IR presentation 2011
Brewing a success in India
Guido de Boer CFO United Breweries
UBL: Key facts and figures
10
54%
1.5
18
39%
75%
Source: FY2011 company Information, Industry Reports
million hectoliters
market share, the largest brewer in India
litre per capita consumption
owned breweries, and 10 contract
breweries
share for the Kingfisher brand - it is
synonymous with Indian beer
owned by Dr Vijay Mallya and Heineken
India and the Beer opportunity
Demographic dividend to be reaped Population increase fuels potential for rapid beer market growth
Source: United Nations (2011), McKinsey Global Institute (2007)
India will have the world’s largest
population by 2025
In 2030, India will have over 1.5bn
inhabitants
Net increase in working population
of 270 million by 2030
In 2030:
20% of the world’s below 25 year
olds will be Indian…
…compared with 11% from China
Significant growth in the legal
drinking age population in India
1%
2%
11%
20%
0% 10% 20% 30%
Russia
Brazil
China
India
Below 25 year olds as % of total
population in 2030
0 500 1,000 1,500
Russia
Brazil
China
India
Population in 2030
mln
Consumption is set for strong growth A significant middle class will emerge supporting increased spending power
Source: McKinsey Global Institute (2007)
Beer will become
increasingly affordable
to a growing number
of people in India
Increase in number of
upper & middle class
households of 123m by
2025
Middle and upper class
will drive 12.5x
consumption growth
Higher income
expected to support
significant increase in
discretionary spend
Household income brackets thousand, Indian rupees, 2000
101.1
91.3
10.9
2.4
1.2 Globals (>1,000)
Strivers (500-1,000)
Seekers (200-500)
Aspirers (90-200)
Deprived (<90)
2005
49.9
93.1
94.9
33.1
9.5
2025
Number of households million
4.1
8.5
2.1
1.0
1.2 Globals (>1,000)
Strivers (500-1,000)
Seekers (200-500)
Aspirers (90-200)
Deprived (<90)
2005
2.4
11.9
24.6
16.5
14.1
2025
Aggregate consumption trillion, Indian rupees, 2000
+123m
12.5x
Beer consumption in India is well below
other ‘BRIC’ countries
The Indian beer market has grown strongly over the past 5 years from a low base
Source: Canadean (2011)
0.8 0.9 1.1 1.2 1.3 1.5
34.5
64.5
76.1
0
20
40
60
80
2005 2006 2007 2008 2009 2010 China Brazil Russia
Per Capita Beer Consumption
PCC in lit
res
India
CAGR 14%
Today’s beer consumption is very low India is far below other emerging markets of similar income levels
22% 87% Beer
Spirits
Wine 5%
8%
<0.5%
78%
Per Capita Beer
Consumption at
comparable GDP
India
Comparable Markets
Share of alcohol
consumption
1.5 liter 20 liter
Note: 2010 data of India versus markets with a similar GDP per capita
High prices & low availability
Two key reasons
AVAILABILITY
65,000 licensed outlets
across the country
1 per 18,000 people
In China: 1 per 300 people
Beer is not the alcoholic beverage
of the common man
AFFORDABILITY
Highest duty in the world
Duty not set according to
alcohol content
Expensive alcoholic
beverage
An Indian has to work up to 7x as
long to afford a beer
India is the only BRIC where a beer
is more expensive than a Big Mac
Affordability
7
8
18
51
0 20 40 60
China
Russia
Brazil
India
Minutes work for a beer
0.2x
0.5x
0.5x
1.1x
0.0x 0.5x 1.0x 1.5x
China
Russia
Brazil
India
Beer relative to Big Mac
Beer prices in India are very high
Taxation is significantly higher
than other countries
Beer is taxed significantly higher
than hard liquor
Excise is highest among BRICs and drives preference for hard liquor
Affordability
0% 20% 40% 60%
China
Russia
Brazil
India
Taxation of Beer
Excise Duty VAT and other tax
29
75
- 50 100
Bagpiper
Kingfisher Premium
Relative pricing vs spirits per unit of pure
alcohol
2.6x
Indicative rates as % of consumer price. VAT is only
levied on value added, so effective rate is lower. Based on consumer prices in Tamil Nadu
12% 14%
31%
Liquor shops Permit rooms Beer shops
Availability Case Study: Mumbai Beer shops
Source: Company estimates. Percentages depict volume growth rates for FY11
New Policy established
Since the 1970’s no new licenses
have been issued for liquor shops
In 2006, the Maharashtra
government started to issue ‘beer
shop’ licenses for outlets that can
only sell beer and wine, but not
spirits
Number of beer shops has increased
sharply…
…driving high growth in beer shop
volumes
…accelerating growth of the overall
market
190 215
300
Mar10 Mar11 Nov 11
8%
3%
4% 15%
Liquor shops Permit rooms Beer shops Industry
A highly regulated market Leveraging the existing framework
Excessive State regulation and intervention
Route to market
Economics, need to have a brewery in each state
Pricing
India is not homogeneous country
27 uniquely different states
Ban on advertising alcohol
Difficult to build new brands
Requires ability to operating in very different
structures
Source: Canadean (2011), World Bank (2011), Company forecasts
India is at the start of the growth curve
Income growth will drive per capita beer consumption
Demographics will fuel further market
growth
UBL expects to grow volume at an average annual rate of 15% over the next five years
By the end of 2015, India is expected to reach 3 liter per capita
