United Breweries Limited has informed the Exchange about Transcript of Analysts/Institutional Investor Meet/Con. Call
1. Department of Corporate Services, BSE Limited, Floor 25, P J Towers, Dalal Street, Mumbai - 400 001 Scrip Code: 532478
Dear Sir,
October 29, 2022
2. Department of Corporate Services, National Stock Exchange of India Ltd., Exchange Plaza, Bandra Kurla Complex, Bandra (East), Mumbai – 400 051 Scrip Code: UBL
Sub: Written Transcript of Financial Results Earning Conference Call
Pursuant to Regulation 30 read with clause 15(B) of Para-A of Part-A of Schedule-III and Regulation 46(2)(oa) of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, please find attached herewith copy of Written transcript of Quarter2 FY22-23 Financial Results Earning call, which was held on Friday, October 21, 2022 @ 04:00 p.m. IST, by way of conference call with Investors and analysts, hosted by Investec India.
Kindly take the same on record.
Thanking you, we remain,
Yours faithfully, For UNITED BREWERIES LIMITED
GOVIND IYENGAR Senior Vice President – Legal & Company Secretary
Encl: As above.
“United Breweries Limited Q2 FY2022 Earnings Conference Call”
October 21, 2022
ANALYST:
MR. HARIT KAPOOR – INVESTEC CAPITAL SERVICES
MANAGEMENT: MR. RADOVAN SIKORSKY – DIRECTOR & CHIEF
FINANCIAL OFFICER – UNITED BREWERIES LIMITED MR. P. A. POONACHA – FINANCE & INVESTOR RELATIONS – UNITED BREWERIES LIMITED
Page 1 of 16
United Breweries Limited October 21, 2022
Moderator:
Ladies and gentlemen, good day and welcome to the Q2 FY2023 Earnings Conference Call
of United Breweries Limited hosted by Investec Capital Services. As a reminder, all
participant lines will be in the listen-only mode and there will be an opportunity for you to
ask questions after the presentation concludes. Should you need assistance during the
conference call, please signal an operator by pressing ‘*’ then ‘0’ on your touchtone phone.
Please note that this conference is being recorded. I now hand the conference over to Mr.
Harit Kapoor from Investec Capital Services. Thank you and over to you Sir!
Harit Kapoor:
Thanks Michelle. On behalf of Investec Capital Services, I would like to welcome you all to
this call and a special welcome to the team at United Breweries for their Q2 FY2023
earnings call. From the management team today we have Mr. Radovan Sikorsky, Director
and CFO at United Breweries and Mr. P. A. Poonacha from finance and investor relations. I
will now hand over to Radovan for opening comments post which we will open the floor for
Q&A. Over to you Radovan.
Radovan Sikorsky:
Good afternoon, to everyone on the call, thank you for joining. I am here together with Mr.
Poonacha and together with him I will be answering some of the questions later on. So just
taking you through the Q2 a little bit. In terms of volume growth, we had 23% in the quarter
V/s the prior year, primarily driven by Rajasthan, West Bengal and Telangana, that is really
a good strong volume performance. The premium segment grew also ahead of the total
portfolio growing at 48% while the total portfolio was around 23%, so a nice growth in the
premium segment. EBIT for the quarter was at 58% driven by volumes, price increase, but
softened a bit by negative state mix. Inflationary pressure on cost of sales continued to
impact gross margins as you can see from the financials contributing to a decline of about
508 basis points to 46.7 as we have in the financials. Strong revenue growth combined with
the cost control though drove EBIT margins growth by about 277 basis points.
Now on the next page of the summary table with its quarterly results you can see the net
sales are up by 18%, EBIT is up 58%, and a margin of 10.8%. On the regional volume
growth, we have seen a strong recovery of volume as I mentioned a 23% growth over the
COVID affected prior year across all markets and when you look at the year-to-date results
67% growth versus all markets, so that is a nice healthy growth. If we look at the particular
regions, the North posted 15% driven by growth in Rajasthan, Haryana, and Uttar Pradesh.
The West posted 22%, the growth driven by higher volumes in Maharashtra state, I still
have to get used to saying some of these states so bear with me, also in Goa, Madhya
Pradesh and Silvasa. The East recorded 52%, growth driven by higher volumes and in West
Page 2 of 16
United Breweries Limited October 21, 2022
Bengal and in the South we posted 21%, growth driven by high volumes in Telangana,
Karnataka, Tamil Nadu and Kerala as well.
