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Cheers! Crisis to push hard drinks market

December 18, 2008 17:19 IST

Global meltdown, sky-high inflation rate and gloomy economic outlook were of little concern to Indians in 2008, as they chose to be high on spirits, thus propelling the alcoholic beverages industry to register a handsome double-digit growth.

In a year that saw inflation touching a 13-year high of 12.82 per cent in August, the 150 million cases beer market grew by 15 per cent, according to All India Breweries Association figures.

The wine segment, which has a total market size of around 1.5 million cases, posted even a higher growth rate of 30 per cent, as per International Wines and Spirits Record, while other alcoholic beverages, with a market size of 190 million cases, grew at 15 per cent.

And all this happened amid spiralling prices of spirits, which shot up by up to 30 per cent in some parts of the country.

The average price of generally consumed liquors ranges between Rs 600 and Rs 1,500 per bottle of 750 ml.

High prices of molasses, the basic raw material for producing alcohol, had sky-rocketed forcing companies to pass on the increased input costs to tipplers.

However, on the corporate front, it was a rather quiet year in terms of big-ticket mergers and acquisitions, but the domestic landscape did feel the ripples of take-overs in the global arena.

A case in point is the 7.8 billion pounds take-over of Scottish & Newcastle, which owned 37.5 per cent stake in United Breweries, by a consortium of Carlsberg and Heineken, resulting in conflict of interests in India.

Heineken got the rights of the Indian market, among others, of S&N. While it was already the single largest shareholder with 42.5 per cent in Asia Pacific Breweries -- its joint venture with Fraser & Neave cent -- Heineken also became the largest single stakeholder in United Breweries too.

APB wanted to bring its flagship Tiger beer to India, which the UB Group resisted, as it directly competed with Kingfisher.

UB Group also opposed the entry of Heineken nominee on its board.

In a similar situation, Belgian brewer InBev acquired US-based Anheuser Busch for $52 billion.

Both companies were already competing in India through separate joint ventures.

InBev has a joint venture with India's biggest Pepsi bottler, Ravi Jaipuria group, in which the Belgian beer maker had a minority 49 per cent stake and Anheuser Busch had operations in the country through its JV with Crown Beer International.

Post their merger on international turf, the two companies began negotiations for amicable solution for conducting business in India.

UB Group firm, United Spirits, was also in the news for its talks with world's number one liquor manufacturer, Diageo, for a possible stake sale.

While the company admitted it had received certain 'unsolicited' proposals from a host of companies, it did not divulge the details.

The domestic liquor industry, nevertheless, witnessed some acquisitions mainly in the form of companies taking over brewers.

UK-based Cobra Beer picked up 76 per cent stake in Bihar-based brewery Iceberg Industries Ltd and also acquired the Iceberg beer brand for an undisclosed sum. 

Deepak Sharma & Deepak Goel in New Delhi
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