AB InBev’s Indian JV under US Security & Exchange investigation

India is a tough beer market to operate for every foreign beer company. Besides central regulations, the beer companies have to face regulations of each state in which it operates. However, this time the regulatory hurdle for a foreign beer producer didn’t come from India, rather from US Securities & Exchange Commission. Anheuser-Busch InBev’s Indian joint venture, which has been struggling to get a foothold in the Indian market, is under investigation by the U.S. Securities and Exchange Commission for possible violations of the Foreign Corrupt Practices Act.

According to a company statement from 25 March, AB InBev “have been informed by the SEC that it is conducting an investigation into our affiliates in India, including our non- consolidated Indian joint venture, InBev Indian Int’l Private Ltd., and whether certain relationships of agents and employees were compliant with the FCPA”.

The Foreign Corrupt Practices Act was passed in 1977 to make it illegal for certain classes of persons and entities to make payments to foreign government officials to assist in obtaining or retaining business, according to the US Dept of Justice.

World’s largest brewer, AB InBev, which generated revenues of 39.8 billion USD in 2012, has not been able to replicate its performance in the Indian market. The company has about 2 percent market share in India, its operations in the country are run by an Indian subsidiary, Crown Beers India, and a joint venture with RKJ Group ( RKJ group is India’s leading supplier of carbonated and Non-Carbonated soft drinks under Pepsi brand) for local production ( Both the JV’s were signed in 2007, AB Inebv purchased the JV partner’s share in Crown Beers in 2008), in which it holds a minority stake. The company had entered the Indian market in the same year by setting up a Greenfield 500, 000 hectoliter brewery in South India based city of Hyderabad. In addition to its iconic brand Budweiser, St. Louis-based Anheuser-Busch brews Armstrong brand in the country, a premium strong beer developed specifically for the Indian beer market. Anheuser-Busch InBev India currently owns and manages three breweries with a total capacity of more than 700,000 hectoliters from its Regent breweries in Madhya Pradesh, Bangalore-based Dasappa and Crown brewery in Andhra Pradesh. As opposed to India, company’s Budweiser is the No. 1 premium beer brand in neighbouring China (AB Inbev has a 13.4 % share of the Chinese beer market via its 36 breweries in the country), as measured by volume. It is actively adding brewery capacity in regions across China to meet huge future demand.

First Belgian Beer Café in the country

In an unrelated development the company is all set to launch its first Belgian Beer Café (BBC) at the Inter Continental Hotel in Noida (a place in New Delhi). Following this, BBC will enter India’s commercial capital Mumbai and then, the beer capital Bangalore. “Work is in progress on the first Belgian Beer Cafe in India. We are already working with local franchisers and different people who might be interested in picking up the concept; whether they’re bringing their existing assets into play or getting a new property,” Kartikeya Sharma, Marketing Head, Anheuser-Busch InBev India, was quoted as saying in a financial daily in the country. “Once we get the first one out of the way (in Noida), we want to see the consumer response, what we need to change or tailor, because as much as possible, the BBC concept stays very pure. At no point, like food chains, do we get into localised strategies. It’s a global concept.”