Turning to the net sales, this was up 18% in the quarter driven by the 23% volume growth
as I mentioned, and pricing was up 4%. The negative state mix was around 9% with
differential volume growth across the states and with lower levels of revenue. There is an
improvement over the previous quarter. If we look at the net sales for year-to-date results
that is really healthy as you can see a 67% volume growth. Pricing is also quite strong at
6% on the year-to-date financials with negative state mix of around 11% and as I mentioned
before it is the differential volume growth across the states and if you look at the EBIT
breakdown on the next slide, you have the presentation with you, the gross profit growth
was driven by the volume and price increases however impacted by commodity prices and
that is why you see the deterioration in our gross profit margins, but the strong revenue
growth drove fixed cost leverage and hence a good control over our costs base, resulted in
healthy margins of 10.7% year-to-date. If we look at the trend going forward, we continue
to be positive about the category penetration while at the same time driving shares in our
premium portfolio and that is key for us. Inflation pressure on cost of goods sold will most
likely continue in the foreseeable future and hence we will continue to pursue with further
price increases to strengthen our earning, in combination with cost measures to mitigate
these cost impacts. We have good capex plans in place for our breweries to meet expected
volume growth going into 2023 as well. We remain optimistic on the long-term growth of
the industry, let us be clear on that one, and the evolving consumer trends will drive
premiumization, we really still believe in that strongly, so these are a little bit on my
opening remarks. I think we can then pass to the Q&A and we will try and answer all your
questions. Thank you.
Moderator:
Thank you very much. We will now begin the question answer session. The first question is
from the line of Avneesh Roy from Nuvama Institutional Equities. Please go ahead.
Avneesh Roy:
Thanks. The first question is one of your competitors have recently acquired Beer Cafe does
this in any way limit your presence or sales in that retail chain and globally is this common
that if a brand acquires the retail chain also and would you also have some thoughts on this
longer term?
P. A. Poonacha:
You are talking about the Bira acquisition of Beer Café, right?
Avneesh Roy:
Yes?
Page 3 of 16
United Breweries Limited October 21, 2022
P. A. Poonacha:
Beer Cafe is like a pub restaurant business. What they do is not like a brew pub, while the
brew pub is a new concept as you know it is a less than a decade old and it is a very small
niche segment and as such it expands the beer business, but for our business we are
currently not looking at that pub space because like a brewpub business is a very different
business. Considering that Bira has limited clout in the root to market, I think they are
trying to use this as a root to market.
Avneesh Roy:
Your presence and sales is Beer Cafe does it get impacted in any way going ahead?
P. A. Poonacha:
We are present in the Beer Café, but their salience is limited, we can say that.
Avneesh Roy:
Sure and last question is on the gross margin pressure which is quite common for every
company so essentially when do you see good recovery here in terms of barley and
packaging material? We are seeing globally also the Ukraine crisis at least from a raw
material availability perspective things are now resolving and you also spoke on the price
hike so when do you see good recovery in margins? Will it be more FY2024 and H2 will
remain under reasonable pressure in terms of margin?
Radovan Sikorsky:
If I understood you correct, sorry I am not hearing very well through the sound, but if I
understood your question correctly you are asking about the commodity prices for example
like barley and how do we see that going forward is that correct?
Avneesh Roy:
Yes?
Radovan Sikorsky:
So true as you can see in our margins there is pressure on our commodities and I think that
is a global phenomena. You guys all know about that. We will still see some of that
continuing going forward. Yes there seems to be some softening on some of these
components, but going forward I think it is still too early for us to comment on that, so I
still think that pressures on margins will remain and it is a little dependent on our ability to
increase prices and also manage our cost to try and mitigate any of that.
Avneesh Roy:
Sure thanks. That is all from my side. Thank you.
Moderator:
Thank you. The next question is from the line of Jaykumar Doshi from Kotak Securities.
Please go ahead.
Page 4 of 16
United Breweries Limited October 21, 2022
Jaykumar Doshi:
Good afternoon and thanks for the opportunity. Could you provide an update on some early
indicators or response to Heineken Sliver launch how does it compare versus your earlier
launches of Amstel and Heineken Original any numbers or any color could be helpful?
