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Edited Transcript of UBL.NSE earnings conference call or presentation 7-Feb-20 10:30am GMT

Q3 2020 United Breweries Ltd Earnings Call

Feb 21, 2020 (Thomson StreetEvents) -- Edited Transcript of United Breweries Ltd earnings conference call or presentation Friday, February 7, 2020 at 10:30:00am GMT

TEXT version of Transcript

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Corporate Participants

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* Berend Odink

United Breweries Limited - CFO

* P. A. Poonacha

United Breweries Limited - Divisional VP of Finance

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Conference Call Participants

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* Aditya Soman

Goldman Sachs Group Inc., Research Division - Equity Analyst

* Ashit Desai

Emkay Global Financial Services Ltd., Research Division - Research Analyst

* Harit Kapoor

Investec Bank plc, Research Division - Analyst

* Himanshu Shah

Dolat Capital Market Pvt. Ltd., Research Division - VP of Research

* Jatin Chawla;First Voyager;Analyst

* Krishnan Sambamoorthy

Motilal Oswal Securities Limited, Research Division - VP of Research of FMCG

* Mehul Desai

IDFC Securities Limited, Research Division - Research Analyst

* Rahul Ranade

Goldman Sachs Group Inc., Research Division - Research Analyst

* Vishal Biraia

Aviva Life Insurance Company India Ltd. - Analyst

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Presentation

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Operator [1]

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Ladies and gentlemen, good day, and welcome to the United Breweries Limited Q3 FY '20 Earnings Conference call hosted by IDFC Securities Limited. (Operator Instructions) Please note that this conference is being recorded. I now hand the conference over to Mr. Mehul Desai from IDFC securities. Thank you, and over to you, sir.

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Mehul Desai, IDFC Securities Limited, Research Division - Research Analyst [2]

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Thanks, Nirav. Good evening, everyone. On behalf of IDFC Securities, I would like to welcome the management of United Breweries as well as all the participants for the Q3 FY '20 earnings call. Today, we have with us Mr. Berend Odink, the CFO of United Breweries; and Mr. Poonacha, Investor Relations Head from United Breweries. I'll hand over the call to Mr. Berend for the opening remarks. Over to you, sir.

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Berend Odink, United Breweries Limited - CFO [3]

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Thank you, Mehul, and good day, everybody. And thank you for joining the call today. I'll start with providing some context on the Q3 and year-to-date results following which we'll be happy to take your questions.

So on the Q3 performance, the overall volumes in Q3 were somewhat subdued with volumes declining 7%. Excluding the impact of the state of Andhra Pradesh, the volumes would have been flat. As you might be aware, the government in Andhra has implemented a number of measures from October 1, including ownership of retail outlets moving into government hands, reducing the number of outlets by circa 20% as well as reduced opening hours and an increase in government duties, resulting in higher MRPs.

As a result, the beer industry volume fell by around 50%. At the same time, we also observed in the market that most orders were given to previously smaller players in the state, instead of being awarded accordingly to prevailing market shares before October 1. As a result, UBL volume and resulting performance in Q3 was negatively impacted.

To provide some context, Andhra Pradesh accounted for around 7% of our volume prior to October 1. Commenting on the regional volume performance. In North, UBL volumes were down 4%. Key state performance included Delhi, which posted flat volumes, and volume growth in U.P. and Punjab, and there was a negative growth in state of Rajasthan and Haryana.

In South, UBL volumes were down 13%, largely due to performance in the state of AP, as explained earlier. Positive growth was posted in Tamil Nadu and Telangana, whilst Karnataka and Kerala declined mid-single digits.

In East, UBL volumes were up 19%, with volumes in West Bengal and Orissa, both increased in double digits.

In the West, UBL volumes declined 7%. Mumbai and Goa declined, while the rest of Maharashtra also saw negative growth, albeit to a lesser extent than Mumbai and Goa.

Touching on the revenue and margins for Q3. Net sales were flat for the quarter. Gross margins declined by 60 basis points year-over-year, which is a lower reduction than the decline year-to-date, as we started to cycle the higher input costs for mainly barley and glass. Input cost increased largely during Q3 with the full impact of the higher costs seen in Q4.

EBITDA for the quarter declined by 10%.

Looking at the year-to-date performance, overall performance in terms of volume growth was positive 2%.

And on the regional performance. North UBL volumes grew 1%. Volume growth again in Delhi, Punjab, Rajasthan and U.P, while volume declined year-to-date in Haryana.

In South, UBL volumes grew 1% with growth in the states of Telangana, Tamil Nadu and Kerala, but the volume declined in Karnataka and Andhra Pradesh.

In East, UBL volume grew 28% with volumes in West Bengal and Jharkhand up, while the Orissa was also up.

In West, volumes declined 6%. Volume declined in Mumbai and Goa, and volume growth for the rest of Maharashtra.

In terms of revenues and margins, year-to-date, net sales were up 5%. Gross margins declined by 290 basis points on the comparable period, given the higher input cost of barley and glass bottles.

