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United Breweries Limited. Presentation November 2007. India and the Beer Industry. Indian Economy. The current year growth rate is 9% The growth is largely propelled by local consumption hence lesser prone to global changes.
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United Breweries Limited Presentation November 2007
Indian Economy • The current year growth rate is 9% • The growth is largely propelled by local consumption hence lesser prone to global changes. • Inflation currently at (5.7- 7.9)% (CPI) giving impetus to growth – Source RBI Oct 13, 2007 • Substantial increase in the disposable income in the age group of 20 to 30 years
Increase in disposal Income Source: Motilal Oswal Securities
Indian Demographics – favorable to growth in beer consumption Current population 1.1 billion Over 50% of the population is below the age of 20 years The demographics to remain almost unchanged till the year 2020 Core target market is 18-30 year olds As initiation to alcohol consumption is through low alcohol beverages like beer – excellent opportunity for growth in beer consumption over the next decade and half.
Population demographics Figures million
Beer Industry in India • Policies & Regulations are driven by State Government • Highly regulated with restriction in movement between states • 65% of the Indian market is state controlled – Distribution by Govt. Corporations, implications upon pricing • Advertising strictly prohibited, advantage for existing players, major barrier to entry
Beer Industry in India contd. • Government corporations are now approachable and not averse to make changes • There have been recent recommendations by some governing bodies to de link beer from spirit and have a common national duty structure much lower than the current duty levels
AFFORDABILITY Duty not set according to alcohol content Highest duty in the world Expensive alcoholic beverage AVAILABILITY 55,000 licensed outlets across the country 1 per 20,000 people In UK 1 per 350 people Beer Industry in India contd Beer is not the alcoholic beverage of the common man
Alcohol Consumption <0.5% Wine 5% Spirits/ Liquor 8% 78% 21.5% Beer 87% Emerging Markets India
Key performance highlights H1 2007-08 • 13.8% volume growth in UBL while the combined business grew at 14.3% as against an industry growth of 12.6% • Kingfisher growth - premium 5.4%, strong 23.9% • EBITDA at the half year end 112 Cr. as against 87 Cr., a growth of 29% • Combined EBITDA at the half year end 143 Cr. as against Cr.110, a growth of 30%
Volume Growth – H1 + 16.6% + 14.3% + 13.8% + 12.6% Combined Business UBL Only MABL Only Industry
Change in Consumption pattern • Currently all international brands known in India are mild beers & most of the new launches have been in this category, which has been declining
UBL V’s SABM Market Share 47% 33% UBL SABM March 07
Margin on sales in the published financials not comparable as Sept. 06 does not include KBDL a 100% subsidiary
Performance analysis • An increase in the operating margins despite cost push • Despite a 29% growth in operating margins PBT growth of only 4% on account of interest & depreciation – Rights issue approved by the Board expected in the first half of the next financial year • Healthy growth in operating margins of 31% in the combined business
