India: Carlsberg is interested in local brewing and acquisitions

Danish brewing giant Carlsberg A/S plans to get involved in wholesale trading of its well-known brand in India as a first step of setting up operations in the country. The Economic Times posted on May 5 that Carlsberg is interested in local brewing and is looking for acquisitions in India. It is looking at under-utilised breweries and has conducted due diligence of a few local breweries in Goa and Aurangabad.

Carlsberg is also eyeing idle brewing capacity in Rajasthan and Andhra Pradesh, including Hyderabad, The Economic Times cited sources. The beer MNC is also considering setting up a greenfield brewery as a third option. Carlsberg, which notched up $6 billion in net revenue in 2004, plans to grow both organically and through geographic expansion in new markets.

Currently around 80% of the Indian beer market is dominated by two major players: UB and SAB. The UB-Scottish Newcastle combine currently commands more than 50% of the market while SAB has around 28% share. Third largest player Fosters commands around 7%.

India's per capita beer consumption is among the lowest in the world. That is why foreign beer forces are interested in the market's potential. India's beer market is around 85 million cases strong, up from 82 million last year. Of this, strong beer (with alcohol by volume above 5% but lower than 8.75%) comprises a whopping 65 million cases. The remaining 30 million cases is mild beer. Imported brands like Fosters and Castle currently operate at the top end of the mild beer market, which is around 2 million cases strong. Growth has been decent in this premium gulp - around 7% last year - and this is the segment that Carlsberg will likely target.

The total beer market grew about 2-3% last year, mirroring global growth trends. The world's total beer market is estimated to hit 1.5 billion hectolitres by 2005. In India, mild beer has seen flat growth, thanks mostly to cannibalisation by stronger beer.

Thanks to high taxation, beer costs anywhere between Rs 30-50 in India whereas it costs just around Rs 8 a bottle in China. In the West too, a bottle of beer costs the same as mineral water or cola. The steep prices have led to consumers looking for a strong alcohol substitute while buying beer. Hence the preference for strong beers.

The beer skew is also made worse by distribution snags. India has 48,000 beer distribution outlets nationwide whereas Manhattan alone has 22,000. Delhi's 12 million population is served by 600 outlets, Mumbai's 15 million by 2300 outlets while Shanghai's 15 million population is served by 83,000 outlets.

E-malt.com, the global information source for the brewing and malting industry professionals. The bi-weekly E-malt.com Newsletters feature latest industry news, statistics in graphs and tables, world barley and malt prices, and other relevant information. Click here to get full access to E-malt.com. If you are a Castle Malting client, you can get free access to E-malt.com website and publications. Contact us for more information at marketing@castlemalting.com .