Overall results have been challenging. However, we remain very much committed to our strategy, which includes investing behind our brands, particularly the premium portfolio. Growth in premium remains very positive, despite a lower GDP growth environment overall.

We recently launched Kingfisher Ultra Witbier, which started the wheat beer segment, and initial consumer response has been very positive.

With that, I would like to conclude the opening remarks, and we'd like to take your questions.

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Questions and Answers

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Operator [1]

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(Operator Instructions) The first question is from the line of Krishnan Sambamoorthy from Motilal Oswal.

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Krishnan Sambamoorthy, Motilal Oswal Securities Limited, Research Division - VP of Research of FMCG [2]

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In your press release, you talked about a delay in payment from the Andhra government. Did this start in the third quarter? Or did this start in the fourth quarter?

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Berend Odink, United Breweries Limited - CFO [3]

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So we have seen this in the current quarter, but also in the prior quarter already.

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Krishnan Sambamoorthy, Motilal Oswal Securities Limited, Research Division - VP of Research of FMCG [4]

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Okay. And you also mentioned that there is advanced duty that have been asked by several states. Now putting the delay in payment in Andhra as well as the advanced duty, how much -- can you just quantify in terms of number of days? How much has -- there has been an increase on a Y-o-Y basis, if you could do that?

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P. A. Poonacha, United Breweries Limited - Divisional VP of Finance [5]

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Yes. Andhra Pradesh currently in days is around 150 days, collectibles. And the amount is in the region of INR 140 crores. And you want to know the quantum of...

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Krishnan Sambamoorthy, Motilal Oswal Securities Limited, Research Division - VP of Research of FMCG [6]

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Yes. How much was it earlier, right? How much was it -- it is currently 150 days, how much was it earlier?

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P. A. Poonacha, United Breweries Limited - Divisional VP of Finance [7]

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No, no. Value-wise, it has come down, reason being our turnover also has come down in the quarter. So both the days has come down. There were times where the outstanding was even higher closer to INR 200 crores.

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Krishnan Sambamoorthy, Motilal Oswal Securities Limited, Research Division - VP of Research of FMCG [8]

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Okay. I'll put it the other way, right? You mentioned that the interest costs have increased because of higher receivables. Now at a net company level, how much of the receivable days has gone up approximately?

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P. A. Poonacha, United Breweries Limited - Divisional VP of Finance [9]

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Receivable days has gone up by -- exactly, I'll tell you, that is 4 days, just let me confirm. Yes, it has gone up by 5 days.

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Krishnan Sambamoorthy, Motilal Oswal Securities Limited, Research Division - VP of Research of FMCG [10]

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5 days, okay. And the other -- just on your CapEx, given the relatively muted outlook, would you be deferring some of your CapEx? And if so, what is the CapEx number for '20 and '21?

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Berend Odink, United Breweries Limited - CFO [11]

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So for next year, we've not yet published the outlook, but the total CapEx that we see for the current financial year has been brought down versus earlier budget. So what we mentioned in the press release is around INR 300 crores year-to-date. I think that would be the run rate for the full year as well.

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Krishnan Sambamoorthy, Motilal Oswal Securities Limited, Research Division - VP of Research of FMCG [12]

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So INR 400 crores plus for the full year?

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Berend Odink, United Breweries Limited - CFO [13]

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Yes.

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Operator [14]

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(Operator Instructions) Next question is from the line of Himanshu S from Dolat Capital.

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Himanshu Shah, Dolat Capital Market Pvt. Ltd., Research Division - VP of Research [15]

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Sir, our price mix has improved quite materially in this quarter, while the volumes were down 7%, the revenues were flat. So I'm assuming that the price mix was very positive. You have called out that you've taken price increase in 4 states. So was the price increase taken in Q3 itself or it was taken in earlier quarters?

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Berend Odink, United Breweries Limited - CFO [16]

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The price increases have been taken in earlier quarters. But obviously, as we progress through the year, year-over-year impact becomes bigger.

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Himanshu Shah, Dolat Capital Market Pvt. Ltd., Research Division - VP of Research [17]

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Okay. So Q3 had a full benefit of the price increase that was taken in quarters prior to that. There was nothing that was taken in Q3, per se, from prices increase perspective, because, last quarter, our price mix was negative in Q2.

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Berend Odink, United Breweries Limited - CFO [18]

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No. So in Q3, there has not been any significant price changes as such. But we have seen, of course, year-to-year impact coming through.

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Himanshu Shah, Dolat Capital Market Pvt. Ltd., Research Division - VP of Research [19]

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Okay. And sir, will there be any -- because the contribution of AP has also gone down, and I'm assuming AP might be a lower realization per case market, and that should have also lead to improvement in realization per case, optically?

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Berend Odink, United Breweries Limited - CFO [20]

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Yes, absolutely. So AP is, in terms of price levels, below the average, given that the volume declines, purely from AP perspective, there is a positive state mix.

