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'Beer is in for boom time now'

Liquor baron Vijay Mallya has always been known for his flamboyance. With his latest acquisition of Mangalore Breweries, Mallya only drives home the point further.

The acquisition is very satisfying for him, more so because it been snatched from his arch rival, Shaw Wallace India Limited, which had initially planned to acquire Mangalore Breweries.

Mallya doesn't pass up a single chance to make it clear that United Breweries India Limited, the company he heads now has captured a very significant share of the beer market in Karnataka, thanks to its acquisition of Mangalore Breweries.

Exulting in the victory, Mallya is confident that he can tide over any problem.

And he has quite a few to fight against. The beer industry has been going through a low phase. UB's share in the beer segment has not been growing as expected. The next month will be marked by the entry of foreign liquor into Indian markets.

But Mallya is on a high. And whether that confidence is just misplaced bravado or does he really have a few aces up his sleeve? Priya Ganapati spoke to Vijay Mallya, chairman of the UB group of companies.

The beer industry has not been doing too well. Even your market share has not grown as expected. How are you tackling the problem?

We have just finished the acquisition of Mangalore Breweries. With that we will have captured the Karnataka market. Shaw Wallace was trying for it, but we finished the acquistion. We will now have significant and unbeatable market share.

Beer has huge opportunities now. Already, Madhya Pradesh has liberalised beer. Andhra Pradesh has given out additional beer bar and outlet licenses. Uttar Pradesh has fully liberalised the beer industry. Even Maharashtra has announced that it will go for liberalisation.

Beer is in for a boom time now. And seeing this I have bought up everything I can. I have bought Associate Breweries and Distilleries Limited, and Mangalore Breweries. I have also been going around to various state governments persuading them to open up the beer industry completely.

I have been asking them to increase the number of outlets, give licenses to beer outlets freely. Let youngsters drink beer and not get pushed into hard liquor.

The intention is not to discourage one and encourage the other segment because I have market leadership in both. But I think that beer is not getting a fair chance because of excessive taxation and poor availabilty.

How has this impacted the beer industry?

Because of excessive taxation, a customers tends to make a choice to go for hard liquor has gets more for the same amount of money. Naturally, a customer wants to go for it because he thinks he gets a better kick out of it. But the market is improving a lot. You shall see a lot of difference in the next few months.

Next month will see imported liquor flow into India. What will its impact be on your company?

I do not think that it is a problem at all. The state governments depend on our revenues. First, the Union finance minister in his budget speech said that the government is going to levy counter-vailing duty on foreign liquor.

This means that the government has a mindset that it will not allow cheap foreign liquor and beer into the country. On the state level, I have told the state governments in my presentations that it is likely that the foreign liquor companies would only end up paying customs duty and the counterveiling duty.

I told the state governments, 'What are you going to get out of it? You cannot levy an excise duty since once the central government has imposed CVD you cannot levy excise'. Therefore, the state governments are going to impose huge taxes on foreign liquor, which will make it quite expensive.

But on the level of your company how are you planning to face competition?

We have two things going for us. We have world class products and we have a great brand equity. So every consumer knows about Kingfisher, Mcdowell. I don't have to tell them about it anymore, they know about all the brands that we have.

There is a ban on advertising by the liquor industry, so these foreign liquor products cannot be advertised. And that is what is going to affect them.

I do not have to worry about that because I have already created my brand equity. They (the foreign liquor companies) are the ones who will be affected. When they come my market share is only going to go up. I am looking at a 40 per cent market share in the spirits business and 60 per cent in the beer segment.

The UB group has been lookign at restructuring its business. How far has that progressed?

The restructuring is happening. I dont' know why journalists keep asking me about it all the time. I have a business to run and all the time I cannot keep focussing on the restructuring.

Are you looking at group consolidation?

Well, spirit and beer are two different business. They are two different product lines. You have to approach differently. I don't think we want to consider it now. I already have a lot on my hands. Right now I am negotiating with ABD for the San Miguel. Though we have acquired a stake in ABD, they still have the licenses and we are negotiating to get it for marketing and other activities.

I also am looking at launching a new product under the Kingfisher brand. The bottomline is that I will first do this and then concentrate on other things.

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