S&N combines Indian brewing business with UB

Related tags Cent Beer S&n

Britain's biggest brewer Scottish & Newcastle (S&N) is to
combine its Indian brewing assets with those of United Breweries,
the largest beer maker on the sub-continent, to form a group
accounting for more than 50 per cent of all Indian beer sales.
Chris Jones reports.

S&N will take up to 37.5 per cent of UB as part of the deal, as well as retaining its 40 per cent interest in Millennium Alcobev (MABL), its existing joint venture with United Breweries, formed in May 2003.

Until now, Millennium Alcobev has been S&N's only foray into the Indian market, although it is one of the few international brewers to have any major presence there at all (neither Belgium's InBev or Dutch group Heineken, S&N's two main European rivals, are there, for example). MABL is the country's third-largest brewer with a market share of around 11 per cent, mainly from its leading brands Zingaro and Sandpiper.

Adding these to the already substantial volumes of Kingfisher - UB's flagship band and market leader with 33 per cent - could give rise to questions from the competition authorities. However, the fact that MABL is already owned by the two partners suggests that little will actually change following the deal - although the pressure on number two brewer Shaw Wallace will undoubtedly intensify.

India has a population of over 1.1 billion people, and is experiencing a sustained period of strong economic growth. Yet India is predominantly a market of spirit drinkers, with 'hard' liquor accounting for around 90 per cent of all alcohol sales. The beer market, which accounts for roughly 10 per cent of all alcohol sales, is thought to be around 7 million hectolitres.

Nonetheless, beer consumption has increased on average by 9 per cent over the last five years, S&N said, and has good prospects for continued growth driven by strong economic growth, favourable demographics (56 per cent of the population is under 25), government deregulation and the growing popularity of beer over other forms of alcohol.

The combined UB/S&N venture will be in a strong position to take advantage of this growth, being one of the few companies with a nationwide reach in a country where many producers focus on the local states.

While strengthening its foothold in a growth market will obviously benefit S&N - especially as it carves a niche for itself in Asia's other great beer market, China - the British company will also be keen to reap the benefits of adding Kingfisher to its own international portfolio, which includes Russia's Baltika and France's Kronenbourg.

Kingfisher is the most well-known Indian beer outside its home market, notwithstanding the undoubted success of relative newcomers such as Cobra, and is already widely available in many European countries, in particular those such as the UK with a large Indian ethnic population.

It is unclear as to whether the current UK distributor of Kingfisher, Kent-based Shepherd Neame, will continue in this role but it does seem unlikely, especially given the additional volumes that S&N could generate by adding it to the range of beers offered through its pub partnerships.

With S&N also in strong positions in emerging beer markets such as Russia, where Baltika is by far the largest brewer, and China, the world's largest beer market with sales in excess of 253 million hectolitres a year, the possibilities for a quality lager brand such as Kingfisher are likely to be considerable.

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