INDIA BUSINESS WORLD - AUGUST 2006
THE MONTH THAT WAS...

BEER WAR HOTS UP

SABMiller, arguably the world's most aggressive brewer, on Friday threw down the gauntlet to Vijay Mallya by buying iconic Australian brand Foster's India operations and consolidating its position in India 's tough-as-nails beer market.

SABMiller, the owner of brands such as Castle Lager, Haywards and Royal Challenge, will pay $120 million for 100% of Foster's India .

The purchase will add a visible international brand to SABMiller's steadily-growing portfolio and help it inch closer to the UB group with a market share of 37% compared with the former's 45%.

SABMiller's bid, including the possible buyout of Foster's brand and other assets in India . The Australian giant had struggled to build volumes due to its single-brewery approach which led to the brand selling at a high price in most parts of the country. There were also distribution issues which crimped sales and prevented Foster's from posing a credible challenge to the UB group. Even after this transaction, UB does not seem to be unduly worried.

“Foster's has been around for some years, and it has not made much impact. And SABMiller has only lost market share after acquiring Shaw Wallace Breweries,” UB group chairman Vijay Mallya said, laughing off the challenge. But Foster's (with annual sales of 2 million cases) remains the most visible international beer brand in India, and continues to return stable volume sales despite the lack of initiative exhibited by the parent in recent years.

Industry observers are betting on SABMiller firing that shot for the top slot in the next 1-2 years.

“We are going to roll out Foster's from all our breweries in a short time. The brand has a lot of popular appeal in the Indian market,” said SABMiller Plc official Nigel Harwood, from London .

"It is a synergistic acquisition strengthening our position in the mild lager category (where SABMiller has been weak in India ) helping us to compete with Kingfisher better. The arrival of Foster's could also open up wider distribution possibilities for our other brands like Castle,” added SABMiller India spokesperson. As expected, SABMiller refrained from forecasting the upscaling possibilities of Foster's brand in India . However, industry observers said Foster's could be a 5 million case brand within a year and could touch 7-8 million in 2-3 years.

This could further narrow UB's volume advantage, estimated at 15 million cases annually, and put pressure on the market leader in the mild lager where it has had a monopoly situation with a segment share as high as 70%.