Financial Daily from THE HINDU group of publications
Friday, Jun 17, 2005
SABMiller prefers incremental market growth Not `egoistic' about pushing for the top slot
Bangalore , June 16
SABMILLER, the world's second largest brewer , is not `egoistic' about pushing for the top slot in the Indian beer market.
The global beer giant, which effected the full takeover of the country's second largest brewer Shaw Wallace Breweries Ltd last month, said any move to wrest leadership from United Breweries (UB) Ltd held no significant relevance in the current context of the domestic beer consumption, which has an abysmal 0.7 litre per capita intake.
In an interview to Business Line, Mr Graham Mackay, Chief Executive of SABMiller Plc, said: "We think it is not relevant to talk about slots in the Indian beer market. It is more relevant in a bigger, consolidating market." Mr Mackay was replying to a query about his company's response to the UB Chairman, Mr Vijay Mallya's statement that marketplace bonhomie was possible if the multinational accepted UB's market leadership as a reality.
Mr Graham Mackay
"We are not after egos, and we feel it is better to have some money in the bank," Mr Mackay added. His statement is in tandem with SABMiller's policy that "buying market share is a dangerous game".
However, the global brewer will go after incremental market growth, explained SABMiller India's Managing Director, Mr Richard Rushton: "If there is an incremental growth of five million cases annually, we will look to get about half of it as most of the growth that is happening is being split between us and UB."
Mr Richard Rushton
The annual domestic beer sales is pegged at nearly 90 million cases, while China, also with a population of over one billion, boasts of a market size that is 40 times bigger.
UB controls 50 per cent of the Indian beer sales, and SABMiller follows with 34 per cent share. The country's beer consumption has been growing at about seven per cent annually in the past five years and could stay on course in the short to medium term if the anticipated de-regulation fails to materialise.
Mr Mackay said robust GDP growth alone may not help beer consumption in the country. "We think it needs to be a combination of both GDP growth and de-regulation. In fact, we reckon that de-regulation is crucial," he said, while adding that a large youth population and changing lifestyles were stimulus for growth of beer. "If that happens, India can easily double the current growth rate," he added.
He rejected the argument that the company might have overpaid to acquire Shaw Wallace's beer business in its bid to make a cut in the domestic market. "The valuation is based on the growth rates you assume, and India with a rather smaller volume base provides a potentially huge opportunity," Mr Mackay reasoned.
He stayed away from putting a figure to SABMiller's investments into the country estimated to be between $350 million and $400 million till date, citing confidentiality clause involved in completing the takeover of Shaw Wallace.
Mr Mackay said there was no decision taken yet on bringing in Miller brands into the country even as it would scan the portfolio of international brands to bring them to India.
SABMiller expected Asia, led by China, to drive volume growth for the beer industry. As for more acquisitions in India, there is no need for one but the company will be open to strategic opportunities, he added.
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