UB to start plant to tighten hold on beer market

United Breweries (UB), India's largest publicly held brewing company in which Dutch brewer Heineken has a majority stake, is set to commission a 12-million cases-a-year plant in Bihar with an investment of Rs 200 crore by the end of the financial year.

This is to tighten its stranglehold over the Indian beer market. The move follows the commissioning of similar breweries in Andhra Pradesh and Karnataka.

UB, which brews India's largest-selling Kingfisher beer, has a capacity to brew 180 million cases a year, of which it owns 80 per cent; the rest are sourced from contract brewers.

Last year, UB added half a per cent market share to its 50 per cent share in India's 270-million-cases-a-year market. The Indian beer market last year contracted one per cent as Maharashtra, Bihar and Punjab markets were impacted due to a steep rise in the excise duty and end-consumer prices.

"The sector in Tamil Nadu was hit by the perverse ordering pattern of the state monopoly, which favoured certain suppliers during the year,” Vijay Mallya, chairman, told shareholders in his annual statement.

"I am happy to state that despite this backdrop, UB performed marginally better than the sector, adding half a per cent per cent national market share, ending the year at 51.1 per cent on volumes of 138.7 million cases.”

Karnataka, Uttar Pradesh and Orissa were key markets in which our company performed better than the sector,” Mallya added.

Maharashtra, Telangana, Karnataka, Tamil Nadu and Andhra Pradesh are among the top few markets for UB.

UB added that with the strength of its brands and in particular the flagship Kingfisher brand, it is able to obtain price increases in several markets, thereby enabling to achieve a growth of six per cent in net realisation. As a consequence of the combination of higher net realisation and control on costs of sales, UB was able to achieve an increase of 11 per cent in net contribution.

The company said it continues to witness pressures on the input costs of its raw materials - especially barley - given the context that there is an increase in demand for malt and the shortage is anticipated to increase in coming year. "We are exploring a number of avenues to address increases in the cost of raw materials and taking measures to invest in the upstream supply chain, to ensure the company continues to receive a sustainable supply of quality barley.”

The UB stock closed almost flat at Rs 735.90 a share on the NSE on Tuesday.