INDIA: Andhra Pradesh dispute hits beer market growth - SABMiller
A dispute between authorities and brewers in the Indian state of Andhra Pradesh has significantly weakened India's beer market growth in the past nine months, SABMiller has said.
India's beer market expanded by 8.5% in volume terms between April and the end of December, down from a rate of around 13% for the same period a year earlier, according to Sundeep Kumar, SABMiller India's head of coporate communications.
Growth has been stifled by a legal tussle in Andhra Pradesh, a state which accounts for around a fifth of India's beer volumes, Kumar told just-drinks today (9 February). Excluding this region, he said, the country's beer market rose by nearly 12% for the nine-month period.
He said that poor summer weather was the other major factor in the market slowdown.
SABMiller last year joined forces with rival and beer market leader United Breweries (UB) to file a lawsuit against the Andhra Pradesh government. They accuse the state purchasing body, Andhra Pradesh Beverage Corporation, of failing to pass down the proceeds from consumer price increases on beer.
State procurement prices have not risen since 1997, while retail beer prices have more than quadrupled in that time, the brewers say. "If consumer prices are being raised year-on-year then we should share in that increased price," said Kumar. Last year, SABMiller stopped supplies to the state, blaming the state government's position on prices.
Brewers hope that a breakthrough in Andhra Pradesh may be a catalyst for easing taxes and regulations in other states.
The Andhra Pradesh situation is particularly crucial for SABMiller, because it relies on the state for around a third of its national beer sales.
Accordingly, SABMiller's volume growth in India for the nine months to the end of December was "slightly below" the industry average of 8.5%, said Kumar. SAB's third quarter volumes rose by 14% in India, marginally ahead of an industry average of 13.4%, however.
A mild winter boosted market growth in the final months of 2008, according to Kumar, who said that accelerating growth in SABMiller's third quarter suggests that India's beer market remained unaffected by the global economic crisis.
SABMiller, which sells Peroni Nastro Azzurro, Foster's and Indus Pride brands in India, has an estimated 38.5% share of the country's beer market. Vijay Mallya's United Breweries controls just over 40% of the sector, largely thanks to its Kingfisher brand.
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