SABMiller plans investments in India arm
SABMiller will invest INR 4.4 billion ( Euro 62 million) in its unlisted Indian arm to expand capacity and its portfolio, and gain back market share in the country, which has slipped below 25 percent from a healthy 33 percent a few years ago. In a general meeting of the company, SABMiller India decided to allot 78 million shares to its UK-based parent @ INR 56 each, according to a filing by the company with the Indian Registrar of Companies.
The maker of some of the top selling beers in the country, such as Haywards, Miller High Life, Royal Challenge and Foster will use these funds to increase its installed capacity by 10,000 litres by 2014. The UK based company has invested over USD 700 million in the country, since its entry in the India twelve years ago. However, the Surrey headquartered company has not disclosed how it will invest these funds in India. According to an earlier SABMiller India’s technical vision, it had planned to have three breweries rated in the SABMiller world top 20 and all its breweries in the world top 50 by the end of current year.
This could be a perfect opportunity for India’s second largest brewer to gain a larger market share in India, as its main competitor and country’s largest brewer United Breweries is struggling with financial difficulties of its subsidiaries. According to various estimates and industry reports, SABMiller India’s share has slipped to less than one-fourth of the total beer market from more than one-third a few years ago. In comparison, its bigger rival UB has increased market share to more than 50 percent from 43 percent six years ago.
In order to revive its fortunes in the country, SABMiller India has also appointed a new managing director. Grant Liversage will take over from Paolo Lanzarotti who will now be taking up the position of Managing Director of SABMiller’s subsidiary Plzensky Prazdroj in the Czech Republic. Grant’s key responsibilities include overseeing the company’s operations, expansion & growth in the country and working towards building the business in the diverse and challenging Indian market. He will be taking over the mandate from 1st of August, 2013.
A stagnating global market is the main reason for SAB Miller to increase its focus and efforts on the Indian beer market. Emerging markets such as India have become key areas to global brewers as beer consumption growth has slowed down to alarming levels in the developed world. “Driven by saturation, health trends and increase in excise duty, beer is forecast to be one of the slowest growing beverage categories globally in volumes during 2013, achieving only a low single-digit increase”, according to a report by Rabobank.
Other major global brewers in the Indian market such as Dutch brewer Heineken, Belgium-based AB InBev and Danish firm Carlsberg are also looking at growing profitability by encouraging consumers to consume premium beers. The global brewers are forming partnerships, introducing new products and marketing milder, pricier brews and overcome a maze of regulations by federal and state governments in India. SAB Miller blames that one of the states regulation lead it to lose it a significant market share in one of the key Indian state, a couple of years ago, when it had about 33 percent share of total Indian market.
So far, the Indian market is highly skewed towards strong beer. However, in the past few years, both global and Indian breweries are pushing light and premium beer that appeals to young professionals. SABMiller has rolled out American-style lager Miller High Life and Indus Pride in the premium beer segment, which is growing at 49 percent and is the fastest-growing segment within the Indian beer market.
