More foreign brewers looking at entering India in a big way
MUMBAI: The leading soft-drink bottlers — the Jaipuria family — have inevitably become the channel for global brewing majors in their quest to enter India and break the stranglehold of the United Breweries Group in the beer market.
InBev NV, the brewer of famous beer brands such as Stella Artois and Beck’s, and the RK Jaipuria Group have plans to set up a joint venture that will invest Rs 450 crore over five years, in building brewery infrastructure in the country. The monies will be spent in building three breweries in India, which will BE set up under a 50:50 joint venture between the two partners.
“The agreement is about to be signed,” R P Gandhi, RK Jaipuria Group’s financial director told Bloomberg on Tuesday.
Earlier this month, the CK Jaipuria family announced a joint venture to set up a plant in Andhra Pradesh for Asia Pacific breweries. The new venture under Jaipuria Beverages & Food Industries is for a greenfield brewery in Andhra Pradesh.
The boards of Leuven, Belgium-based InBev and RKJ still have to ratify the plan, the foreign wire agency added.
It comes at a time when Heineken, through its arm Asia Pacific Breweries, has announced plans to enter India. As the action in the local brewery industry hots up, recent reports suggest that Foster’s group has decided to put its venture in India on the block. The proposed sell-out is part of the Australian brewer’s plan to revamp Asian operations.
The Indian beer market is truly hotting up. Another brewer willing to dilute part stake is Mohan Meakins Breweries, though the plans are still on paper.
The timing is also perfect as the two leading brewers- Heineken and Inbev have already made inroads in other Asian economies through big-ticket acquisitions.
The Indian beer market, though small, holds a lot of potential for foreign brewers to entrench themselves quickly. Beer sales are growing at a fast clip of 7% annually.
The Indian market is currently dominated by UB Group’s joint venture with Scottish & New Castle and Sab Miller, the international brewer who partnered the Shaw Wallace when the late Manu Chhabria was at the helm. They later bought out the Shaw Wallace stake completely before the Chhabria family exited from the company.
InBev, the Belgium-based brewer will follow an entirely different strategy in India unlike its experiment in China and Mexico where they made a big-bang entry through acquisitions. Here it will be a gradual scaling up of operations and market share.
RK Jaipuria’s group has 18 soft drink bottling plants in India and Nepal and accounts for 44% of PepsiCo Inc. sales in India.
The country’s beer market was estimated at Rs 3,800 crore in 2004. If one compares this with China, it is miniscule as it was pegged close to Rs 39,000 crore.
Likewise, consumption per capita of beer in China in 2004 stood at some 20.3 litres, compared with just 0.7 litres for India. The reason the foreign brewers are betting on India, is their belief that as per capita income in the country rises, so would the thirst for beer.
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