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Himanshu Shah, Dolat Capital Market Pvt. Ltd., Research Division - VP of Research [21]

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Yes. Okay. So if we -- like -- and how you have informed in volumes that without AP, the volumes would have been flat? What would have been the realization improvement ex of AP in Q3 on a Y-o-Y basis?

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Berend Odink, United Breweries Limited - CFO [22]

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Well, we don't break that out separately. But as I commented earlier, the realization in AP is below the company average.

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Himanshu Shah, Dolat Capital Market Pvt. Ltd., Research Division - VP of Research [23]

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Fair enough, sir. Sir, second question is on other expense line item. First, just want to -- want a clarification. Is there any one-off write-backs or anything? One-off provision, write-backs either for receivables or any other line items in that, a significant number or anything? Because other expenses on a Y-o-Y basis has gone down very significantly. I mean in last trailing 5, 6 quarters, the other expenses were up by 15% to 20% on a Y-o-Y basis. And suddenly, that came off. So anything, if you can just provide color on that line item?

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Berend Odink, United Breweries Limited - CFO [24]

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Yes. So in Q3, we have an income of around INR 15 crores from a reversal of service tax and GST on license fees. So that has been booked in the Q3 as a positive one-off. And you might recall, year-to-date, the first 6 months, there were a few things we called out last call in terms of one-off costs, so that the impact was the other way.

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Himanshu Shah, Dolat Capital Market Pvt. Ltd., Research Division - VP of Research [25]

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Okay, okay. And sir, any color you can provide on A&P spend on a Y-o-Y basis on absolute number, Q3 of last year to Q3 of this year?

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Berend Odink, United Breweries Limited - CFO [26]

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In terms of marketing investments, we're slightly up year-over-year. So as I said in the opening comments, we continue to invest, particularly in the premium part of the portfolio. And in that, we take a very long-term consistent approach, I would say, to support the brand building.

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Himanshu Shah, Dolat Capital Market Pvt. Ltd., Research Division - VP of Research [27]

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Okay. So sir, then which has been the line item which has gone down? Means, if I see on a sequential basis also, we have never seen historically such sharp decline on a sequential basis. Also on a sequential basis, the cost is down almost by INR 80 crores. So if you can just provide some bridge or something?

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P. A. Poonacha, United Breweries Limited - Divisional VP of Finance [28]

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Which cost you are talking about that has gone by INR 80 crores?

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Himanshu Shah, Dolat Capital Market Pvt. Ltd., Research Division - VP of Research [29]

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Other expenses. Last quarter, it was INR 507 crores and this quarter, it is INR 419 crores.

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P. A. Poonacha, United Breweries Limited - Divisional VP of Finance [30]

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Last year, that's what I'm saying. If that reversal was not there, your INR 419 crores would have been INR 569 crores.

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Himanshu Shah, Dolat Capital Market Pvt. Ltd., Research Division - VP of Research [31]

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How much is the reversal, sorry, you say?

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P. A. Poonacha, United Breweries Limited - Divisional VP of Finance [32]

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INR 15 crores?

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Himanshu Shah, Dolat Capital Market Pvt. Ltd., Research Division - VP of Research [33]

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1-5?

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P. A. Poonacha, United Breweries Limited - Divisional VP of Finance [34]

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Yes, 1-5.

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Himanshu Shah, Dolat Capital Market Pvt. Ltd., Research Division - VP of Research [35]

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Okay. So sir, INR 419 crores would have been INR 434 crores or something you are saying?

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P. A. Poonacha, United Breweries Limited - Divisional VP of Finance [36]

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Perfect, perfect.

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Himanshu Shah, Dolat Capital Market Pvt. Ltd., Research Division - VP of Research [37]

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Still it would have been lower on a Q-o-Q basis versus INR 507 crores of last quarter.

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P. A. Poonacha, United Breweries Limited - Divisional VP of Finance [38]

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No, you can't compare the previous quarters because they are cyclic because you have rates and taxes also, which is variable to your volume turnover, which forms part of your other things. For example, bottling fees. Bottling fees is like a duty which you pay on your dispatches. So if your volume goes up, your bottling fees goes up. Your volume comes down, your bottling fees comes down. So there's variability of volume also. It's not other expenses per se. It's not that this is purely business benefits, it's also part of duties included there.

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Operator [39]

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Next question is from the line of Harit Kapoor from Investec.

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Harit Kapoor, Investec Bank plc, Research Division - Analyst [40]

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Just have a few questions. Firstly, if you could give a sense on your volumes have declined by 7%. In your estimate, what would have been the market decline?

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Berend Odink, United Breweries Limited - CFO [41]

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So for the most recent quarter, we don't have the market shares as of yet. But for the 12 months ending September, we do believe we have expanded share to around 2%.

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Harit Kapoor, Investec Bank plc, Research Division - Analyst [42]

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Okay, okay. So your absolute share would be in the range of about 54-odd?

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Berend Odink, United Breweries Limited - CFO [43]

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Probably 53%, that kind of level.

