Mohan Breweries to exit SABMiller pact

BANGALORE: Mohan Breweries & Distilleries (MBDL), an associate of Tamil Nadu-based Mohan Meakins, is likely to snap its bottling pact with SABMiller, dealing a blow to the foreign brewer���s chances of making headway in the country���s second-largest beer market.

People close to the development said MBDL and SABMiller are unlikely to renew the bottling alliance, which expires on June 30. MBDL, they added, has already indicated this to SABMiller. This will see the MNC brewer losing about three million cases in annualised volume sales, and being shut out of the state. SABMiller���s presence in the state is mainly through its largest selling domestic brand Haywards 5000 beer.

Tamil Nadu does not allow beer shipments from other states and this has prevented SABMiller from servicing the market from its brewery in Puducherry. In 2008, Tamil Nadu briefly allowed SABMiller to bring in beer from its Puducherry plant, but has reverted to its earlier stance of not allowing beer made in other states. A SABMiller application for a greenfield brewery in Tamil Nadu has been pending with the state government for several years
now.

A top SABMiller official said the company was yet to receive any official communication from MBDL on formal parting of ways, but alluded to difficulties in its ties with MBDL. In fact, SABMiller has exited bottling arrangement with MBDL���s unit in Andhra Pradesh last month even though that will not hurt, as the MNC has its own brewing capacities in the state.

SABMiller sources said the company will not mind staying away from Tamil Nadu market for the time being. ���We are having differences (with MBDL) on product quality and on payables to us... Staying out of the market is not going to hurt us much, as we were not making any money out of the operations there for some time,��� said one company source, on condition of anonymity. SABMiller had inherited the bottling pact with MBDL, following its acquisition of Shaw Wallace Breweries.

The registration of SABMiller brands in Tamil Nadu is through MBDL, and the receivables are collected by the latter. Sources said SABMiller had differences with MBDL on the amount that is due to them. SABMiller was taken by surprise when the state decided to ban import of beer from other states more than five years ago.

This led to SABMiller���s complete dependence on MBDL for a presence in one of the country���s biggest and fastest growing markets where rival United Breweries, with its own breweries, is now the leader.