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Boby Kurian

"The change in Tamil Nadu, which is a big market, had a significant impact on our ability to service Haywards 5000 beer that accounts for a third of the total consumption in the State."

Bangalore , Feb 26

NINE months after buying into Shaw Wallace Breweries Ltd, SABMiller has completed integrating the brewing resources of the two companies without any loss in the combined market share.

Shaw Wallace Breweries, in which SABMiller owns 50 per cent stake and management control, has maintained 35 per cent share in the beer market while executing the biggest M&A in the Indian alcoholic beverage sector, Mr Richard Rushton, Managing Director of SABMiller India Ltd, said.

In an interview to Business Line, Mr Rushton, who manages the operations of Shaw Wallace Breweries, said the new joint venture has had its share of pain that was natural when a family-controlled business joined hands with a transnational company.

On May 21, 2003, SABMiller, the world's second largest brewer, paid roughly $132.8 million to take control of Shaw Wallace Breweries from the Jumbo Group controlled by the estate of the late Manu Chhabria.

"Usually, we hear of integration process that takes one or two years. Moreover, when two large-sized operations are merged, there is initially a drop in the combined market share before it picks up again. In this case, our share in the month of January this year was higher than what we had when we decided on the merger in May last year," Mr Rushton said.

"The two cultures were different, there were changes in the top management and in the footprint. I understand there was lot of focus on us. The Indian alcoholic beverage industry has been largely controlled by local families, and we were the first multinational to by up a substantial presence in this market," he added.

Stating that the business was "on track and the vibes were good," Mr Rushton noted that the formation of the joint venture was followed by a downswing in beer sales on account of last year's monsoon and significant regulatory changes in Tamil Nadu, which banned import of beer from neighbouring markets with effect from July 1, 2003. "The change in Tamil Nadu, which is a big market, had a significant impact on our ability to service Haywards 5000 beer that accounts for a third of the total consumption in the State," he added admitting that his main competitor UB group made advances in Tamil Nadu as "they were the main beneficiaries" of the change in regulation.

SABMiller restructured the operations of the joint venture into three regions - the North, the West (which also controls the East) and the South under separate regional directors. The company has also streamlined the production footprint across the country that entailed termination of some contract brewing alliances and closure of two owned breweries in Uttar Pradesh and in Maharashtra.

Shaw Wallace Breweries currently operate 10 owned plants and has alliances in Tamil Nadu, Andhra Pradesh, Goa, Madhya Pradesh, Rajasthan and in Nepal.

Mr Rushton indicated that the company would carefully chart its plans for greenfield projects as there were no major gaps in its capacity footprint across the country. It holds licence for new plants in Andhra Pradesh, West Bengal and Madhya Pradesh.

"We see the return on investment is more efficient if we go for expanding our existing capacities than setting up new projects. The licence in Andhra Pradesh is still in our radar and we will take a decision on it as the summer evolves, but it will be far from truth if I say we are going ahead with the two other licences now. However, these licences give us the flexibility," he said.

More Stories on : Mergers & Acquisitions | Breweries

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