“Our consumption is looking good. We are having positive results on market share. So, we feel quite positive about the trends,” says Vivek Gupta, MD & CEO, United Breweries.

Just wanted to begin by asking you in terms of the demand trends on the ground, what are the initial sense that you are getting because it has been fairly volatile for the breweries market, both in terms of the demand as well as the raw material, but if you can just begin by giving us a synopsis of how things stand right now.
We had a very good quarter last quarter. We grew our volume by 8%, our revenue by 13%. Our consumption is looking good. We are having positive results on market share. So, we feel quite positive about the trends. Yes, there is volatility on raw material. We are getting positive tailwind on barley, but there are some challenges around broken rice and some of the other bottles. So, I think overall the market remains volatile. But we feel quite positive and optimistic on how the category on beer is doing and continue to do in India. But you talked about the volatility in the raw materials. I want to talk a bit more about that because the gross margins contracted by 55 basis point and the street is a bit concerned about that. What is the trajectory that gross margins will take from here on you believe?
Yes, I think, the gross margin has contracted and we got some positive news on barley. But there were other raw materials which also constitute. Like, for example, return bottle is a big one and as we invest in innovation, we are also infusing a lot of new bottles in the system, which actually impacted the margin. The third thing is we continue to go and go broad based on our growth. So, the mix had an impact on our margin which we think will recover soon. So, we continue to see a positive momentum on mid to high single-digit growth. But at the same time, margin will gradually expand. But we will continue to invest on the business. We will continue to invest around our spend so that we can continue to strengthen our brands at the same time.

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You have taken over this position in September. It is almost five-six months now. It is a pretty decent time to take stock of the operational deeper parts of the company or the business. What are the strategic gaps that you have identified, which you would aim to fill in the next two to three quarters in terms of distribution, in terms of product profile and margins?
I think the first is portfolio. We have to absolutely raise our game on portfolio. So, we are actually offering broad-based portfolio to consumers, both in the economy segment, mainstream segment and premium segment. In fact, our last quarter, our premium segment grew faster than our overall business and we believe that we have grown shares in premium versus previous quarter.

We also have introduced economy segment and various price tiers in markets like Karnataka, where we have also seen a share growth. At the same time, I think the other big priority is to really ensure that we are future ready for growth. So, we are working at our capacities across various markets, our supply chain network, so we can serve the market not only for the coming year, but for the next five years we continue to ride the momentum on growth.
And the last and most important is to have a very strong capable organisation and our go-to-market capabilities which can give us broad-based distribution but also visible distribution so that consumer can actually start engaging with beer in a more positive manner.

I wanted to ask you about something which is now evolving here in India. It is a young country. Beer as a beverage is a choice of the new young drinker who are getting in the adult space now. And they have a very fickle taste. They may like a particular category of beer for six months and then may choose something else. At least, when we speak to some of the micro-brewery guys in different regions with NCR Gurgaon area or the south, mainly Bangalore around that, one gets that they are so very fickle. How do you tie down this kind of a target audience to have a more stickier or very predictable kind of a volume number going forward? Is that a challenge?
I think the core challenge on beer business is around affordability, around accessibility and policies. I think we continue to work with the government and various state governments to really advocate about moderate alcohol because I think it is very critical that we have taxation on beer so that we can make it more affordable and more accessible. If you see in many other, even South Asian markets and everything, beer is available in every single grocery store. I think here access to beer and affordability is the main challenge. At the same time, I think we continue to bring very high quality product. For example, we just launched Heineken Silver Draught Beer in Mumbai, Maharashtra. And we are seeing extremely positive response with the Zen Z’s and the young consumers. And as long as we are offering them a very high quality beer, which has moderate alcohol, but high sessionability and sociability, we believe that the category will continue to grow and we can meet their needs.

And I think we just feel positive about the trends, but the macro needs to work for the category. And that is the work we continue to do with the government and the regulatory bodies.

How is the comparative landscape right now? And how are you really finding it to really go back and gain market share?
See, as I always mention that I actually welcome competition. The penetration of beer category is so small in India. Out of almost 200 million people who drink any kind of liquor, 85 to 90 million drink beer. So we have a huge opportunity to increase the beer category penetration so more category competition is welcome. At the same time, the way we want to grow market share is to really ensure we serve the full portfolio, great quality products, have a best execution in stores and continue to work on improving our capacities. And we are seeing positive results as we work on these parameters. As we look at our internal data in December, we think we have gained market share on a national basis and over key segments as well.

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