Financial Daily from THE HINDU group of publications
Saturday, Nov 27, 2004
Industry & Economy - Breweries
UB, SABMiller on bottle buying binge
Bangalore , Nov. 26
INDIAN brewers have injected about 250 million new returnable glass bottles into the beer market during the last nine months to beat down prices of recycled bottles.
The soaring prices of recycled bottles, which went over Rs 7 per bottle as against the normal rate of Rs 2.75 to Rs 3, crippled the beer industry in the last financial year.
The average price of a new glass beer bottle is pegged at Rs 5.50, which means the industry has invested over Rs 135 crore to prevent shortage of bottles in the run up to the summer months when beer consumption peaks in the country.
Currently, the recycled bottles are quoting between Rs 3.70 and Rs 4 with the recent industry reports suggesting that the trade has been exhibiting hoarding tendencies to drive up the price as brewers soon start pipeline filling for the summer.
However, the effectiveness of investing in new bottles to check the recycled bottle cartel would be known only in December-January season when the beer companies get ready for the pipeline filling.
``The industry as a whole has injected about 250 million bottles in the last nine months. Most of these, save 5-10 million, were pumped into the system by the two major brewers - United Breweries (UB) and us," Mr Richard Rushton, Managing Director, Shaw Wallace Breweries Ltd (SWBL), said. UB accounts for nearly 45 per cent of the domestic beer consumption followed by the SABMiller managed by SWBL, which commands close to 35 per cent.
"There is a tremendous improvement in the conduct of the beer industry, and UB and we are determined not to let the vested interests to drive up prices of the recycled bottles," Mr Rushton added.
UB is on record that it lost between Rs 35 crore and Rs 40 crore last year on account of the appreciating recycled bottle costs as traders formed cartels to increase their holding capacity to garner better profit.
Even as the injection of fresh bottles would go on, the beer industry is also looking at lasting solution to the problem of recycled bottles that include looking at alternate packaging such as aluminium cans and contemplating a mechanism of their own to bring back the recycled bottles.
The beer industry is also building bridges with the glass manufacturers and trying to erase its image as an erratic customer by undertaking to buy a fixed quantity of new bottles every year in perpetuity.
In fact, the major brewers have been lapping up the domestic glass industry's entire beer bottle output - estimated at 2.5-3 crore per month - in recent times. It has also been in discussions with the glass manufacturers for light-weighting bottles aimed at bringing the price of a new bottle below Rs 5.
Meanwhile, the brewers are also keeping the option of importing glass bottles from Saudi Arabia, Thailand and China even though the landing price in the prevailing conditions would be in excess of Rs 6.
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