The Hindu Business Line : Beer sales up 17% in Q1; UB reports 23 pc growth

The largest domestic brewer, United Breweries (UB) Ltd, has reported 23 per cent growth in volume sales for the first quarter ended June of the ongoing financial year, while the industry as a whole saw beer consumption rise 17 per cent during the three-month period compared to last year.

The April-June quarter is considered the best months for the brewing industry as volume zooms across the country during summer, especially in the North where beer is yet to tear away from its seasonal drink image. A 17 per cent rise in beer sales during the first quarter — which translates to increased consumption of four million cases — is rather significant for the domestic beer industry, which has been used to a 6.5-7.5 per cent annualised growth over the past five years.

A few of the big growth markets were Tamil Nadu at 44 per cent, Rajasthan at 85 per cent and Karnataka with 41 per cent.

It is expected that the industry could end the financial year with over 15 per cent growth if it holds on to the early gains. A good summer with delayed monsoon and the settling down of the retail trade in markets such as Tamil Nadu (where the State took over trade about 18 months back) are cited as some of the factors that led to the beer industry's good performance.

"At 23 per cent volume growth, it has been one of the best growth quarters for us in a long while," Mr Kalyan Ganguly, CEO of UB Ltd, said. What makes the quarter more heady for the industry is the fact that its profitability is also on the upswing, buoyed by price hikes in many States and the low input costs such as recycled bottle price, which is down more than 50 per cent compared to last year.

The bottle cost, which touched Rs 7 during last year's summer, is currently quoting below Rs 3.50, even as big guzzling states such as Andhra Pradesh allowed price increases for the brewers. Informed sources said the correction in input costs and the State allowed price hikes could boost the earnings of large brewers such as UB and SABMiller between Rs 20 and Rs 25 per case.

UB and SABMiller together account for 85 per cent of the Indian beer market pegged at nearly 90 million cases in 2004-05.

However, the price hikes allowed by state governments came at some cost for players such as SABMiller. The multinational brewer, which accounts for nearly 62 per cent of the beer consumption in Andhra Pradesh, held back supplies for five weeks at the peak of summer demand to push its case for a hike with the local government authorities. While it helped to bargain for a reasonable price increase, the stopping of supplies to a market from where it derives one-third of its national sales dragged down the company's overall growth figures for the quarter to a moderate two per cent.

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