SABMiller India, country?s second largest beer company, has more than halved its net loss to R60 crore in financial year 2010-2011 from a loss of R142 crore in the previous year helped by improved volumes and margins in its key states and by controlling costs. The brewer, whose sales in its biggest market Andhra Pradesh had been hit by a new procurement policy, also expects to regain market share with the state restoring its earlier policy this month.
The Indian arm of the London-headquartered beer-maker has posted losses consecutively since 2008-09 largely due to pricing and procurement issues at Andhra Pradesh.
Gross revenue in 2010-11 grew 16% to R2,454 crore from R2,116 crore in the previous year while volumes increased 10% driven by sales in Karnataka, Haryana, Maharashtra, Uttar Pradesh and Madhya Pradesh, according to the company?s annual report for the financial year.
SABMiller tops selling brands include Haywards 5000, Royal Challenge, Knock Out and Fosters. According to the company, volumes of Haywards 5000 and Knock Out grew 11% and 35% respectively during the year.
?The company has focused on the markets which provide higher returns instead of chasing volumes at any cost,? Paolo Lanzarotti, MD, SABMiller, said in the report.
It attributed the performance to improved volume and margins in key states and a focus on driving sales of more profitable brands along with a reduction in operating expenses. However, the company could not achieve a turnaround during the financial year on account of regulatory hurdles, the report said.
Earlier this month, the Andhra Pradesh Beverages Corporation everted to an earlier policy of procuring beer based on companies? regional market share as against national market share. ?This will set the scene for restoring the market share in Andhra Pradesh and would improve the performance for this financial year,? Lanzarotti said.
The company had posted a loss of R65 crore in 2008-09 largely because of the beer industry?s impasse with the wholesaler over a price revision which saw it suspending operations at its Hyderabad brewery for over a month in the peak summer season. In 2009-10, its losses doubled to R142 crore as the stand-off continued amid fresh regulatory issues in UP.
The AP Beverages Corporation granted beer companies a price increase in February 2010 but later that year it introduced a new policy of procuring beer by national market share that SABMiller says affected its sales. The company dominated the Andhra market though its national market share was between 30%-35%. In FY11, rival United Breweries achieved market leadership for the first time in Andhra Pradesh.