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Harit Kapoor, Investec Bank plc, Research Division - Analyst [44]

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Okay, okay. The second was on the material cost outlook. You've seen the kind of impact of glass as well as barley over the last few quarters. Is it your sense that now most of this is behind us in the base? Or do you see any kind of cost inflation issues going forward also? Hello? Hello?

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Operator [45]

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Sir, the management line disconnected. Just a moment. (technical difficulty) Participants, please stay connected while we join the management back to the call. Participants, thank you for your patience. We have the management line back to the call. Sir, go ahead.

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P. A. Poonacha, United Breweries Limited - Divisional VP of Finance [46]

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Harit?

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Harit Kapoor, Investec Bank plc, Research Division - Analyst [47]

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Yes, yes. So this was regarding the material cost question, what's your outlook on that? Did you think the glass and barely costs are now behind you in terms of -- in the base?

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Berend Odink, United Breweries Limited - CFO [48]

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Yes, absolutely. I think the last year Q4, we have seen the major pickup in barely and glass. I think for barley, we are -- have secured the whole position for the remainder of the year, so that we don't see any significant changes from where we are today. And in terms of glass, again, we will go back to normal kind of inflationary price changes. We have secured additional capacity in the market. And under our normal circumstances, we can source demand without any major price movements (inaudible) 1 to 2 quarters at least.

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Harit Kapoor, Investec Bank plc, Research Division - Analyst [49]

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Good to know. If you look at the issues in Andhra Pradesh that you faced in quarter 3. Would you say that as you've come into quarter 4, some of those issues are kind of dissolved or there has been a move to normalcy there? How would you kind of assess the situation in Andhra Pradesh going forward?

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Berend Odink, United Breweries Limited - CFO [50]

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Now, obviously, we closely monitor the situation. It's a bit difficult to predict, but I don't see immediately in the next quarter a major improvement where we stand today. So we continue to make representations to the government. But there's not been a kind of a major improvement in the quarter so far.

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Harit Kapoor, Investec Bank plc, Research Division - Analyst [51]

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Okay, okay. And from a rest-of-India perspective, markets in the North are down and the West is down. Apart from the East, the balance markets also have shown a bit of lower growth or, in fact, even declined. So how do you look at this? Do you see this as a slightly near-term or medium-term demand issue? Or how are you assessing this impact?

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Berend Odink, United Breweries Limited - CFO [52]

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I think the dynamics are, of course, state-by-state. So Karnataka has seen some challenging environment in the last few months. I think it has to do with the overall slowdown in economics and consumer spending. So we have to see how long that takes to improve. Year-to-date, we obviously also pulled out some of the impacts in terms of capacity issues in Q1, impact of elections in Q1 and even in Q3 in Maharashtra with a number of dry days that took place. So without AP, I would say, we're cautiously optimistic. But obviously, yes, the consumer spending confidence is somewhat subdued versus prior years.

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Harit Kapoor, Investec Bank plc, Research Division - Analyst [53]

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Okay, okay. On the premium side, what's the kind of growth that you've seen for the premium portfolio? And if you could just give a sense of which are the brands that are leading this?

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Berend Odink, United Breweries Limited - CFO [54]

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So the whole premium portfolio is growing double digits. So that's continuing, I would say, quite strongly and right there where we have -- it's one of the cornerstones of our strategy. Again, it's brand-by-brand, state-by-state, dynamics are a little bit differently, but safe to say that the Amstel, Storm and also Ultra are doing quite well.

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Operator [55]

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(Operator Instructions) Next question is from the line of Aditya Soman from Goldman Sachs.

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Aditya Soman, Goldman Sachs Group Inc., Research Division - Equity Analyst [56]

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Just one question from my end, actually. So next quarter, given that we've had elections in Maharashtra that are behind us and even with the Karnataka, there's government now in place and majority of the disruption because of the change in government or the vote -- confidence vote now that is done, should we expect volume growth in these 2 states? Also, we start hitting the weak pace for these states from 1Q next year. So a related question to that one, should we see volume in these 2 states? And would volume growth in these 2 states lead to an improvement in the mix?

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Berend Odink, United Breweries Limited - CFO [57]

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The 2 states, you mean Maharashtra and Andhra?

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Aditya Soman, Goldman Sachs Group Inc., Research Division - Equity Analyst [58]

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Maharashtra and Karnataka.

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Berend Odink, United Breweries Limited - CFO [59]

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Maharashtra and Karnataka. I think, for Maharashtra, the rest of Maharashtra, obviously, has been performing a little bit better than the Mumbai itself. So without the impact in lieu of state elections that we've seen in Q3, we're cautiously optimistic. Similar for Karnataka, I think Q1 has been positive in terms of industry growth, Q2 and Q3 was negative. So it's too early to tell what Q4 will look like. But I think if the overall economy and the optimism step-by-step comes back, again, we're cautiously optimistic. But in any case, we -- of course, we're ready on our end to supply any pickup in demand that we can see.