Radovan Sikorsky:
So it is very early days really because we just launched recently but we have received very
good feedback and also responses through social media in terms of the big launch we did in
Bengaluru a few days back. In terms of distribution in outlets, it is on track. We have
selected certain outlets and areas where we want Heineken Sliver to be. That seems to be
going very well, but it is a little bit too early to say. The rate of sales seems to be good as
well with repeat buying but it is still quite small, so I think to give you a bit more
comprehensive feedback, I think we need a few more months in the market for Silver.
Jaykumar Doshi:
Understand. Do you have plans to launch the product in other states some time later this
year or when do you intend to take it to other key states?
Radovan Sikorsky:
We are looking at that as well and we will be doing that. We are looking at how well it is
now performing but definitely there are plans to roll it out to different states as well and that
is still being discussed where and when we would do that.
Jaykumar Doshi:
Understood. Now you have called out for the first time that premium portfolio grew about
48% Y-o-Y volumes but I understand that last year this quarter was impacted on trade
would have been low so how does premium volumes in the current quarter compare versus
September 2019?
Radovan Sikorsky:
Poonacha can you answer that one. I do know that far back in 2019.
P. A. Poonacha:
From pre-COVID days to now the premium salience has gone up. It has gone up from 6%
to about 8%.
Jaykumar Doshi:
Understood that is helpful and final one your notes to accounts indicate that there is no
impact in Tamil Nadu and Andhra Pradesh because of the changes that you have introduced
and I guess it is almost more than three to four months now so should we assume that this is
a steady state now and there will not be any disruption in those markets or any adverse
impact on volumes or are you still cautious?
Radovan Sikorsky:
I think if it is still early to say that there will not be any impact. So far there has not really
been any impact but we are monitoring that carefully. Whenever you do a new sort of a
Page 5 of 16
United Breweries Limited October 21, 2022
route to market, it takes a while to shape out what will happen, so far, it seems okay in
terms of invoicing and the volumes but we closely watching that market as we progress.
Jaykumar Doshi:
That is helpful. Thank you so much. I will go back in the queue.
Moderator:
Thank you. The next question is from the line of Pritesh Chheda from Lucky Investment
Managers. Please go ahead.
Pritesh Chheda:
Sir what is the volume growth on September 19 base and second did we get any price
increase between Q1 and Q2 in any of the states and if you could call to the blended price
increase?
Radovan Sikorsky:
Okay I heard the first part of the question so I will answer that one and may be you can just
repeat, because of the bad audio, you wanted to ask about how we are comparing volumes
versus 2019, is that correct yes?
Pritesh Chheda:
Yes that is the first question yes?
Radovan Sikorsky:
So if we look at volumes versus 2019 in the quarter we were slightly down at around 4%
versus 2019, but a lot of the impacted is on account of Andhra Pradesh, in terms of this
policy change that happened there about a year ago so it is impacted by that and if you look
at the other states there is also a good growth versus 2019, but still on a year-to-date number
we have grown 3% versus 2019 and that is where we are very positive about the category.
That is how quickly it has actually recovered and we are back to growth versus a
normalized 2019, that is quite good news for us.
Pritesh Chheda:
My second question was Sir did we get any price increase between the Q1 and Q2?
Radovan Sikorsky:
So you can see that the pricing in Q1 has gone up like 6% so that pricing has gone through.
We have looked at taking some pricing in Q2 also, succeeded in Punjab, but of course the
pricing that we took in Q1 are now flowing through into Q2 right and because it was taken
at different times within Q1, so that is why we able to see the increase in Q2 as well.
Pritesh Chheda:
So what is the incremental price increase that we have got in Q2 in Punjab or let us say the
blended company level?
Radovan Sikorsky:
Sorry I did not hear that. Poonacha can you take that one. I could not hear the question.
Page 6 of 16
United Breweries Limited October 21, 2022
P. A. Poonacha:
It is 3%.
Pritesh Chheda:
3%?
P. A. Poonacha:
Yes.
Pritesh Chheda:
Thank you very much.
Moderator:
Thank you. The next question is from the line of Himanshu from Dolat Capital. Please go
ahead.
Himanshu:
Thank you Sir. Thanks for the opportunity. Sir can you help me what will be your market
share during the quarter and last quarter also?
Radovan Sikorsky:
Total market share.
Himanshu:
Yes total market share?
P. A. Poonacha:
The market share is around 51% plus.
Himanshu:
What would it be Sir in the last quarter?
