<dhhead-MESSAGE FROM THE CHAIRMAN</dhhead-
We have pro-actively managed sustainability under our "3R"
policy to reduce, recycle and reuse/recharge as well as explore opportunities for water
conservation through rainwater harvesting.
Dear Shareholders,
The Indian beer market presents an exciting opportunity for the future.
Not only is the industry growing faster than the global average, it is fuelled by several
important factors. Firstly, it is a highly under penetrated market, constrained by
historic cultural barriers to alcohol combined with regulatory hurdles. However, with a
young population, attitudinal shifts, favourable climate, increasing GDP and corresponding
enhanced disposable income, the category is set to significantly strengthen in the years
to come.
There are many other movements that are playing in favour of our
industry. Rapid urbanisation, substantial population entering the legal drinking age,
enhanced domestic and international tourism, explosion of celebratory occasions
combined with increasing cases of online sale and home delivery.
In fact, the consumption of alcoholic beverages is becoming more
acceptable to consumers who are developing an appetite for beer, which is emerging as a
social beverage in metros and tier two cities. Beer is gradually becoming a perfect
after-work companion for corporate India as well.
Further, signs of liberalisation in retail and distribution augurs
well. The recently concluded general elections brought the ruling party back to power.
We should, therefore, see continuity in economic policies and reforms.
As states aim to bolster their excise revenues, governments should proactively consider
allowing more points of purchase and consumption
through online and home delivery. Equally, simplification of the
regulatory environment could liberate the industry while enhancing revenues for the
states.
All in all, the outlook for the beer industry looks bright and with
full of potential. Consequently, there is a very exciting opportunity for UBL (Heineken)
to not only participate in this evolving market but to shape the future.
In recent times there has been a barrage of new brands in segments like
craft and premium beers. However, your company is well poised to compete, armed with its
market leading brands, innovative offerings, product quality and distribution network.
Backed by the might of Heineken and its international brand
portfolio, UBL is well positioned to not just participate but win.
Your company is focused on driving growth in the premium segment. New
products like Heineken Silver were launched in key markets like Maharashtra and Goa and
have been well received by the discerning consumer. We launched Kingfisher Ultra Max
draught in Karnataka recently and are now planning to launch it in other key markets.
A variety of taxes and levies are imposed on beer during and after
production, transportation and sale by each state.
Pricing regulations as well as additional taxes on inter-state movement
of beer continues to pose a challenge to the industry. Government intervention in
distribution, ever increasing taxation, increased cost of raw materials (glass, barley,
malt, other packaging material, etc.) and government restrictions applied on advertising
also pose impediments to industry growth.
The threat of prohibitive actions, which stems from constant changes in
the political agenda remains a possibility. Your company is actively engaged with various
corporations/ Excise Departments in a proactive manner to mitigate the impact of adverse
policy decisions to ensure a favourable business climate.
Changes in availability, quality or price of raw and packaging
materials, commodities, transportation, or monopolistic supply situations may result in
shortage of those resources and/ or increased costs. Barley is a key ingredient which is
subject to market forces; your company is exploring the option of collaborative farming.
New glass availability is constrained in India; here again your Company is in discussions
with incumbent and alternate suppliers to address the long-term supply risk of bottles.
The effects of social and economic uncertainties in the market often
make it difficult to predict demand cycles. To overcome these challenges, UBL remains cost
conscious at all levels of operations, and works with a high degree of agility and
efficiency. We continue to invest and expand the brand portfolio while continuing to be
cost-efficient. We also continuously upgrade and adopt modern technologies and solutions
to be able to respond with agility to market demands, without losing focus on cost and
quality.
The labour market in India is becoming more competitive.
There is a risk of business disruption due to the Industrial Relations
environment with the unions, labour authorities and contract vendors. The company is
developing a detailed IR strategy to address labour related concerns. Further, various
initiatives have been taken to be able to continue to attract the right talent, build a
diverse and inclusive culture, including the top management positions, while building an
engaging workplace.
Sustainability is an important priority, not just for the company but
the planet at large. Non-availability of water, rationing of its supply and restrictions
on withdrawal of ground water also poses a major threat. Your company has built
infrastructure which helps in reduction of water consumption in breweries. We have
pro-actively managed sustainability under our "3R" policy to reduce, recycle and
reuse/recharge as well as explore opportunities for water conservation through rainwater
harvesting. Our objective is to achieve ideally a positive - or at least a neutral water
balance. The company's focus on sustainability is poised to increase multifold which will
help in addressing ESG concerns.
Adoption of the Heineken Evergreen strategy will enable us to meet
short-term challenges and will ensure the long-term sustainability of our business to
create lasting value for all stakeholders.
The Company also focuses on secure IT operations while addressing the
ever increasing risks of cyber security. This includes risks from IT lapses, malware and
ransomware attacks, disruptions in key Enterprise Processes and hacking, which could lead
to disruptions in business operations and loss and/or leakage of confidential data. We now
have a focussed approach towards IT (Data & Technology) and have adopted Best-In-Class
technology solutions to become the best-connected Brewer.
We are committed to doing business the right way and we are actively
helping shape perceptions for the sector with a strong compliance focus. We will continue
to progress on our journey towards sustainable performance. While there are challenges
along the road, I envision a path filled with opportunities for growth, innovation, and a
positive impact for all stakeholders.
With determination, vision, and a collective effort, we strive to shape
a brighter and inclusive future by brewing a better world for our people and communities.
On behalf of the Board of Directors,
I thank all our stakeholders in the Government, both at the state and
central level, investors, colleagues, the leadership team and every member of UBL for
their hard work and commitment and for delivering another good year.
Regards,
ANAND KRIPALU
Chairman