INDIA: Beer market deregulation would help market mushroom - analyst

Deregulation of the Indian beer market could grow the country's profit pool by 14 times its current size by 2016, according to an analyst. 

Nomura said the market offers a "major growth opportunity" for global brewers as India currently only accounts for about 1% of global beer volumes, despite accounting for 17% of the world's population. 

But it said in a note today (21 August) that regulation remains a "big barrier".

"With taxes taking around 50% of the revenue pool for beer in India and alcohol regulation devolved to state governments, producer profit/volumes are unlikely to improve significantly in the medium term," the note said.  

Affordability also "remains an issue", the analysts noted, meaning beer is "almost a luxury". 

However, Nomura said that deregulation of the market could see the country's beer profit pool grow by US$90m to US$1.2bn by 2016. This would be compared to a doubling of the profit pool if there was no change in regulation. 

Beer only accounts for 10% of alcohol tax revenues, against 90% for spirits, Normura said. And a number of measures have been introduced to improve beer's situation, it said, including delinking beer and spirits duties, higher taxes on spirits, and the rollout of beer-only retail outlets. 

Heineken would be the "largest beneficiary" of deregulation, the analysts said, as its 37% stake in United Breweries accounts for 75% of the industry's profit pool.  

SABMiller and Carlsberg could also see benefits from growth in the market, the note added.

SABMiller is India's number two brewer, with 24% volume share, while Carlsberg is India's number three operator with 6% volume share. 

Last week, Carlsberg reported a 43.2% leap in net profits, partly boosted by strong growth in Asia.