P. A. Poonacha:
Similar. We do not give the exact number because it is basically done on approximation
based on data available and after the CCI order, we do not track market share specifically in
many states other than where it is available in the government cooperation websites.
Himanshu:
Okay and secondly other expenses have gone down on a Y-o-Y basis by 3% and this is
despite a 23% volume growth on a Y-o-Y basis and there has also been inflationary
pressure on freight, etc., front so what is driving this decline in other expenses during the
quarter?
P. A. Poonacha:
As you know there have been a lot of initiatives with respect to cost cutting, now that are
margins are squeezed because of the inflationary pressures, so the level we are at, is what
will stand going forward. You cannot see anything better, but the level at which we are will
be what we will see going forward?
Himanshu:
So there is no one off or anything in this particular line item during this quarter?
Page 7 of 16
United Breweries Limited October 21, 2022
P. A. Poonacha:
No one offs.
Himanshu:
Okay and can you just tell us Sir what will be A&P spend as a percentage of revenue during
the quarter?
P. A. Poonacha:
It remains constant as a percentage of topline as it was in the last four or five quarters.
Himanshu:
Okay and Sir what are the initiatives which are driving such significant decline if you can
just highlight a few of them?
P. A. Poonacha:
Decline in cost.
Himanshu:
Yes decline in costs in other expenses line item?
P. A. Poonacha:
Like I said most of our administrative costs are being relooked at and this has helped us
reach a new level, and it would remain at that particular level going forward.
Himanshu:
No issue and that is it from my side and all the best.
Moderator:
Thank you. The next question is from the line of Krishnan Sambamoorthy from Motilal
Oswal Institutional Equities. Please go ahead.
Krishnan S:
My question is on I again see that West Bengal and Haryana this quarter doing
handsomely? Now in that states like UP, West Bengal and Haryana because of differential
taxation between beer and spirit are we also seeing a pickup in the erstwhile non seasonal
consumption of beer as well because beer is relatively cheaper than spirits in the states.
P. A. Poonacha:
I mean we are better off in West Bengal than we are in the past because the gap between the
pricing of spirits and beer vis-à-vis alcohol content has now narrowed down so we are
looking at better time now but still spirits are favorably taxed. If you compare alcohol
volume by volume, spirits are taxed far lower than what beer is so we cannot say that we are
fully out of the woods, but we are better off than what we were.
Krishnan S:
Okay that is useful. My question was more is the seasonality of beer consumption also
reducing a bit compared to the past in these states?
Page 8 of 16
United Breweries Limited October 21, 2022
P. A. Poonacha:
Seasonality yes. Like I said the pricing has put us in a better situation, so the seasonality
effect has come down but it will still be there that is what I was trying to reiterate because
still spirits are taxed at a lower rate when you compare it by alcohol volume.
Krishnan S:
Okay that is clear. My second question is you indicated that the demand is great and also
about capex plan? Can you just quantify that number for FY2023 and FY2024 your capex
plan?
P. A. Poonacha:
Yes, considering we are an operating company of Heineken, our capex plans are done from
January to December. For the coming January to December the capex spend we are looking
at somewhere in the region of Rs.350 Crores.
Krishnan S:
That is it from my side.
Moderator:
Thank you. The next question is from the line of Litika Chopra from JP Morgan. Please go
ahead.
Litika Chopra:
Thanks for the opportunity. Sir my question is a little more medium term rather than
welcome to United Breweries I wanted to just check with you is there going to be
disproportionate focus to drive the premium part of the portfolio now which is also
witnessing more competition and does not in that process you would kind of put lesser
focus on the mass beer segment and a related question is in that context how should one
think about profitability? UBL had generated almost 16% to 17% operating margins in the
past? We are now currently hovering between 12% to 13%, there is a lot of gross margin
pressures but assuming we go back to normalized levels of gross margin would A&P
spends need to increase disproportionately to drive the premium mix and probably we need
to settle with a more like mid teens kind of margins or do you think the business over the
next three to four years has the potential to go back to those high teens margins any initial
thoughts or the way Heineken is approaching the other India business now?
