The Indian beer market was estimated to be 6.7 million hectoliters (hl) in 2002-03.

As seen in figure 1, beer consumption has been growing rapidly at a CAGR (Compound Annual Growth Rate) of 7 per cent over the last 9 years, while growth in 2002-03 was 11 per cent. Indian growth rates compare favorably with the global beer industry, which grew by about 2.6 per cent in 2001-02 Apart from providing strong growth, India also provides attractive profit margins due to the consolidated nature of the industry a comparison between China and India, for example, reveals that the Chinese beer market is marked by intense competition, with several players being marginalized. In China there are about 400 brewers, of which the top 10 account for only 45 per cent of the market. This has resulted in low profit margins for the Chinese beer players. In contrast, the top two beer players in India account for about 75 per cent of beer sales in India and the industry stands a chance to see more consolidation in the near future. The effect of this consolidation can be seen in the fact that beer prices in India rarely go down with the competitive pressures of new product or brand launches. In the past, whenever beer prices have gone down, it has been due to either the lowering of duties by the government or the deregulation of distribution (leading to lower margins for the distribution channel partners). In neither scenario have the margins or revenues of beer manufacturers been affected. Per capita consumption in India is hovering around a measly 0.5 litres per annum. These figures pale into insignificance if one compares them with those of Czech Republic that has the highest per capita consumption of 156.9 litres per annum (see box) Per capita consumption is directly related to the taxation, according to an industry observer. For instance, in Maharashtra there is a direct 100% excise duty on Beer. An equivalent 650 ml bottle is available for approximately Rs 8 in China. Which is why the per capita consumption in China is a high 16 litres per annum. The Indian beer market has been growing rapidly over the last 10 years, due to the positive impact of demographic trends and expected changes, like: Rising income levels: India is home to nearly one-sixth of the global population and is one of the most attractive consumer markets in the world today. Various research studies have shown that a rise in the income levels has a direct positive effect on beer consumption. The National Council for Applied Economic Research (NCAER) projects India's 'very rich', 'consuming' and 'climbers' classes to grow at a CAGR of 15 per cent, 10 per cent and 2 per cent respectively. With this growth in income levels, Indian beer consumption is expected to continue growing, at the very minimum, at the growth rates witnessed in the last decade. Changing age profile: As a consequence of the high birth rates prevalent until the 1990s, a large proportion of the Indian population is in the age group of 20-34 years. This age group is the most appropriate target for beer marketers. This population trend will give a further boost to the growth of beer consumption in India. Many global players are planning to enter the Indian beer sector and they realise that a partnership with a local player is important to establish a successful presence in India in a short time frame. Changing lifestyles: A deep-seated traditional social aversion to alcohol consumption has been a traditional feature of the Indian society. However, as urban consumers become more exposed to western lifestyles, through overseas travel and the media, their attitude towards alcohol is relaxing. Social habits are undergoing a transformation as mixed drinks are

