E-Malt.com News article: India: Anheuser-Bush Cos. to brew Budweiser in India

After focusing so intensely on China, Anheuser-Busch Cos. hopes to add another Asian economic powerhouse to its foreign markets for Budweiser. The St. Louis-based brewer is developing a strategy to enter the Indian beer market, a task that it expects to complete before the end of this year, Saint Louis Today posted August 17.

A-B is talking with potential Indian business partners, and the brewer is looking for the best way to brew Budweiser in India, said Stephen J. Burrows, president and chief executive of A-B's global brewing subsidiary Anheuser-Busch International Inc.

"India has been on the list of (A-B's) attractive countries for a few years, but we've been very busy in China with our investment and strong position there," Burrows said. "In the past eight months we've put together a plan for assessing the (Indian) market and developing an entry strategy."

Though Budweiser will be its key brand, A-B is considering the introduction of a new beer with higher alcohol content since there is local demand for that type of product, he said. "I think it would be wise for us to be looking at the strong beer as a part of our entry. And so we would have to create one," Burrows said.

India's market of 1.1 billion people is compelling for any global consumer products company.

But the country presents significant hurdles. There are heavy regulations on the local alcohol industry, high excise taxes, tight restrictions on foreign investment, relatively low per-capita beer consumption and drinking is discouraged.

In India, per-capita consumption is less than a quart of beer each year. In contrast, consumption is nearly six gallons annually in China, according to figures by London-based consumer research company Euromonitor International.

Still, India's beer market has a great potential for growth, analysts say. Indian beer consumption is growing rapidly, boosted by a growing middle class and an economy that is expected to expand by 8 percent this year.

"While the U.S. market appears to have stabilized, it would be prudent for the company to diversify away from the domestic beer industry over time," said Patrick Schumann, senior consumer analyst with Edward Jones in St. Louis.

Last month, Burrows went to India and met with local companies that might make potential partners. He declined to identify which companies A-B visited.

However, the Economic Times of India recently reported A-B was discussing a new brewery with India's Crown Breweries. Citing anonymous sources, the article said the project would be in Andhra Pradesh, one of India's largest beer consuming states.

Meanwhile, business publication Hindu Business Line said the St. Louis brewer was in talks with Jaipuria Group, a New Delhi-based soft drink manufacturer, to brew and market Budweiser.

Burrows declined to comment on the media reports. But he did say a decision on a partner should be made before the end of the year.

One of the greatest challenges for brewers is convincing Indians to drink beer. Due to the dominant Hindu religion, the alcohol industry keeps a relatively low profile. Some areas in India prohibit selling alcohol, while advertising of alcoholic drinks is forbidden throughout the country.

And many of those who do drink alcohol prefer distilled spirits.

Anheuser-Busch also will face two rivals that dominate the local brewing industry. Indian brewer United Breweries Ltd. controls about 45 percent of the Indian beer market, while London-based SABMiller holds about a third of the market.

Yet, heavy regulations and high excise taxes appear to be the biggest obstacles blocking the development of the Indian beer market.

"The issue with the Indian market is not really a competition necessarily between breweries," said James Crampton, SABMiller's media relations manager in London. "The Indian beer market has an issue itself as it is highly regulated, which makes it difficult to be able to expand margins and be profitable."

Although United Breweries and SABMiller will continue to dominate the market, A-B can establish its early presence in India before other global major players come, said Yvonne Kok, a Singapore-based analyst with Euromonitor.

Danish brewer Carlsberg and Belgian brewer InBev are reportedly looking to enter India. Singapore-based Asia Pacific Breweries Ltd. began investing in India this year and is planning further expansion in the market.

Foreign brewers may find an opportunity with Indian brewer Mohan Meakin, which has 9 percent of the market. Mohan Meakin is reportedly considering the sale of its beer operations.

However, most foreign brewers are still adopting a wait-and-see stance, Kok said.

Because A-B's brands are not well-known in India, the company will need to invest significantly in brand-building, she said.

Still, India's potential won't appear anytime soon.

It could take between five and 10 years before the Indian beer market takes off, depending on the timing of reform to the heavy regulations directed at the alcohol industry, analysts say.

Development also depends on when the current interest in the Chinese beer market begins to wane, Kok said. "Global brewers will start looking for another growth spot," she said.


18 August, 2006