24 March 2021
C
orner
O
ffice
the
Interaction with the CEO
Recovery on track; next few months pose acid test
We hosted United Breweries (UBBL)’s Mr Rishi Pardal – CEO & Managing Director and Mr
Berend Odink – CFO for a discussion on the near- and long-term prospects of the business.
Here are the key takeaways:
United Breweries
Global trends catching on faster in emerging markets:
Technology is accelerating
global trends in the developing markets. The management believes global trends
toward lower/no alcohol products could be at play in India as well.
Alleviating seasonality impact:
In an effort to reduce seasonal dependence on
Mr Rishi Pardal — CEO &
Managing Director
beer consumption (and the resulting company profitability), the company has
rolled out the “beer at home” campaign; the next 8–12 quarters would have more
Mr Rishi Pardal joined UBBL in
Aug’20. Previously, he served
initiatives on products and campaigns to address the challenge. The online channel
as VP of Global Apparel
could have been a game-changer, but state governments did not focus on this
Solutions for Retail Brand and
enough to overcome the obstacles. West Bengal is one state that successfully
Information Solutions of Avery
implemented an online alcobev sales channel, and the company hopes other states
Dennison and was also a
Member of the Corporate
would follow suit in the long term.
Leadership Team. Prior to
UBBL does not believe Kingfisher (which we believe contributes around 80% to
Avery Dennison Corporation,
sales) is losing traction among new-age customers:
The management believes
he served as MD of Marico
Bangladesh, following a 14-
there is no room for complacency that could lead to share loss – either from the
year career in various
age group or geographical perspective. Notably, unlike some other parts of the
management roles with HUVR.
world, India does not have an anti-large manufacturer trend. New-age customers
Mr Pardal has completed his
want freshness and variety. With the largest brewery network of 21 owned and
Masters’ Program in
International Business from
eight contract breweries, the company is well-placed to ensure freshness and could
IIFT, New Delhi. He has also
do even better on the variety front.
completed various leadership
More understanding from government:
After a very sharp increase in excise last
and management
year, governments – due to loss of revenues, despite hikes – are awakening to the
development programs from
Northwestern-Kellogg’s, IMD,
fact that steep increases are detrimental and heeding the opinions of alcobev
and HBS (in progress).
players.
Local brewing/distilling capacity to remain important or gain further importance:
This is likely over the
medium term, especially after GST refunds to states are halted by the center.
Spirits v/s beer:
While beer did lose share to spirits in the early part of the COVID disruption, the former is
clawing its way back gradually as markets reopen. The acid test, the management admits, would come in the
crucial months (for beer) of March, April, May, and June.
Technology to aid:
Technology is likely to be a key supporting factor in marketing to the next generation
(especially digital marketing) – in improving analytics, processes, and systems and reducing inventory.
Detailed notes from the call are as follows:
Longer term opportunity attractive
The Beer category in India is underpenetrated. Compared with other emerging markets as well, there is scope
for growth.
A marked preference is seen worldwide for low-alcohol or no-alcohol drinks – this trend is not only big already
but also rising.
The UBBL management believes global trends are catching on faster in emerging markets, with technology
accelerating these trends. It believes global trends toward lower/no alcohol products could be at play in India as well.
Taxation in India has a disproportionate price influence on alcobev as it is skewed in favor of spirits; this has
consequently skewed demand in this direction as well. Although beer falls under the affordable segment
globally, it remains an underpenetrated category in India due to high taxation.
Krishnan Sambamoorthy – Research analyst
(Krishnan.Sambamoorthy@MotilalOswal.com)
Research analyst: Dhairya Dhruv
(Dhairya.Dhruv@motilaloswal.com) /
Kaiwan Jal Olia
(Kaiwan.O@MotilalOswal.com)
Investors are advised to refer through important disclosures made at the last page of the Research Report.
Motilal Oswal research is available on www.motilaloswal.com/Institutional-Equities, Bloomberg, Thomson Reuters, Factset and S&P Capital.