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K Giriprakash

To keep pace with growth in beer market

Bangalore , June 15

United Breweries (UB) may fast forward its investment plans for expansion of its breweries to keep pace with the sudden spurt in the growth of the beer market in the country.

The United Breweries' Chief Financial Officer, Ms Lesley Jackson, told Business Line that the beer market was growing at a faster clip than it was anticipated earlier. The company has already earmarked around Rs 400 crore for investments into expansion of its breweries and strengthening its marketing network. "It is likely that we may spend Rs 400 crore in a shorter time period than we had originally planned," Ms Jackson said.

"The beer market is growing so fast that the seven-year expansion plan of UB might in fact collapse into a four-year plan and it could shrink even further," she said.

Ms Jackson said while the market recorded a growth of around 8 per cent on average during the last few years, in 2005, it grew by as much as 14 per cent. One of the main reasons for such a growth was several northern States made structural changes in their liquor policy leading to such a high growth.

Outgrowing market

She said the total market size of 8.5 million hectalitre is expected to grow to around 10 million hectalitre next year and "could in fact grow further".

UB's decision to move forward its investment plans is also because of the fact that its beer sales have, in fact, outgrown the market. For example, UB recorded a 13 per cent rise in mild beer sales during the year compared with an industry growth of 9.4 per cent while its strong beer brand grew 36 per cent compared with the industry growth of 16 per cent. India is considered one of the fastest growing markets in the world.

The effect of higher growth has also resulted in a significant addition to the bottomline of the company. The net profit of the company during the fourth quarter (January-December, 2006) of 2005-06 grew 22.30 per cent to Rs 21.22 crore while its total income rose 43.58 per cent to Rs 191.78 crore during the same period. For the entire year (2005-06), UB's net profit grew 244.65 per cent to Rs 48.39 crore on a total income of Rs 595.58 crore which grew 31.21 per cent.

Related Stories:
UB plans new drinks, packaging
UB `rationalises' brand portfolio

More Stories on : Outlook | New Projects | Breweries

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