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UB aims to push Heineken volumes

LiveMint logoLiveMint 19-05-2014 Mihir Dalal

Bangalore: India’s largest brewer United Breweries Ltd (UBL) plans to launch Heineken beer in cans and expand the distribution of the brew to Andhra Pradesh and Punjab in an attempt to maintain the high growth rate of the famous Dutch brand.

Heineken is the highest-priced as well as the fastest growing beer in UBL’s portfolio. Its sales volumes rose 65% in the year ended on 31 March, and the company expects the brand’s volumes to jump 50-60% this year, UBL marketing head Samar Singh Sheikhawat said in an interview.

“We’re launching 500 ml cans in June. Cans as a segment is growing and the kind of money we make on cans is higher than other SKUs (stock keeping units),” Sheikhawat said.

Heineken was launched in India in August 2011 and the brand is now available in 15 states including Maharashtra, Karnataka and Delhi. The company is now looking to enter Andhra Pradesh, India’s largest beer-consuming state, as well as other states including Punjab and Chhattisgarh, said Sanjay Roy, who moved from United Spirits Ltd in 2010 to head the Heineken business at UBL.

“The key task, even after three years, is to get more people to start drinking Heineken. AP (Andhra Pradesh) would be a big win and a game changer, if and when we get permission to launch there,” Roy said.

Though UBL’s distribution network reaches practically every retail outlet that sells beer, the company has made Heineken available in a gradual manner to maintain quality of the beer—it even hires an external agency to monitor the product’s freshness—rather than push sales volumes.

Launching Heineken successfully in India is seen as a test of the company’s ability to manufacture and market a so-called super-premium brand, one that is owned by UBL’s largest shareholder, Heineken NV.

“Practically everything is imported—from the label to bottle to the crown. Even the water is treated to Heineken’s specifications. The overriding consideration has been to deliver the upmarket, premium Heineken experience at every touch point: pristine packaging, zero-defect product, collateral merchandise around it. We don’t need the money from Heineken; it’s a brand play and we’re investing in it for the future,” Sheikhawat said.

Several brewers have launched super-premium beer in India. SABMiller India Ltd started selling Peroni, which is even pricier than Heineken, last year. Carlsberg and Budweiser have significantly expanded their distribution and even imported brands such as Geist and Hoegaarden are more widely available. A 650 ml bottle of Heineken costs Rs 170 in Karnataka, roughly 30% more than beers such as Carlsberg and Budweiser.

Super-premium beer accounts for just 2% of India’s beer volumes; Heineken, for instance, generates less than 1% of UBL’s beer volumes. However, super-premium beer is the fastest-growing part of a market that saw volumes increase by 1-2% last year. Super-premium labels also generate attractive margins for manufacturers and are seen as important for a company’s brand image.

“Growth of ‘aspirational’ products is going to be exponential in the next two to five years and if you look at beer, places like micro-breweries and specialty beer cafes are increasingly becoming very popular,”said Harminder Sahni, managing director at Wazir Advisors. “Beer at these places is much more expensive— around about or even more than what you’d pay for a brand like Heineken. So it’s clear that the market opportunity is there for an ‘aspirational,’ well-packaged brand like Heineken, you only need to solve the distribution and availability issues.”

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