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Aditya Soman, Goldman Sachs Group Inc., Research Division - Equity Analyst [60]

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I understand. And just a follow-up on that. I mean if you see growth, hypothetically, let's say the growth improves in these 2 states or is at least in line with your company growth, would you see an improvement in the mix and the margins?

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Berend Odink, United Breweries Limited - CFO [61]

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Yes. So both states, you called out are important states in our total business. So they would lead to a positive mix, absolutely.

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Operator [62]

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Next question is from the line of Ashit Desai from Emkay Global.

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Ashit Desai, Emkay Global Financial Services Ltd., Research Division - Research Analyst [63]

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This is Ashit. Sir, my question is on volumes again. Last quarter, you had mentioned that domestic volumes were up 6%, and sales growth was 3.5%. So there was a negative price mix of around 2.5%. This quarter, you have a positive price mix of 7% with 7% decline and flat volumes. And I think last year -- last quarter, you had also mentioned some one-offs relating to exports or something. So can you tell us what is the domestic volume growth for this quarter? And is -- are there any one-offs like last quarter in that?

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Berend Odink, United Breweries Limited - CFO [64]

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No. So in terms of the impact of exports this quarter, there's nothing to call out. It has been trending, let's say, as usual. So there's no difference between domestic and total as such.

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Ashit Desai, Emkay Global Financial Services Ltd., Research Division - Research Analyst [65]

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Okay. And last quarter, how much was the export impact?

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Berend Odink, United Breweries Limited - CFO [66]

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Last quarter, I think there were around 2 percentage points difference in terms of total company growth due to exports.

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Ashit Desai, Emkay Global Financial Services Ltd., Research Division - Research Analyst [67]

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Okay, okay. And secondly, Telangana has seen some change in the way they collect excise. Could you tell us what is the impact of that?

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P. A. Poonacha, United Breweries Limited - Divisional VP of Finance [68]

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Working capital wise?

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Ashit Desai, Emkay Global Financial Services Ltd., Research Division - Research Analyst [69]

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Telangana, there has been a...

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P. A. Poonacha, United Breweries Limited - Divisional VP of Finance [70]

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Yes. Working capital, positive working capital improvement.

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Ashit Desai, Emkay Global Financial Services Ltd., Research Division - Research Analyst [71]

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Yes. So what is the change and the benefit, if you could...

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P. A. Poonacha, United Breweries Limited - Divisional VP of Finance [72]

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In capital wise, anywhere between INR 60 crores to INR 80 crores, working capital.

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Ashit Desai, Emkay Global Financial Services Ltd., Research Division - Research Analyst [73]

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INR 16 crores to INR 18 crores or INR 60 crores to INR 80 crores?

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P. A. Poonacha, United Breweries Limited - Divisional VP of Finance [74]

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Yes, INR 60 crores to INR 80 crores.

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Berend Odink, United Breweries Limited - CFO [75]

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6-0 to 8-0.

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Ashit Desai, Emkay Global Financial Services Ltd., Research Division - Research Analyst [76]

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Okay. That is the benefit that you all get?

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Berend Odink, United Breweries Limited - CFO [77]

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Yes, yes.

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Ashit Desai, Emkay Global Financial Services Ltd., Research Division - Research Analyst [78]

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Okay, okay. And just on volumes, again, I mean, the industry growth also seems to be -- seems to have declined. But overall, if you look at markets which have declined, can you share what has been the consumer price increase for beer in those markets? Is it due to a very steep price increases? Or it's just because of the economic slowdown? And if you could give some picture on that?

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P. A. Poonacha, United Breweries Limited - Divisional VP of Finance [79]

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No. I mean, I wouldn't project the state specifically, but largely, what has happened in the business in this previous quarter and the year, but we just speaking on the year-to-date basis is, wherever there has been some correction -- for example, you see correction in West Bengal with respect to reduction in price, correction in Tamil Nadu with respect to route to market. So wherever there's been correction where, in the past, impediment to demand, those markets have grown. Wherever the markets where there were no impediments, the slowdown of the economy has pulled the volumes down. Am I clear?

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Ashit Desai, Emkay Global Financial Services Ltd., Research Division - Research Analyst [80]

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Yes, yes. So how do you see the next few quarters? I mean, are these impediments still there? Or do you expect these to reverse? Or these will be there for some time?

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P. A. Poonacha, United Breweries Limited - Divisional VP of Finance [81]

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No. Since the impediments remain as it is or at the level where it is today, then going forward, an upward boost in the economy is going to go take it upwards.

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Operator [82]

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Next question is from the line of Harit Kapoor from Investec.

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Harit Kapoor, Investec Bank plc, Research Division - Analyst [83]

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There is one clarification. Now you have said in the past that there was some supply issues in U.P., which you were trying to fix, and you couldn't meet the demand there. So what's the scenario there? Have you -- have those things cleared out now?

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Berend Odink, United Breweries Limited - CFO [84]

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Yes, we have put in place additional capacity. So we're in a better place to supply the growth in U.P., absolutely.

