United Breweries: Ushering in a New Era?

“But generally, we see a bit of a softening. So we for sure see improvement in our gross profit margins — into the next quarters. We’ll continue to focus on growing the category and pushing premium as well going forward. And yes, we remain quite optimistic in terms of going forward over the next quarters that there should be an improvement in our gross profit margin.”

– Mr. Radovan Sikorsky, Director & CFO, United Breweries on Q1FY24 ConCall

Stock Data
Ticker	UBL
Exchange	NSE
Industry	LIQUOR

Price Performance
Last 5 Days	-2.70%
YTD	-4.55%
Last 12 Months	-2.03%

*As of 18.09.2023

Company Description:

United Breweries Ltd (UBL) is an Indian beverage company primarily known for its brewing and marketing of alcoholic beverages, including beer. The business model of United Breweries Ltd revolves around the production, distribution, and sale of alcoholic beverages, with a primary focus on beer. Here are some key aspects of their business model:

• Brewing: UBL operates multiple breweries across India, where they produce a range of beer brands, including Kingfisher, one of their flagship brands. They also produce other beer variants, including strong beers, lagers, and premium beers.
• Brand Portfolio: UBL owns and manages a diverse portfolio of beer brands to cater to various consumer preferences and market segments. Kingfisher is their most prominent and widely recognized brand, but they also have other brands like Kingfisher Ultra, Kingfisher Storm, and more.
• Distribution: The company has an extensive distribution network that covers both urban and rural areas in India. They distribute their products through various channels, including liquor stores, bars, restaurants, hotels, and supermarkets.
• Marketing and Promotion: UBL invests significantly in marketing and advertising to build and maintain brand awareness. They engage in various promotional activities and sponsorships to promote their brands, such as sports events and music festivals.
• Partnerships and Joint Ventures: United Breweries Ltd has entered into strategic partnerships and joint ventures with international brewing companies to expand its product offerings and leverage global expertise.
• Export Business: Apart from serving the domestic market, UBL also exports its products to several countries. They leverage their brand recognition and quality to tap into international markets.

Financial Results:

United Breweries Ltd reported Revenues for Q1FY24 of ₹2,275.00 Crores down from ₹2,439.00 Crore year on year, a fall of 6.72%.

Total Expenses for Q1FY24 of ₹2,105.00 Crores down from ₹2,232.00 Crores year on year, a fall of 5.69%.

Consolidated Net Profit of ₹136.00 Crores down 16.05% from  ₹162.00 Crores in the same quarter of the previous year.

The Earnings per Share is ₹5.15, down 15.99% from ₹6.13 in the same quarter of the previous year.

Key Strengths:

• Strong Brand Portfolio: UBL’s flagship brand, Kingfisher, is one of the most recognized and trusted beer brands in India. The company has successfully built a diverse portfolio of beer brands, catering to various consumer preferences and market segments.
• Market Leadership: UBL has a significant market share in the Indian beer industry, making it a market leader. Its established presence and distribution network give it a competitive edge.
• Extensive Distribution Network: The company has an extensive and well-established distribution network that covers urban and rural areas across India. This network allows UBL to reach a wide range of consumers efficiently.
• Quality and Consistency: UBL has a reputation for producing high-quality beer products. Maintaining the quality and consistency of its products has contributed to consumer loyalty and trust.
• Diversification: In addition to beer, UBL has diversified its product range to include other alcoholic beverages, such as spirits and wines, and non-alcoholic beverages. This diversification helps the company tap into various segments of the beverage market.
• Global Partnerships: UBL has strategic partnerships and collaborations with international brewing companies, such as Heineken. These partnerships allow them to leverage global expertise, expand their product offerings, and access international markets.
• Export Opportunities: The company exports its products to several countries, capitalizing on the global appeal of its brands. This international presence provides additional revenue streams and opportunities for growth.
• Marketing and Promotion: UBL invests significantly in marketing and promotion, using various advertising and promotional activities to create and maintain brand awareness. Sponsorships of sports events and music festivals have also been part of their successful marketing strategy.

Key Weaknesses:

• Regulatory Environment: The alcoholic beverage industry in India is subject to complex and evolving regulatory frameworks, including state-specific regulations. Changes in government policies, tax structures, and alcohol bans in certain regions could impact UBL’s operations and profitability.
• Competition: The beer market in India is highly competitive, with several domestic and international players vying for market share. UBL faces competition from both established and emerging brands, which could put pressure on pricing and market positioning.
• Dependency on Beer: While UBL has diversified its product portfolio to include spirits and non-alcoholic beverages, a significant portion of its revenue still comes from beer. This reliance on a single category makes the company vulnerable to fluctuations in beer demand and market dynamics.
• Dependency on Key Markets: UBL’s revenue heavily relies on the Indian market. Any adverse economic, political, or market developments in India could significantly affect its financial performance.