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SABMiller plans Rs 440-crore investments in India arm to take on rivals

MUMBAI: SABMiller, the world's second-largest brewer after AB InBev, plans to invest440 crore in its unlisted Indian arm to expand capacity and its portfolio, and revive its fortunes in Asia's third-largest 


economywhere young urban consumers are driving demand.

In an extraordinary general meeting in March,SABMiller India decided to allot 78 million shares to its UK-based parent at 56 each, it said in a filing with the Registrar of Companies.

The maker of beer such as Haywards, Miller High Life and Foster's plans to use the funds to increase capacity by over 10,000 litres by 2014, according to the filing submitted two weeks ago.

Confirming the development, a 
SABMiller India spokesperson said the move reiterates that India continues to be a focus area for the group, which has over the past 12 years invested over $700 million in the country.

"Fresh equity should accelerate the company's ongoing drive to support development of the 
Indian market on all fronts, build a wider brand portfolio to offer more choice to the consumer, innovate and bring world-class technology and best practices into the country," the spokesperson said.

SABMiller, the second-largest player in India's $2.2-billion (approximately 12,000-crore) beer market, is looking to claw back its 


market share




 lost to leader United Breweries and others in the past few years.

According to Euromonitor, SABMiller's share has slipped to less than one-fourth of the total beer market from more than one-third a few years ago. In comparison, its bigger rival UB, the maker of KingfisherBSE 0.33 % beer, has increased market share to 57% from 43% six years ago. Then there are global rivals such as Carlsberg, the maker of Carlsberg and Tuborg brands, which has over 7% share.

All Players Readying Aggressive Plans

Carlsberg, which entered the country in 2006, now leads local rivals 
Mohan Meakin, which makes Golden Eagle beer, andThunderbolt beer brewer Mount Shivalik IndustriesBSE 4.73 %. All these companies are drawing up aggressive plans to uncork the huge potential in the Indian market where beer consumption is still to catch up. An Indian drinker, for instance, consumes just 1.7 litres of beer a year on an average, compared with more than 37 litres in China and 74 in the US. With pubs becoming commonplace in urban India and social drinking becoming more acceptable, brewers expect the Indian beer market to grow rapidly. Swiss financial services firm UBS estimates the Indian beer market recorded revenue CAGR of 27% between FY02 and FY12 to $2.2 billion.

Another factor that is making 
SABMiller increase its focus on markets such as India is stagnating global markets. Driven by saturation, health trends and increase in excise duty, beer is forecast to be one of the slowest growing beverage categories globally in volumes during 2013, achieving only a low single-digit increase, according to a report by Rabo Bank.

Major brewers such as Dutch brewer Heineken, Belgium-based AB 
InBev, Danish firm Carlsberg and Chinese company 
Tsingtao are now looking at growing profitability by encouraging consumers to trade up to premium beer, craft beer or new categories such as cider. Also, as mature markets decline, brewers are shifting focus to emerging markets such as India to ramp up volume growth. Heineken, the world's third-largest brewer, holds more than 40% share in India's largest brewer, Vijay Mallya's United Breweries.

So far, the Indian market is skewed towards strong beer that has been often projected as masculine and closer to hard liquor. Strong beer brands including UB's KingfisherStrong, SABMiller'sHaywards 5000 andKnockOut, Carlsberg's Tuborg Strong and AB InBev's Budweiser Magnum control over 82% of the total beer market. However, in the past few years, both global and Indian breweries are pushing light and pricier beer that appeals to young professionals.

UB now has milder varieties of its best-selling Kingfisher lager apart from pushing its partner Heineken's flagship beer. SABMillertoo has rolled out American-style lager Miller High Life and Indus Pride in the premium beer segment, which is growing at 49% and is the fastest-growing segment within the Indian beer market.

UBS expects the beer market to continue its aggressive growth rate. "We expect growth to be driven by rising disposable income and favourable demographics. A rise in discretionary spending should also boost volume growth," Sunita Sachdev of UBS wrote in a report. "The new generation may want to consume an alcoholic beverage that appeals to them as opposed to the older generation's preferred choice of whisky," she added.