewer InBev SA plans to set up a new plant in Andhra Pradesh, the country’s largest beer
B l i b db I B SA l l i A dh P d h h ’ l b
market by sales, even as it takes its first locally produced brand, Tennents Super, to the neighboring state of
Karnataka
Aug 2008 Radico Khaitan plans on entering the beer market. The company wants to tie up with an international brand
for its beer foray because it believes that it will help it to break into the domestic market faster
y p
July 2008 The USD 52 bn InBev‐Anheuser‐Busch Deal would is expected to create the world’s largest brewery and
could potentially see a third big player emerging in India
May 2008 SABMiller India plans to bring Dutch premium beer Grolsch to India which it acquired in 2007 for USD 1.2
bn. The company is also likely to launch Miller Lite beer in India
BEER MARKET – INDIA.PPT 28

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BEER MARKET – INDIA.PPT 29