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Foster's to hit Karnataka and AP early next year -- Battle royal on the cards in UB citadel

Boby Kurian

MUMBAI, July 10

IT'S official. The die has been cast for an intense battle in the beer markets of Karnataka and Andhra Pradesh. Foster's has announced its decision to enter the two southern markets by mid-summer next year.

Foster's entry, after prolonged and unsubstantiated market rumours, puts it in direct confrontation with UB group's Kingfisher, that too on the latter's home turf. UB is the market leader in the domestic beer business. It controls roughly 40 per cent of the market with Kingfisher, the company's flagship, staking claim to 24 per cent of the whole market.

``We have definite plans to enter Karnataka and Andhra Pradesh before mid-summer next year. It will most probably be a simultaneous entry into both the States,'' Mr. Pradeep Gidwani, Managing Director, Foster's India, told Business Line in an exclusive i nterview. Foster's, the Australian beer, entered India two years ago and first hit the Mumbai and Pune markets. The brand is currently present across the whole of Maharashtra, Goa, Daman and Diu.

The beer, Mr. Gidwani said, has conquered one-third of the lager business in Maharashtra, which was hitherto dominated by Kingfisher. ``We move 150,000 cases a month in Maharashtra and are present nearly in 85 per cent of the retail outlets in the State, '' he said. UB maintains that Kingfisher outsells Foster's 2.5:1 in Mumbai's lager beer market.

``We have a sizable existence in the West of the country, and it is time now to move South, which is an exciting big market for beer,'' Mr. Gidwani said. The two markets roughly constitute 75 per cent of the national beer market. The three states of Maha rashtra, Andhra Pradesh and Karnataka alone account for nearly 45 per cent of the business.

``The company has no issues with a small entry into the South. We are here to build the markets over a period of time, phase by phase,'' Mr. Gidwani said. He added that the company was in negotiations with leading breweries in Karnataka and Andhra and ma y even end up adding production facilities in both States. ``However, there is no decision made in this regard yet,'' Mr. Gidwani said.

Foster's could enter into a contract agreement with the local breweries and invest to upgrade the brewing facilities to match the international standards. Alternatively, the company is open to the idea of outright acquisitions, ``if there is a brewery wi th quality brewing facilities''.

Mr. Gidwani also didn't rule out the possibility of setting up a 2-lakh-hectolitre greenfield brewery, which may cost Rs. 55 crores. ``We have an open mind on how to go about adding fresh capacities,'' he added. But, industry experts have ruled out the p ossibility of a greenfield brewery, given the short time frame the company has set for its southern foray. Mr. Gidwani is expected to visit Bangalore to firm things up in the last week of July.

Foster's currently services the existing markets from its 2-lakh-hectolitre greenfield Aurangabad brewery. The company will soon be investing a sum of Rs. 4-5 cores in expanding the plant facility here. Mr. Richard Scully, Managing Director, Foster's Int ernational, during his recent India visit had told Business Line that the company's operations here hoped to break even and post moderate profits by June next year.