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Operator [85]

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Next question is from the line of Krishnan Sambamoorthy from Motilal Oswal.

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Krishnan Sambamoorthy, Motilal Oswal Securities Limited, Research Division - VP of Research of FMCG [86]

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Has there been any increase in the excess duty in any of the key states similar to what Maharashtra witnessed last year?

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Berend Odink, United Breweries Limited - CFO [87]

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In Q3, I think we have seen -- to call out 2 states. So in Telangana, in December, there was an increase in excise. So to give you some perspective, that meant the MRP for Kingfisher 650 mL moved from -- up by INR 10 a bottle. And then in AP, as part of the overall changes in policy, the excise also moved up. And there was an increase of INR 20 per bottle. So Kingfisher Strong moved from INR 110 MRP to INR 130.

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Krishnan Sambamoorthy, Motilal Oswal Securities Limited, Research Division - VP of Research of FMCG [88]

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Okay. Any other key state in January so far or nothing?

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Berend Odink, United Breweries Limited - CFO [89]

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No.

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Operator [90]

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(Operator Instructions) Next question is from the line of Jatin Chawla from First Voyager.

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Jatin Chawla;First Voyager;Analyst, [91]

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First question is on the volumes in Mumbai, and I noticed that in terms of the outlook going forward as well, you seemed a lot more confident about growth in rest of Maharashtra coming back, other than Mumbai. So what's the real issue with Mumbai because it's been a few years where volumes have either been flattish or kind of declining?

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P. A. Poonacha, United Breweries Limited - Divisional VP of Finance [92]

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The number of outlets in Mumbai has remained by and large flat. And including the beer only licenses have been largely procured outside Mumbai rather than in Mumbai. So as such, the business has been flat or declining in Mumbai, as you rightly pointed out. And ROM is, I mean, these are flat or growing slightly.

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Jatin Chawla;First Voyager;Analyst, [93]

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Sir, the number of outlets is flattish broadly across the country in most states, right? But that does not stop growth. So why should it really have that bigger impact in Mumbai?

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P. A. Poonacha, United Breweries Limited - Divisional VP of Finance [94]

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I mean, if you look at Mumbai, it stops at the octroi zone. So consumption is going higher in the outlets outside the octroi zone.

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Jatin Chawla;First Voyager;Analyst, [95]

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Okay, okay. Second question was just a clarification on barley when you said you've secured for the year, that's for this calendar year, for next fiscal year, what was the exact interpretation?

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Berend Odink, United Breweries Limited - CFO [96]

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The current financial year. So up to next Q4, we are covered. From April, the domestic -- harvest will take place with new buying activities, et cetera. So then we look into the next financial year in terms of positions.

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Jatin Chawla;First Voyager;Analyst, [97]

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So broadly, you covered for just for this quarter?

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P. A. Poonacha, United Breweries Limited - Divisional VP of Finance [98]

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Yes, up to March 2020.

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Jatin Chawla;First Voyager;Analyst, [99]

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Yes, yes. Okay. And the last question is that between the last quarter and this quarter, there is a 10% kind of realization shift and there are various reasons for it. If you could just kind of put them in order? Because there is a price increase, there is a state mix, there is a premium share mix. So which of these would you kind of say are the most relevant ones.

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P. A. Poonacha, United Breweries Limited - Divisional VP of Finance [100]

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Number one is price mix -- sorry, state mix. And next is the price increases we have taken.

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Jatin Chawla;First Voyager;Analyst, [101]

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Okay, okay. And last question, on premium, you said double-digit growth. What's the contribution of premium now to your overall volumes?

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Berend Odink, United Breweries Limited - CFO [102]

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We don't split it up, but it's between 5% to 10%.

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Operator [103]

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(Operator Instructions) Next question is from the line of Harit Kapoor from Investec.

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Harit Kapoor, Investec Bank plc, Research Division - Analyst [104]

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Yes. Just -- one last follow-up. On the -- any trend that you can call out between mild and strong kind of category growth or your growth in terms of mild and strong, is there any differential that you see there, either for the 3 months or for the 9-month period?

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P. A. Poonacha, United Breweries Limited - Divisional VP of Finance [105]

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For the quarter, mild has grown by 1%, while strong has declined by 10%. That's for the Q3 alone.

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Harit Kapoor, Investec Bank plc, Research Division - Analyst [106]

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And would you attribute this more to the fact that premium is a slightly larger share than mild and -- that would have driven it? Or it's largely to do with the state mix?

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P. A. Poonacha, United Breweries Limited - Divisional VP of Finance [107]

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Perfect. (inaudible).

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Harit Kapoor, Investec Bank plc, Research Division - Analyst [108]

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Okay. It would be state mix, is it?

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P. A. Poonacha, United Breweries Limited - Divisional VP of Finance [109]

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No, no, no.

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Harit Kapoor, Investec Bank plc, Research Division - Analyst [110]

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It's a premium.

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P. A. Poonacha, United Breweries Limited - Divisional VP of Finance [111]

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Perfect.

