Inside HighSpirits

Joint Venture Between UB Group, Scottish And Newcastle Formalised

EH&C Staff - Mumbai

McDowell AlcoBev, a joint venture between UB Group (UB), Scottish and Newcastle (S&N) and Ravi Jain, with an equity in the ratio of 40:40:20 respectively, is all set to storm the Indian beer market. Already, there has been an inflow of approximately Rs 1, 800 million from shareholders to the company. This coupled with further contributions expected from shareholders over the next year and committed loan facilities, totalling in excess of Rs 3,000 million has given the company a robust platform.

Ravi Jain, managing director of McDowell AlcoBev

The company, immediately after its formalisation, announced that it had reached an agreement to acquire 51.75 per cent of the equity of Inertia Industries Ltd, a public listed company, belonging to United Breweries and two companies controlled by Ravi Jain, an individual with more than 25 years of experience in acquisition and facilitation of alliances in the alcohol beverage industry and also the managing director of McDowell AlcoBev.

Inertia Industries owns two breweries in Aurangabad (Maharashtra) and Dharuhera (Harayana) and the Sandpiper, Zingaro and Turbo brands. McDowell AlcoBev has also made a public announcement to acquire 25 per cent of the equity from the other shareholders of Inertia in compliance with the SEBI Takeover Code.

Following the acquisition of the Inertia stake, McDowell AlcoBev will control a brand base which is larger than any of its competitors with a combination of national brands such as Sandpiper and Zingaro and strong regional brands like Bullet, Kalyani Strong, Turbo, Guru and Marco Polo. In addition to controlling the breweries at Aurangabad and Dharuhera, McDowell AlcoBev also owns breweries in Andhra Pradesh, Tamil Nadu and Kerala with plans to acquire or build additional strategic assets in other key states.

These existing five breweries are located in states, which together account for 55 per cent of Indian beer consumption and coupled with its own sales force and distribution network, the company will be able to reach cost effectively 42,000 beer outlets across India. McDowell AlcoBev currently has its own captive capacity to produce over 15 million cases annually, with an additional capacity of five million cases from seven breweries, which are under contract. “We aim to provide customers with international quality beer,” commented Jain.

Elaborating on the entry of S&N into the Indian brewing industry, Dr Neville Bain, director S&N and vice chairman of the joint venture said, “We anticipate the Indian beer market, like the Indian economy, will continue to exhibit sustained growth. With the market for beer forecast to grow in excess of 12 per cent this current year we are extremely excited and optimistic about the prospects for McDowell AlcoBev.”

S&N will invest approximately Rs 2,500 million in United Breweries Ltd, the recently de-merged beer company of The UB Group through an allotment of Redeemable Optionally Convertible Preference Shares (ROCPS) of Rs 2000 million and Rs 500 million by way of External Commercial Loan. S&N and United Breweries Ltd have agreed to introduce the Kronenbourg beer brand into India and provide access for the Kingfisher brand to S&N distribution networks in certain key global markets. S&N will be offered a seat on the board of United Breweries and the company plans to share best practices in terms of beer production, technical standards, brand development, marketing and international business practice.

Commenting on the formalisation of the joint venture, Dr Vijay Mallya, chairman, UB Group said, “The target is to touch 10 million cases in McDowell AlcoBev and 35 million in UB Beer in the current year. Together we will be twice the size of our nearest competitor.”