Kenya
Nigeria
Vietnam
India
Philippines
China
Colombia
Brazil Mexico
Russia
0
20
40
60
80
$0 $5,000 $10,000 $15,000 $20,000
Per
Cap
ita B
eer
co
nsu
mp
tio
n
GDP per Capita (in USD, PPP)
Beer consumption versus income level
Capitalising on UBL’s strengths
for growth
Market leading position in India
UBL’s leadership is undisputed
Strong market position will continue to drive economies of scale and superior
returns
All time high market share of over 54%
UBL is more than two times its
nearest competitor
UBL 54% SAB
23%
M Meakins 4%
Mt Shivalik 4%
Carlsberg 4%
AB-Inbev 1%
Others 10%
0%
10%
20%
30%
40%
50%
On a brand basis the leadership is even more apparent
All-India market share FY11
What is this leading position resulting from? UBL’s Competitive Advantages
UBL has been able to achieve its market leadership by
leveraging four competitive advantages:
Brands
Manufacturing footprint
Route-to-Market
People
The strength of the Kingfisher Brand is
unparalleled
Iconic brand – KINGFISHER is
synonymous with beer for Indian
consumers
No other beer brand comes
close:
Brand Equity among young consumers:
Kingfisher is India’s most liked
beer brand by far. No.2 has only
172k fans
On a global basis, Kingfisher is
the most liked alcohol brand
after Heineken
Leaving all global beers such as
Budweiser and Corona, and
renowned spirits as Smirnoff
and Bacardi well behind it 0% 20% 40% 60%
Golden Eagle
Tuborg
Sandpiper
Kalyani
Budweiser
London Pilsner
UB Export
Fosters
Royal Challenge
Kingfisher
All-India market share Mild Beer FY11
Brands in green are part of UBL portfolio
>6x
But it is not only Kingfisher…
…UBL leads across all segments
Mumbai mild beer portfolio Q2FY12
Economy
Mainstream
Premium
Super
Premium
80
100
135
170+
PR
ICE IN
DEX
Key brand Segment
share
65%
49%
70%
81%
Relative
share
0.25x
0.96x
0.23x
0.19x
No.2
Corona
Carlsberg
Fosters
Golden Eagle
Investing behind the brand Leveraging aspirational properties in fashion and sports
Cricket: Indian Premier League
Formula One: Force India
Football: Kingfisher East Bengal
Fashion: Kingfisher swimsuit calendar
Heineken Building brand equity for the future
Selective launch in key metros: Mumbai, Delhi, Bangalore, Kolkata and Goa
Gradual roll-out based on: 1. Perfect execution
Targeted Distribution
Premium Visibility
Cold & Fresh Stock management
2. Driving awareness & be part of the conversation.
Strong focus on digital media
3. Set benchmarks at every touch-point - Quality over quantity
K2 bottles
World class PoS materials
4. Leveraging UBL strengths in market
IPS segment is still a very small part of the overall market
Manufacturing network across all major
states
UBL brewery footprint Unique brewery footprint
In line with the requirements of
a complex regulatory
framework
18 owned breweries and 10
contract breweries
Closeness to market a critical
success factor
Freight costs
Import and export duties
Freshness
Ability to manage contract
brewers in key states
Owned breweries
Contract breweries
Best Route to Market
India has 27 states that have distinctly different routes
to market
Ability to manage this complexity is one of UBL’s
core strengths
Established distributor relationships
Group scale - with 60% share in spirits and 54% in
beer - provides significant benefits
Most distributors have been UB Group partners for
multiple decades
The best distributors and trade partners aligned
with UB Group
In distribution…
Best Route to Market
Leadership in cold chain management
Point of sale visibility
Must stock brands provides portfolio
benefits
Economies of scale
…as well as in retail
Fastest selling brands
Cold stock
freshness
People
Most experienced management in the industry Customer facing management has been with the group for 20+ years
Very low churn rate
Strong background in dealing with regulatory environment and market complexities
Very difficult for foreign entrants to replicate
Chairman’s added value
Dr Vijay Mallya provides significant added value as ambassador for the industry’s interests and is a member of parliament
UBL has a proven track record
0
2
4
6
8
10
12
FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11
Exceptional volume growth
UBL Sales volumes
In Million Hectoliters
5x
UBL volumes increased five fold in less than a decade
Performance highlights FY2006-2011
Continued outstanding performance
Sales up with an average 32% y-o-y EBITDA exceeds Rs 4 billion
Net Profit has grown with 54% CAGR EBIT has quadrupled since FY2006
0
10
20
30
40
2006 2007 2008 2009 2010 2011
0.0
1.0
2.0
3.0
4.0
2006 2007 2008 2009 2010 2011
0.0
0.5
1.0
1.5
2.0
2006 2007 2008 2009 2010 2011
-
1.0
2.0
3.0
4.0
5.0
2006 2007 2008 2009 2010 2011
All amount are in Rs bln, for year ending 31 March
Closing remarks
In Summary…
Indian beer market growth opportunity unparalleled in
the world
UBL is the clear market leader with strong segment
leadership positions
UBL expects to grow volume at a CAGR of 15% over the
next 5 years
A superior route-to-market and manufacturing footprint
provides consumer reach and scale benefits
Strong fundamentals in place to continue strong profit
growth
Questions, please?