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Operator [112]

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(Operator Instructions) Next question is from the line of Ashit Desai from Emkay Global.

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Ashit Desai, Emkay Global Financial Services Ltd., Research Division - Research Analyst [113]

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If I look at the nonalcoholic beer segment, sales are pretty flattish over the last 4 quarters. I mean, are you restricting sales only to a few outlets? Or if you can tell us something, how is the consumer response? Why is there no scale up over here?

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Berend Odink, United Breweries Limited - CFO [114]

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So we continue to expand the distribution footprint for nonalcoholic. It comprises basically 2 elements. One is the Radler portfolio with 3 product offers. And second element is 0.0 Heineken. I think in -- the consumer response is, certainly for Heineken 0.0 quite positive. I think for Radler, we are on a journey that -- yes, we have to explain the product. People have to try it. People have to get used to it. So this is, I would say, longer-term approach to building that category, which is completely new in India. But if you look internationally, we think it's a very exciting segment that has gotten a lot of traction. So for India, again, it's early days. But yes, we take a phased approach than one, I would say, for the long term.

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Ashit Desai, Emkay Global Financial Services Ltd., Research Division - Research Analyst [115]

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And your spend towards this category will be similar to last year? Or they will also see a step up? Hello?

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Operator [116]

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Participants, please stay connected. The line for the management dropped. (technical difficulty) Thank you for your patience. We have the management line connected back to the call. Sir, please go ahead.

Ashit, may I request you to say your question once again for the management, please?

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Ashit Desai, Emkay Global Financial Services Ltd., Research Division - Research Analyst [117]

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Yes. So my question was on the investments for the nonalcoholic beverage? Will they be similar to last year? Or you will see a step-up in that?

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P. A. Poonacha, United Breweries Limited - Divisional VP of Finance [118]

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I mean the large majority of the expenditure there is towards brand building. And as Berend called out before the line dropped, that this is in the launch stage, and we should see this as a percentage of top-line reduce, but quantum-wise would remain.

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Ashit Desai, Emkay Global Financial Services Ltd., Research Division - Research Analyst [119]

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Okay, okay. And lastly, could you share what was the growth in your premium segment in Q3?

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P. A. Poonacha, United Breweries Limited - Divisional VP of Finance [120]

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It is double digit.

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Ashit Desai, Emkay Global Financial Services Ltd., Research Division - Research Analyst [121]

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Double digit. I mean, could you give a -- could you quantify it?

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P. A. Poonacha, United Breweries Limited - Divisional VP of Finance [122]

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Sorry, we will not quantify it. It is a good double-digit.

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Ashit Desai, Emkay Global Financial Services Ltd., Research Division - Research Analyst [123]

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Okay. So should we take it as high teens? Or it's plus 20% or 30% that it used to be?

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P. A. Poonacha, United Breweries Limited - Divisional VP of Finance [124]

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Not plus 30%. It's in high-teens.

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Operator [125]

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The next question is from the line of Mehul Desai from IDFC Securities.

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Mehul Desai, IDFC Securities Limited, Research Division - Research Analyst [126]

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Just wanted to know on the scale-up plans for your wheat beer by when do you plan to scale it up pan-India? And second thing, similarly, in your premium portfolio...

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P. A. Poonacha, United Breweries Limited - Divisional VP of Finance [127]

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Mehul, we didn't get the first question.

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Mehul Desai, IDFC Securities Limited, Research Division - Research Analyst [128]

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Yes. Can you hear now?

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P. A. Poonacha, United Breweries Limited - Divisional VP of Finance [129]

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Yes, didn't get the first question itself.

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Mehul Desai, IDFC Securities Limited, Research Division - Research Analyst [130]

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Yes. The first question was your plans of scaling up your wheat beer?

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P. A. Poonacha, United Breweries Limited - Divisional VP of Finance [131]

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Wheat beer, okay.

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Mehul Desai, IDFC Securities Limited, Research Division - Research Analyst [132]

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Yes. And second is, I understand that some of your premium portfolio is also not available. I think it's not scaled up pan-India. So what are the plans to scale up the same too?

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Berend Odink, United Breweries Limited - CFO [133]

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Yes. So specifically, on the wheat beer, we've launched it in December in Karnataka and Goa. Next expansion will be towards Delhi and Maharashtra. And on the rest of the premium portfolio, indeed for brands like Storm and Amstel will continue to expand that in additional states, mainly towards North where there is a limited presence today for those brands. So still also on the premium side of the portfolio, I think a lot of opportunities are still out there.

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Operator [134]

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The next question is from the line of Vishal Biraia from Aviva Insurance.

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Vishal Biraia, Aviva Life Insurance Company India Ltd. - Analyst [135]

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Sir, you pointed out -- hello, sir, you pointed out in AP, some of the smaller [plants] have taken a higher share or they have been granted more preference by the state government. So how are we planning to tackle this?

