*Two global rivals may be exploring sharing of production facilities to push ahead in a challenging market.*
Global brewing giants and rivals Anheuser Busch InBev (AB InBev) and Carlsberg A/S may have discussed the possibility of an alliance centered around sharing of production and distribution platforms in India's rapidly growing beer market, said at least two sources familiar with the developments. Preliminary talks have taken place between the senior management of the two brewers in charge of their Asia-Pacific operations, they added. Both Carlsberg and AB InBev have struggled a bit in their push into one of the fastest growing beer markets in the world. The two brewers have invested in breweries that are operating below optimal utilization as their brands made a sedate start. While sharing of infrastructure between the drinks rivals is not common in the matured markets, there are instances of them working together in Africa to optimise resources in rather difficult operating conditions. AB InBev spokesperson Michael Torres declined to comment on market speculation, while an emailed query to Carlsberg remained unanswered at the time of posting this report. Carlsberg has four operating breweries with a combined capacity of over 10 million cases annually while AB InBev with its one plant has over 6 million cases capacity. With market access in a heavily consolidated market taking time, most of these breweries are operating at just over 50% of the installed capacity in terms of annualized output. Carlsberg along with its two other brands Tuborg and Ockcim Palone sell around 5 million cases, while AB InBev's annual sales led by Budweiser and Tennents is estimated at 3 million cases. This gives them a combined market share of less than 5% in India's beer consumption pegged at 200 million cases in FY10. Overall domestic beer volume jumped 12% in the just ended financial year continuing the trend of robust consumption in the last five years. AB InBev is present in India through a fully owned subsidiary Crown Beers India Pvt Ltd, which controls its only brewery near Hyderabad in Southern India. It also has a joint venture with the New Delhi-based RJ Corp, which controls 51% stake in this entity dealing in contract brewing, marketing, and distribution of brands. While RJ Corp is aware of the discussions between the two global peers, its consent is required under India's JV regulations before AB InBev commits to any substantial new alliances. Carlsberg too has regional minority shareholders in its India unit, they have been allies with the Danish brewer in other south Asian markets for sometime now. Sources said the talks between the two was aimed at limiting the cash burnout in a growing but difficult market. It could possibly kick off with sharing of production at AB InBev's brewery near Hyderabad, where Carlsberg is also coming up with a plant. If the talks fructify, Carlsberg may put on hold its plans to set up the fifth brewery near the southern Indian city. Last year, AB InBev had explored sale of Crown Beers unit but did not find takers due to high valuation. The latest developments come at a time when United Breweries (UB), makers of KIngfisher beer, continued with its strong growth in FY10. UB sold 101 million cases with over 50% market share and extended its lead over the nearest rival SABMiller, which acquired Shaw Wallace Breweries in 2003. Between UB and SABMiller, they control over 75% share od the beer consumption, making it difficult for foreign brewers making independent entry into India's highly regulated market. In context, it must be mentioned that domestic beer consumption continues to be dominated by local brands, with SABMiller banking heavily on the acquired local brands even after a decade-old operations. Talks between AB InBev and Carlsberg may be significant in this backdrop, as it may be a case of two MNCs getting together to push ahead in India, often described as the world's last potentially big beer market. -- Regards Hardik Shah -- You received this message because you are subscribed to the Google Groups ""GLOBAL SPECULATORS"" group. To post to this group, send email to [email protected]. To unsubscribe from this group, send email to [email protected]. For more options, visit this group at http://groups.google.com/group/globalspeculators?hl=en.
