AB InBev, the largest beer company in the world, has witnessed its toughest period during the pandemic. In an interaction with BusinessLine, the company’s President – India & South East Asia, Kartikeya Sharma, shares insights into the post-pandemic strategy of AB InBev in India.
Globally, AB InBev has seen both revenues and profits for the July-September quarter at a lower level than it was during the same period last year. Do these results reflect the performance in India as well?
In India, both volume and value are not yet at pre-pandemic levels. This quarter has been one of the better quarters if one takes into account the last six since the pandemic started. If we take three quarters of last year and three quarters of this year, this has been the closest to the 2019 levels but still negative in high single digits.
The on-trade share in Maharashtra was absent because it was shut and the high duty cess imposed by the government in Telangana, impacted beer sales significantly which we believe resulted in consumers shifting to spirits.
We expect Q4 to be even better than Q3 because Maharashtra is set to lift all restrictions. Going into 2022, Q1 and Q2 should definitely come back to 2019 levels and maybe even better.
We usually have a 5 to 7 per cent outlay on capex as a percentage of the topline and we intend to get back to that level in 2022.
The real litmus test will be the H1 of 2022 and if the third wave does not hit us, then by H2, we should be back to pre-pandemic levels on all fronts.
If one looks at some of the leading spirits companies in India, one can see that a foreign brand has actually performed better than some of the domestic brands. It may be wrong to compare spirits with beer, but does this indicate a trend in the market?
Well, Corona and Hoegaarden have witnessed triple-digit growth for us even though the base is small. We were a bit concerned as we had investments in these two brands and then the pandemic hit us.
We did not expect home consumption to grow so well. I must also point out to you that the Budweiser Magnum brand which is the most expensive among similar brands has witnessed a 50 per cent growth and this is not from a small base.
It goes to show that there has been an acceleration in premiumisation and an increase in-home consumption.
The same brand bought at hotels and clubs would have cost more so I am curious to see when the on-trade sales pick up, will a similar trend continue.
AB InBev is entering the energy drink category for the first time. With a high content of caffeine in energy drinks, will you also be targeting coffee drinkers as well especially in hot weather conditions?
AB InBev decided to introduce its first energy drink, Budweiser Beats in the Indian market which goes to show the kind of confidence it has for this market.
The category has been growing at around 20 per cent during the last five years. Nevertheless, it is a significantly under-penetrated market and we expect to have around 10 per cent market share in the next few years.
Red Bull, the leading brand, has around 85 per cent market share in the country today. There is a functional reason for drinking coffee because it refreshes and makes one more alert. We want to do something similar with our brand and are looking at replacing many cups of coffee with few cans of Budweiser Beats. We plan to disrupt the market as our non-alcoholic drinks have a 55 per cent market share largely because of the increase in e-commerce transactions.
Has there been any changes in the company’s strategy given that what was relevant during the pre-pandemic era is no longer so in the post-pandemic phase?
That of course is true. Premiumisation will continue to be our core strategy and we expect it to accelerate further. However, one big takeaway from the pandemic is the renewed emphasis on health and wellness which will be the fulcrum that will drive all our efforts. The consumer of the pre-pandemic is not the same as the one post-pandemic. Therefore, we can’t be simplistic and say less sugar is better. It will be about moderation, balance and what we are consuming. So, our energy drink, for example, is made of natural ingredients. We will continue to innovate keeping in mind the changed preferences of the consumers.
What are the learnings from the Competition Commission of India’s verdict on cartelisation?
The verdict validates the right way we have conducted our business and have operated at the highest level of integrity. As far as the industry itself is concerned, we need to be the beacon for ushering in compliance for other categories. We conduct our business in a tough market where each state is like a country.
Every single alcohol company should be thinking of re-evaluating its internal practices, conducting rigorous compliance training programmes, engaging with the government and setting very high standards of compliance.