The Hindu Business Line : SABMiller's Foster's acquisition marks first phase of consolidation

Wide open
Sources point out that in a market that still does not have Heineken and Budweiser, the game is still wide open. "If number 1, 2 and 4 beer brands are not there in the country, nothing is closed,"

Bangalore , Aug. 8

With SABMiller paying over three times the price per hectolitre for buying Foster's compared to its acquisition of Shaw Wallace brewery business, the South African beer major will finally have a brand that can find a good market across the country.

Industry sources told Business Line that with the acquisition of Foster's, the first phase of consolidation in the industry is over. "Big boys are not yet in," sources said. Sources point out that in a market that still does not have Heineken and Budweiser, the game is still wide open. "If number 1, 2 and 4 beer brands are not there in the country, nothing is closed," a former official with a beer major said.

Liberal outlook

What is also significant is that several States in north India are liberalising their policy on beer and hence several licences to start breweries are being given out. At least 15 breweries are currently under construction in the country. Hence, there is a good possibility that big brands may be eyeing the market more closely now.

Industry sources said that with the acquisition of Foster's, SABMiller may delay launching Miller Lite and instead promote the Australian brand, which could give some competition to Kingfisher in the light beer segment. "It is still not time to say that Foster's will do to SABMiller what Kingfisher has done to UB. But on the horizon, one can finally see some competitor emerging," according to an industry veteran who has worked with some of the beer majors earlier.

Lesson from Foster's' exit

According to an industry analyst, one of the lessons to be learnt from the exit of Foster's is that in the emerging markets of China and India, it was necessary to have a strong presence across the country. "With just one brewery, it was always going to be difficult for Foster's to make a bigger impact in the country," the analyst said.

Sources point out that Foster's had invested over Australian $100 million in its operations in India and Vietnam since the late 1990s. It entered India in 1997 after it bought a 51 per cent stake in an Indian venture and in 1998, it took over the full ownership of the Aurangabad brewery. Foster's expects to utilise the $120 million cash it received from selling off its business to SABMiller into strengthening its wine business.

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