‘Consumers are moving towards strong premium beer brands’

Changing consumer preference is bringing the share of regional beer brands down gradually, says Samar Singh Sheikhawat, Senior Vice-President, Marketing, United Breweries Ltd.

UBL, from the Vijay Mallya stable, owns the flagship Kingfisher brand. Sheikhawat, himself a teetotaller, says high malt prices and new taxation structures are impacting revenues. UB accounts for nearly 53 per cent of the total beer market in the country. Rival SABmiller has about 23 per cent. UB, which sponsors six IPL teams, is looking to be associated with sports such as football, marathon, rugby and motor sport racing to promote its brands.

Is the beer market on a slow pitch due to rising input costs?

Last year, a delayed summer did cause some sluggish sales. However, there is no slowdown in the beer market. The price of malted barley has gone up by 15 per cent, so have prices of sugar and rice. All these are a significant part of the cost of production of beer. Also, 60 per cent of our markets are Government-controlled and our experience is that in most of these markets, while the State Government increases duties, and thereby their revenues each year, the manufacturers are not adequately compensated for input and other cost increases. In non-Government controlled markets, we are able to make price changes to compensate for the increase in input costs. The overall beer market in India stands at 270 million cases, with the industry growing at 20 per cent.

There are a slew of regional brands under your umbrella. What are your plans for them?

Research indicates that acquired tastes are hard to change. Our regional brands have been hugely popular for this reason. Our regional brands like Kalyani Black in West Bengal, London Pilsner in Maharashtra, Bullet in Rajasthan and UB Exports in Karnataka are huge revenue earners. These brands are at least 15 per cent cheaper than Kingfisher Strong, which accounts for a chunk of our revenues.

Going forward, do you see consumer preferences shifting?

Overall, 83 per cent of our business comes from strong beer and the rest from mild beer. Consumers are definitely moving towards strong premium brands.

Gradually, we expect the share of regional brands, which are milder, to come down. The mix used to be 70-30 per cent a couple of years ago.

Also, with Heineken in our portfolio, we are seeing a salient demand for premium brands.

Sport seems to be a great medium for surrogate advertising. Besides Indian Premier League, what other sports are you looking at?

By leveraging on sports, we are able to connect with consumers. Cricket is major part of our sports activation. Football, hockey, running, golf, horse racing, Formula One car racing, rugby and sailing are others. Kingfisher Blue is positioned on the outdoor adventure sports platform, something like a cold drink or an energy drink.

Is UB looking to set up another brewery?

Yes, we will be investing in a greenfield brewery in Patna. The new plant is likely to start operations by 2014. The initial investment is about Rs 200 crore.

Do you see competition from Diageo (Diageo recently bought stake in United Spirits Ltd), especially with a brand like Guinness in the coming months?

No, they are largely in the spirits’ space.

What is UB’s debt position currently?

Our current net debt is in the region of Rs 1,000 crore.

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