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Berend Odink, United Breweries Limited - CFO [136]

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So we continue to make representations to the state government. We just noticed [deep] ordering pattern be quite different from before October 1. We see some press coverage that the brands that consumers look out for is not always available in the government-owned retail outlets. But it is something we, of course, try to correct going forward, but it's not fully in our own hands, I would say.

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Vishal Biraia, Aviva Life Insurance Company India Ltd. - Analyst [137]

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Okay. And this problem, I guess, would be faced by some of your peers like Carlsberg and AB InBev as well?

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Berend Odink, United Breweries Limited - CFO [138]

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(inaudible) on the ground, yes.

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Operator [139]

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Next question is from the line of Rahul Ranade from Goldman Sachs.

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Rahul Ranade, Goldman Sachs Group Inc., Research Division - Research Analyst [140]

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So I just wanted to understand -- so AP, what is the volume growth -- volume decline for us?

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Berend Odink, United Breweries Limited - CFO [141]

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So, very steep. So we did supply some primary orders in the quarter. But compared to previous levels, it has reduced dramatically.

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Rahul Ranade, Goldman Sachs Group Inc., Research Division - Research Analyst [142]

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Okay, okay. Because since we are saying that AP was 7% for us before October and ex of AP, we are flat, then it would be like way more than 50-odd percent, where you indicated that the industry would have degrown by 50%, is it?

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Berend Odink, United Breweries Limited - CFO [143]

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Absolutely yes, yes.

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Operator [144]

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Next question is from the line of Vishal Biraia from Aviva Insurance.

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Vishal Biraia, Aviva Life Insurance Company India Ltd. - Analyst [145]

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Sir, my question is on the export side. As to when do you see a pickup in exports? And what will lead to the scale up in exports?

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Berend Odink, United Breweries Limited - CFO [146]

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Can you repeat your last part of the question?

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Vishal Biraia, Aviva Life Insurance Company India Ltd. - Analyst [147]

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What will lead to the improvement in exports?

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Berend Odink, United Breweries Limited - CFO [148]

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So we have seen in the quarter normal export volume, and we believe there's no reason to see any change in that pattern going forward. As we called out in the notes and in the last quarter that we are changing our export agents, so that is happening. And the good news is that on the consumer end, there's still a healthy appetite for the brands of the company. And we'll continue to supply those export pockets going forward in a good way.

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Vishal Biraia, Aviva Life Insurance Company India Ltd. - Analyst [149]

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So next quarter, shouldn't see too much of a change, but maybe in the coming few quarters, should there be a significant change? Or any guidance on that front?

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Berend Odink, United Breweries Limited - CFO [150]

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I don't expect any wild changes up or down over there. I mean, we have been steadily growing the export business in the last few years. And yes, we continue with new partners to pursue that growth. Whether that leads to significant growth in one quarter or the other, I think that remains to be seen. But generally, I think, yes, it has been a good growth journey, and we'll continue to pursue that going forward.

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Vishal Biraia, Aviva Life Insurance Company India Ltd. - Analyst [151]

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Okay. Lastly, anything that you've heard from CCI in terms of their deliberations or incremental input that they will need? Or by when do you expect resolution to this?

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Berend Odink, United Breweries Limited - CFO [152]

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Yes. So as we stated in our notes to the accounts is that in December, we were communicated the report from the (inaudible) the initial findings. So we're now in a phase that we can comment and provide our suggestions and objections to those findings. That is what we'll do going forward. And then, yes, the CCI (inaudible) get around -- make the findings known to the initial phase.

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Operator [153]

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Thanks next question is from the line of Himanshu S from Dolat Capital.

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Himanshu Shah, Dolat Capital Market Pvt. Ltd., Research Division - VP of Research [154]

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Sir, just I want to check one thing. If AP would have been status quo, would there have been a significantly material positive impact on our EBITDA or earnings for that matter? Just trying to understand does AP has a significantly better EBITDA per case.

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Berend Odink, United Breweries Limited - CFO [155]

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So the pricing level, as I said earlier, is below the average, also profitability of the state is below the average. Obviously, in absolute terms, there is a negative impact in the quarter from the volume drop we have seen in AP. But I will not give the specifics of the profitability of that state.

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Himanshu Shah, Dolat Capital Market Pvt. Ltd., Research Division - VP of Research [156]

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Fair enough. Sir, but just qualitatively, would have it been material? Or just a few percentage points, maybe low single-digit or something like that?

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Berend Odink, United Breweries Limited - CFO [157]

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No, no, I think with 7% of the volume, it would be material for the quarter. That's why we also pointed it out in the press release.

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Operator [158]

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(Operator Instructions) As there are no further questions, I will now hand the conference over to the management for closing comments.

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Berend Odink, United Breweries Limited - CFO [159]

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Great. Thank you, everybody, for your interest. Thank you for the questions, and wish you a very good day-ahead, and look forward to the next call.

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Operator [160]

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Thank you very much. On behalf of IDFC Securities Limited, that concludes this conference. Thank you for joining us. You may now disconnect your lines.