Radovan Sikorsky:
So I will take that one, thank you for the question. So in terms of premium, we can see that
there is appetite for premium products also in India and we want to be strong in that
segment as the leader. So disproportionate growth, well yes, we for sure we would like to
achieve that. Lose focus on our main-stream, definitely not. Kingfisher remains the bread
and butter of our company and it is an extremely important brand for us so the focus
remains. Actually, when we look going-forward we will continue doing strong activities
around the Kingfisher brand so that needs to be clear. As you know we also do extensions
on Kingfisher like Kingfisher Ultra, so it is a great brand. In terms of gross profit margins
Page 9 of 16
United Breweries Limited October 21, 2022
and the impact of the growing premium, apart from main stream so we are also looking at
driving more margin via premium, but currently premium is still at quite a small scale, also
the pricing is a challenge there, because of the smaller scale we need to work through that in
terms of cost of sales for the premium brands in order to improve those margins, but that
will come with scale, no doubt about it and it will help our gross margins. In the longer-
term on the gross margins of course it is our plan to get back to previous levels and we
believe we can get there. It is just that as we now currently under inflationary pressures that
are seen across the globe, hence we are a bit under pressure with gross margins and taking
up prices in India, we try and do what we can State by State and we will continue to do that,
but sometimes it is a little bit more difficult in certain states to take pricing and therefore
there can be a bit of delay in catching up on some of the cost of sales growth.
Litika Chopra:
Sure this is helpful and non gross margin the other cost whether it is AMC or whether it is
the fixed costs and so Mr Poonacha did refer to some of the cost saving initiatives? There it
a lot of extra cost that you can take away from the system still in your view? Can it be run
even more efficiently? How do you think about that?
Radovan Sikorsky:
Definitely, we can still do more in terms of that. I think UBL has done a good job on
driving costs down and as the previous comments from Poonacha showed the cost saving
achieved. There are definitely more opportunities, particularly still in productivity at the
breweries and also bottle returns and these type of things that we can drive cost downwards,
so as I step into this role and I have only been there for it is like four to five weeks I will be
reviewing that as well, but I am sure when I compare it to others there are opportunities for
more.
Litika Chopra:
Sure and the last question from me is that given your experience in different markets with
Heineken when you look at the per capita consumption levels, demographic profile, the
constraints that you see on from a regulation standpoint what is the realistic target for
premium share in the overall revenue mix in your view in your portfolio may be five years
down the line can it be 20% or 30%? What could be that realistic share?
Radovan Sikorsky:
In terms of the per capita consumption obviously we see a lot of opportunity there as well
and that is why we are in the market and we want to make sure that the category grows in a
responsible manner. In terms of premium share, you are right quoting 20% to 25% would
be something to aim for in terms of premiumization as a category so we can see that the
trend is there. Like I mentioned 48% growth in the quarter is excellent so I think to get to
those sort of 20% mark is definitely achievable.
Page 10 of 16
United Breweries Limited October 21, 2022
Litika Chopra:
Great. Thank you so much and wish you the best in the new role.
Moderator:
Thank you. The next question is from the line of Pratik Rangnekar from Credit Suisse.
Please go ahead.
Pratik Rangnekar:
Thanks for the opportunity Sir. Just one clarification on the volume growth versus pre
COVID so when you had called out 8% growth over pre-COVID in 1Q was AP impact in
the base then as well and excluding AP what would be the growth will it be possible to call
that out please?
Radovan Sikorsky:
Sorry I did not hear that properly. Poonacha can you try.
P. A. Poonacha:
I will just give you a vis-à-vis 2019 Andhra Pradesh used to be 6% of our volume salience
with the drop seen because of the change in policies there, it is down to 3% of our volume
salience.
Pratik Rangnekar:
Okay got it thank you and just one more question. Usually we complete the buying of
barley for the year in advance? Is that now done till the next peak season and how much
higher is the purchase price for say this year versus last year?
Radovan Sikorsky:
If I understood correctly you are asking how secure is our barley till the end of the year or
for this year is that correct?
Pratik Rangnekar:
Yes that is right? Are we done with the barley buying for the year and how much higher is
the purchase there?
Radovan Sikorsky:
So yes, we are secured of course for 2022 and we are already looking into 2023 to secure
ourselves. Obviously, the barley crop will come through I think it is around March or April
next year. Prices have gone up. You have heard my predecessor talking about the price
increases that were there. There has been a slight dip recently in the markets, but the
pressure still remains and the prices are definitely higher than they used to be in the
previous years. We have procured quite a lot, but there is still an opportunity if prices do
come down so that we can pick up at better pricing at the backend and going into the next
year. It is still difficult to tell in these volatile times what is going to happen. Poonacha
anything else to add on that.
P. A. Poonacha:
I think you have covered.