becoming more popular. The greatest evidence of this trend is the increase in beer consumption among women. More and more women are consuming beer the penetration in metropolitan areas is almost twice as high as the penetration in other large cities implying that the greater tolerance towards alcohol consumption in metropolitan areas facilitates the consumption of beer. With increasing urbanisation, this acceptance is only going to rise. Reduction in beer prices: The Indian consumer typically values an alcoholic beverage on the basis of its 'kick' factor versus its price. The following two factors therefore, affect the market for beer. Firstly, as most states do not have a differential tax structure based on the alcohol content, strong beer... As far as the Light beer segment goes, there is no existing competition in the market. However, a number of well-established brands, especially lagers, have a significant market presence. Chiefly Kingfisher - India's celebrated malty draught lager since 1857; voted 'The World's Best Lager' in Stockholm and Chicago. In India the future of beer industry is very much optimistic because: 1. India has predominantly a warm/hot climate 2. The beer-drinkers in the country are much younger than the average beer-drinker elsewhere in the world. This makes them more likely to carry the brand with them for a lifetime. 3. Increasing exposure to beer and wine drinking, mainly due to media and consumer mobility. All these factors combined make the scenario very promising for beer industry and are 'in sync' with their strategy for India. UB (United Breweries Ltd.) is the market leader in the Indian beer market with a 40% market share. Its flagship Kingfisher brand alone commands 25% market share. The company has however been focussing on strong beer, which has driven growth. The company introduced its strong beer, Kingfisher Strong during the year 2000 in the selected market of Maharashtra and Karnataka. The move came as a reactive move following increasing shift of consumers towards strong beer, a trend started by Shaw Wallace. While the overall market grew marginally by 2%, the strong beer market grew at 8-10% during the year at the expense of lager beer. The market is now skewed towards strong beer with more than 60% of the market being strong beer market. Beer mix today is approximately 60 percent lager beer and 40 percent strong beer. This ratio was very different 4 years ago. Over the last four years strong beer has been the fastest growing segment. This was completely usurped by Shaw Wallace. As of today while Shaw Wallace has approximately 28 to 30 percent of the strong beer market, UB already has achieved 14 to 15 percent of that strong beer market and is growing very fast. It launched Kingfisher Strong only in May of 2001. And once it is able to takeKingfisher Strong national, it will try to match Shaw Wallace's market share over the next few years. Apart from Kingfisher , and Foster's Beer, the other brands in the Indian market are Carling Black Label, Carlsberg, Dansberg, Golden Eagle, Guru, Maharaja Premium Lager, Haake

Beck, Haywards 2000 Beer, Haywards 5000, Haywards skol, Flying Horse Royal Lager, Taj Mahal, Heinekin, Hi-Five, Ice, Kingfisher Diet, Kingfisher Strong, Kirin, KnockOut, Legend, London Diet, London Draft, London Pilsner, Royal Challenge, San Miguel Lager, Sand Piper, Strohs and Zingaro. The major brands which belong to large groups in the industry (apart from UB) are Shaw Wallace - Royal Challenge Premium Lager, Haywards 2000 Premium Lager, Haywards 5000 Super Strong, Hi-Five and Lal Toofan. South African Breweries India Ltd. - Knock-Out, Continental and Three Lions, a new brand that was launched in the autumn of 2001 by SAB in Uttar Pradesh, Chandigarh and Himachal Pradesh. Other possible competition Radico Khaitan and beer international Interbrew have formed a joint venture to distribute Interbrew's Beck's brand of beer in India. The premium lager beer segment in India will be targeted. Radico has also announced the launch of its international division. The beer-drinkers in the country are much younger than the average beer-drinker elsewhere in the world. This makes them more likely to carry the brand with them for a lifetime. Also, as the target audience becomes younger, a light beer is expected to attract first-time drinkers, since it is much milder than any of the other beers in the country. A lot of new variants promise to gain prominence, but mainly in niche urban segments. The sophisticated consumer who drinks beer for the experience and not to get drunk will lap up ice beer or light beer. In urban centers, apart from first time users companies are also targeting women, who as 'the times they are a changing,' are entering the market for beer. Essentially, women shy away from beer consumption because it is associated with calories, and has traditionally been a buddy drink, associated with pot-bellied men sitting at bars and shooting darts.

Liters Per Person Beer in comparison with other Liquids

Categories Beer Bottled Water CSDs Coffee Distilled Spirits 1995 0.5 0.1 1.0 2.0 0.3 1996 0.5 0.1 1.2 1.2 0.3 1997 0.6 0.1 1.2 1.3 0.4 1998 0.6 0.2 1.5 1.3 0.5 1999 0.7 0.3 1.6 1.3 0.6 2000 0.7 0.5 1.8 1.2 0.6

Fruit Beverages Milk Tea Wine Subtotal All Others* TOTAL

0.1 41.2 49.7 0.0 94.8 631.9 726.7

0.1 41.7 50.9 0.0 96.1 630.6 726.7

0.1 40.2 49.2 0.0 93.1 633.6 726.7

0.2 40.7 52.5 0.0 97.4 629.3 726.7

0.2 40.1 48.2 0.0 93.0 633.7 726.7

0.2 40.5 44.2 0.0 89.7 637.0 726.7

* Includes tap water, vegetable juices, powders, and

miscellaneous others.