UB to face the heat with InBev-SABMiller merger

If merger is successful, the beer company will have a market value of $250 billion

A merger between Anheuser-Busch InBev and SABMiller globally would create a beer giant in India that would give tough competition to present market leader United Breweries, which controls almost half of the Indian market.

SABMiller confirmed InBev had approached it with a merger proposal which, if successful, would create a beer company with a market value of $250 billion. In India, both the companies have sizeable operations with SABMiller holding the number two position.  

But a sectoral analyst said with UB, owned by Heineken and Mallyas, controlling 51 per cent of the market share, it will not be easy for the combined entity to take on the might of UB. “But it will certainly give more competition to UB as both can synergise operations and cut costs,” the source said.

SABMiller, with brands like Haywards 500 and Knockout, is also eyeing the premium beer segment, which is growing at a higher rate than the industry average. In the recent years, the company’s volumes took a knock with Maharashtra and Punjab increasing excise tax rates.

On the other hand, InBev in February this year announced it is going solo by exiting its joint venture with Delhi-based Ravi Jaipuria. 

InBev, maker of Budweiser and Corona beer, said it would bring more of its international brands to India after the split. InBev is also importing its premium brands Stella Artois and Hoegaarden and is bottling Budweiser beer in India from its two plants in Maharashtra and Telangana. It is also doing well with the launch of its Budweiser Magnum in India.

Analysts said the Indian beer industry volume — with sales of 284 million cases in FY15 — is expected to grow at an annual rate of five to six per cent in the next two years.

As India remains one of the fastest growing and least penetrated markets, the competition is expected to heat up between the two players in India, analysts said. At present, UB leads its nearest competitor SABMiller with almost double the market share.

Besides, the Indian beer market is in a nascent stage with per capita consumption of 1.9 litres per annum, it provides significant scope to grow as a change in lifestyle and increased disposable income boost consumption of beer.  This will help both UB and SABmiller and InBev combine to grow their volumes.