Page 11 of 16
United Breweries Limited October 21, 2022
Pratik Rangnekar:
Thank you and all the best.
Moderator:
Thank you. The next question is from the line of Karan Taurani from Elara Capital. Please
go ahead.
Karan Taurani:
Thanks for taking my question. My question is around the Heineken Silver launch which
was there? Do you not think there could be some kind of cannibalization in the economical
premium category because Kingfisher is around the same price point your thoughts on that
please?
Radovan Sikorsky:
I guess you are talking against price points versus ultra. The way we approach it is also
different consumers choose different brands, Silver is also quite a bit marked for the
younger sort of consumer sort of the 25 to 30 category or 20 to 30 category so I think we
feel that there is a place for both brands in the market, particularly with the fact of how
quickly premium is growing so the opportunity exists for both brands to work together in a
growing market so I am optimistic for both.
Karan Taurani:
So you do not believe growth for Heineken Silver will come at the cost of loss for
Kingfisher Ultra or something of that some sort because is this the way to kind of as you
said, you told in a detailed manner that you want to focus on both the brands Kingfisher as
well as Heineken but these of strategies can we see this further as well wherein Heineken is
kind of made to stand with Kingfisher in a particular range and that actually leads to a loss
of Kingfisher’s market share in the future unintentionally?
Radovan Sikorsky:
I did not hear that properly unfortunately.
Karan Taurani:
My question basically was that can we see this coming more up in the future as well
wherein you have got brands of Heineken standing on par with Kingfisher’s brands in the
premium space which is available economical premium or higher premium range and that
could lead to unintentional loss of market share for Kingfisher?
Radovan Sikorsky:
In terms of total market percentage share, potentially yes, because the premium is growing,
but Kingfisher is also playing with its Ultra brands in the premium segment. The thing is we
are optimistic about the total category growth right. That is the big opportunity for beer and
Kingfisher as a the main stream brand has a big role to play in this so I would not be too
much concerned about the fact that there is a bit of decline on the back of a growing
premium segment so if you look at total category there would be, but you know when we
dissect categories, we then look at our market share growth within those categories so we
Page 12 of 16
United Breweries Limited October 21, 2022
look at our market share within main stream and we look at our market share within
premium and that is important for us as well that within main stream Kingfisher will not be
losing and within premium we are gaining share and the category is growing.
Karan Taurani:
Right thank you. That is it from my side.
Moderator:
Thank you. The next question is from the line of Vishal Punmiya from Nirmal Bang
Institutional Equities. Please go ahead.
Vishal Punmiya:
Thank you. I just wanted to understand or hear your thoughts on the operating margin
profile of the company for the next two to three years assuming that the gross margins
revert back to the 2018-2019 levels and the kind of sales that you are doing currently are
sustainable? Would you rather see a better margin profile or would you put all those back
into growing the premium portfolio or the other new launches that you do?
Radovan Sikorsky:
Of course, we want to grow our operating profit margins going forward and I am not going
to really comment on what we believe the margins will be in two to three years time. It is a
little bit difficult. We do internally forecast that. It is based on what we know. Like I
mentioned in terms of the gross profit margins. You see the decline, we are aware of that
and we are working with our teams in terms of procuring at the right prices, getting the best
prices, securing supply and also having quality supply. It is difficult to say at the moment
how long it will sustain, but like I said there could be some shoots of hope going into 2023,
but at the moment it is still anyone’s guess in terms of that. Now again on the premium
versus main-stream, premium should bring in the medium to longer term better margins
right because of the price points, but we need to work also on the cost part of that in terms
of the cost of sales part, get the scale so then that comes. We just need to be a little bit
patient on that one, but as premium grows and as our scale grows it can get just be very
good for our margins going forward.
Vishal Punmiya:
Sure. Secondly any update for the current quarter in terms of Delhi how the change in
policy or changes in policy impacting the overall environment in Delhi? How is that
panning in 3Q?
Radovan Sikorsky:
Poonacha may be you can give it a little bit of an update on those changes in Delhi.
P. A. Poonacha:
In Delhi effective August 2022, the state government has reverted back to the policy they
had prior to November 2021. The previous policy was every manufacture had to have their
own depot within the State of Delhi to bring in the beer that are manufactured outside
Page 13 of 16
United Breweries Limited October 21, 2022
Delhi, because there is no production facility within Delhi, and then distribute it, but in the
interim the manufacturer was allowed to have one super distributor to do the job, but now
since the announcement the state government has made, that they will revert back to the old
policy with the open statement that this is only temporary and they will review what needs
to be done going forward. With that being the case. with the Government making such
statements. people are not ready to invest, so the market is very volatile. We really cannot
do any kind of projection in this kind of a scenario.
