Aniket PujariAfter disruptions during the general elections last fiscal impacted production and shipments across the sector, an early and longer summer this year is “going to be more helpful as it will lead to more consumption from a macro standpoint”, said Vivek Gupta, managing director and CEO of Dutch parent Heineken-controlled United Breweries. “We are definitely looking forward to having a year with less disruptions.”
Since the company was “not able to produce or ship beer last fiscal” in many places, United Breweries (UB) has amped up its facilities in many locations in anticipation of a prolonged summer.
March to June is the main business period for most beer companies in India, and the season began a little earlier this year because of unprecedented heat. The company is “definitely ready for the summer and we are seeing a gradual increase in our demand”, but it remains to be seen how changing prices impact consumers.
Many states increased duties and taxes on beer in the last quarter. Some data indicates there is a double-digit slowdown in demand, Gupta said. Telangana, for instance, has increased prices for consumers by 15% but hasn’t cut duties. Karnataka, too, has increased the duty and beer prices.
“Rajasthan has also increased beer prices. How much of that will impact volumes is to be seen,” he said, adding that Punjab could also see an impact from this change.
“We can’t say that demand is so strong that it (the season) will be fantastic. If taxation and duties keep increasing, affordability will become an issue,” Gupta said. “We will just have to wait and watch for some time,” he said, calling higher taxes the “biggest disruptor” this year. “You cannot have beer being 70-80% more expensive than liquor in general.”
Growth potential
Beer volumes are growing at a compounded annual growth rate of 7-8%, according to data from drinks consultancy IWSR. In 2024, UB’s volumes grew 8%.
“Until some years ago, this number used to be just 2-3%. We accelerated our growth post-pandemic on the back of the premium portfolio that grew a lot. We also brought in a lot of innovation,” he said.
According to Gupta, UB’s premium portfolio grew 34% last year and 33% in the past quarter. The strongest growth came from its Ultra portfolio, both Kingfisher Ultra and Ultra Max.
The company is aiming for a growth of about 30% this quarter (January-March) as well from its premium beers, which account for about 7-8% of its business by value.
“Younger consumers are looking for more, and more mild beers and fashionable beer as well in general,” Gupta said. “This is why there is a growth in this business.”
UB didn’t produce premium beers in many states, but “we have invested a lot to expand this”, Gupta said.
In the third quarter ended December, its volume growth predominantly came from Telangana, Andhra Pradesh, Uttar Pradesh, and Rajasthan, but Tamil Nadu, Goa and West Bengal partially offset that.
Net sales grew 10% in the quarter ended December 31, mainly due to higher prices in several states and higher premium sales. That was partly offset by increased demand for lower-priced products and higher sales in states where prices are lower.
Rift with Telangana
In January this year, the company withdrew supplies to Telangana, one of its larger markets, citing a five-year lag in price hikes and rising losses.
Telangana State Beverages Corporation Ltd (TGBCL), which oversees the state’s wholesale and retail alcohol market, had not revised the prices it paid to suppliers since 2018-19 despite rising costs, increasing financial pressure on alcohol businesses.
While the supplies have resumed, Gupta said things could still improve in the state, which is among the highest beer consumers.
“We had been very straightforward with the Telangana government as there was no viability in continuing at those costs. We welcome that they took a call that helped business, but it is still not at the level that it is breakeven for us. We are still working on that plan,” Gupta said.
“We’d have also appreciated if they’d rationalised some taxes on beer. But we understand their compulsions and we are still interested in investing in building more supplies in those states, but we have to see how the demand shapes up,” he said.
South India contributes about 40% of the company’s beer sales.
New projects
The company has also said it is in advance talks with the Uttar Pradesh government to invest in a greenfield brewery with a capacity of 1-3 million hectolitres to cater to additional demand in the northern market, primarily to produce Heineken and other premium brands. It is also in talks with other state governments to set up more breweries.
“Our business is already doing quite well there (Uttar Pradesh) and if this pace continues, we may not have supplies. The policy the state has come up with for new greenfield breweries is encouraging,” Gupta said. “But these types of projects take about 2-3 years… The state is also keen to drive more moderation (in consumption of strong beer), so that’s quite positive.”
At present, the company contract manufactures in Uttar Pradesh and brings in supplies from other states. UB is also looking to expand its “new economy” segment to launch more affordable beers in states where taxes are too high.
For nine months ended December 31, United Breweries reported a revenue from operations of ₹1,498 crore, up from ₹1,359 crore a year earlier. Its profit during the period stood at ₹344 crore compared with ₹329 crore a year earlier.
There is still room to grow in the low- to no-alcohol segment, Gupta said. “It still needs some consumer education. It will happen in the coming years.”
