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| Q2 likely to be sober for beer-makers |
| Viveat Susan Pinto / Mumbai Oct 03, 2011, 01:19 IST |
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Steep price hikes and a prolonged monsoon appear to have taken the fizz out of beer consumption in the tropical country this year. The Rs 7,000-crore industry is likely to see a decline in volumes for the second straight quarter this fiscal, putting pressure on players to deliver numbers in the third and fourth quarters, respectively.
This is the first time in seven years that the beer market is likely to see a decline for two consecutive quarters. Till last year, the beer industry was growing at a CAGR of 15 to 20 per cent. Last year’s volume sales were 230 million cases. But the trend has reversed this year.
According to industry estimates, the decline in the September quarter is likely to be in the region of 7-8 per cent. This will be higher than the five per cent decline the industry saw in the June quarter this year.
Almost 20 per cent of the sales come in the second quarter alone. While it is not the highest contributing quarter for beer makers, a decline doesn’t augur too well for them either.
Samar Singh Shekhawat, senior vice-president (marketing) of UB Group, says he sees the industry recovering in the third and fourth quarters. “An unusually mild and wet summer, coupled with high consumer prices thanks to a change in taxation in certain states, is the key reason for the decline. The industry should recover in the forthcoming quarters,” he adds.
UB is the country’s leading beer manufacturer with a share of over 50 per cent. SABMiller follows next with a share of 22 to 23 per cent. In other words, between them the two players control close to one-fourth of the beer market in India.
In the last six months, beer prices have shot up by almost 25 per cent riding on excise and VAT hikes in various states. Earlier, a 650-ml beer bottle, also called a quartz, used to be available at roughly Rs 75 from Rs 60 on an average. A 330-ml or a pint was available at Rs 45 from Rs 35-40 earlier, while a can of beer was priced around Rs 55 from Rs 45.
Industry players say the country’s western and southern regions are already beginning to recover. “It is the north and the east that are weak at the moment,” says an executive from a beer company requesting anonymity.
Most players are now banking on the festival season to take them through. Typically, beer consumption picks up during this period. The December quarter typically contributes about 25 per cent of sales to beer-makers, second only to the first quarter, which contributes about 40 per cent. The fourth quarter is generally the weakest, contributing about 15 per cent in terms of sales.
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