GUJARAT - OUT OF THE INVESTMENT RACE

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Major brewing groups are clamouring to get into India, which, by dint of its young population, expanding economy and rising personal disposable income offers huge growth potential.

The Indian beer market has attracted major investment from international brewing groups, such as SABMiller and Scottish & Newcastle (S&N), over the last couple of years and, given the growth forecast for the market, it is easy to see why.

Euromonitor International forecasts that Indian beer volumes will grow by over 50% over the next five years, from 9.07m hectolitres in 2006 to 13.69m hectolitres in 2011. This follows growth of 45% between 2001 and 2006.

Anheuser-Busch has been linked to joint ventures with both Crown Breweries, based near Hyderabad, and the S.K. Jaipuria Group, a New Delhi-based soft drinks manufacturer. Reports have suggested that the company is planning to focus on marketing while agreeing bottling arrangements with mid-sized brewers, rather than opting for an outright acquisition.

UK-based beer group Scottish & Newcastle (S&N) is already present in India, having acquired a 37.5% stake in market leader United Breweries (UB) for US$106m in January 2005. In February, UB and S&N increased their individual stakes in their joint venture, Millennium Alcobev, by 10% each, giving them 50-50 ownership.

One of Japan's largest beer makers, Sapporo Breweries, is reportedly seeking to enter the market either by forming a joint venture or by acquiring existing breweries. It intends to launch its €˜third beer' brand Draft One which is a beer-like, low-alcohol (5% ABV) beverage made from pea or soy protein. Due to the absence of malt and wheat, the product is categorised as neither a regular beer nor a low-malt beer. As in Japan, this could liberate Draft One from the high taxes imposed on beer, making it more affordable to lower income consumers.

Asia Pacific Breweries (APB), the Singapore-based brewer in which Heineken owns a 42% stake, appears to be looking to boost its own portfolio. It is seeking to acquire a 76% stake in Lilasons Breweries, which owns the strong beer brand Khajuraho, present in the states of Maharashtra and Madhya Pradesh. Lilasons is seen as one of the last few independent beer breweries left in India. In May, APB acquired a 76% holding in Aurangabad Breweries for around US$18m, with an option to buy the remainder at the end of 2008, and followed this in June by forming a joint venture with the Jaipuria Group in the state of Andhra Pradesh.