Vishal Punmiya:
Understand. Thanks team and Happy Diwali to everybody.
Moderator:
Thank you. Ladies and gentlemen, this would be the last question for today which is from
the line of Jaykumar Doshi from Kotak Securities. Please go ahead.
Jaykumar Doshi:
Thanks for the opportunity. When I look at your volumes in the first six months of this
financial year, it is marginally higher than the same period of 2019 and you just called out
that we have gained market share so it implies that overall beer industry volumes have
barely grown versus pre-pandemic level in this six month period? When we look across
other categories, we have seen pent up demand and much higher growth rates so why do
you think this category has not seen any pent up demand at all and why is it lagging most
other consumption categories wherein prior to pandemic this category was growing faster at
least in volume terms than a few other consumption categories so any market study or
ground research that you may have done that explains this disconnect?
Radovan Sikorsky:
So like Poonacha mentioned, yes in terms of market share, we are broadly flat right year-to-
date so the market we see growing at around 3% in total industry. I cannot compare to
others categories because I do not have the facts, but I think looking at our industry we also
just need to bear in mind the impact that policy changes have on the market, correct, so I
think Poonacha mentioned earlier, a market like Andhra Pradesh which was a big volume
for us in the past, due to the policy change, there has been a significant decline in the
volumes and I think it is in the region of 70%, so you need to take into account that sort of
negatives within the category, so if you look at the other States, if you look at growth rates
in Uttar Pradesh are 48%, Telangana which is growing in the region of I think it was around
15% and some of the others as well, we see a lot of opportunity and growth in the category.
The thing is you need to just take into account some of these policy changes and the impact
that they have on particular States, so we are very bullish about the beer category going
forward.,
Page 14 of 16
United Breweries Limited October 21, 2022
Jaykumar Doshi:
And what is the base growth that you think the capable growth should be now that we have
normalized? Should it be like mid single digit, high single digit or do you think double
digits is also possible base case assumption that you have?
Radovan Sikorsky:
Sorry really I did not catch that question in terms of the audio.
Jaykumar Doshi:
What is the base case assumption for the category growth is appropriate in your view? What
should be the normalized beer category growth going forward? Should it be 5% or 7% or
more closer to 10% kind of volume growth?
Radovan Sikorsky:
If I understand correctly what do we believe how the category will grow in the coming
years is that the question?
Jaykumar Doshi:
That is correct thank you?
Radovan Sikorsky:
Again, these are just assumptions, but we believe that the growth rates of high single digits
is definitely a possibility and hopefully higher. Of-course inflation does play a bit of a role
on this, but still like I said the category is going to grow, I am sure and we think that the
sort of rates of strong single digits, we can see going forward.
Jaykumar Doshi:
Understood. Thank you so much. This is a very helpful.
Moderator:
Thank you. Ladies and gentlemen as that was the last question for today, I would now like
to hand the conference over to Mr. Harit Kapoor for closing comments.
Harit Kapoor:
Thank you Michelle. On behalf of Investec Capital Services would like to thank the
management of United Breweries for taking out time for this call as well would like to
thank all the participants for joining into this call. I would now like to hand over to Radovan
for his closing comments. Over to Radovan.
Radovan Sikorsky:
Yes, thank you and hopefully next time when we have this call, I will be in Bengaluru and I
will have a better audio connection because it has been difficult calling from London
through a mobile phone and hopefully I can catch up with a lot of you. Just on closing, like
I said, yes there is pressure on margins, but we as a business, we will manage that, going
forward in terms of what we can do with pricing, cost, etc., and with our brands. We have
strong brands in place so we have the ability to play and grow the category going forward
and on that we remain optimistic that the category will continue to grow. There will be
premiumization and that can in the medium to longer-term, just be good for our margins
Page 15 of 16
United Breweries Limited October 21, 2022
going forward, that would be my closing remarks and thank you every one for joining us
and hope to see you soon in India.
Moderator:
Thank you. On behalf of Investec Capital Services that concludes this conference. Thank
you for joining us and you may now disconnect your lines.
Page 16 of 16