United Breweries

Dear Fellow Shareholders,
 
 It gives me great pleasure to welcome you to this 8th Annual General
 Meeting of United Breweries Limited, which comes at the end of another
 successful year. As a result of the continual efforts by the industry,
 led by United Breweries, to encourage a supportive regulatory
 framework, the year witnessed success on the front in many North Indian
 markets. You will recall that the beverage alcohol markets in North
 India were typically controlled by private cartels that paid scant
 respect to consumer choice. Profiteering by these monopolistic cartels
 resulted in high end consumer prices for beer across most of North
 India, leading to very low consumption and poor profitability.
 
 Your Company had been championing the industry cause to change the
 regulatory framework in the States in favour of either a free market or
 distribution by Government undertakings. While the first, viz., free
 market is the most desirable operating environment for any business, it
 was felt that even a change over to State Government distribution would
 be a step forward, as the State undertakings are accountable to
 consumers.
 
 The current year saw this effort coming to fruition, with the States of
 Punjab & Haryana moving away from the existing pernicious auction
 system to a license fee based distribution system. Conseguently both
 these States witnessed a boom in demand, resulting in overall industry
 growth of nearly 30%. The overall volume for the industry stood at
 about 137 million cases at the end of March 200 7, of which our
 Company, along with its subsidiaries and associates sold 66.7 million
 cases. This signifies a record of sorts with beer consumption per
 capita reaching the 7 Itr per annum, which still continues to trail
 even emerging markets, which average about 24 Itrs per capita. Robust
 growth continues in the current year and is expected to reach sales of
 155 million cases.
 
 In order to cater to these growths, United Breweries had embarked upon
 an investment plan totalling about Rs. 400 crores. This included
 setting up of two new greenfield breweries in Rajasthan and Orissa,
 which have been recently commissioned, as well as expansion of
 capacities at other locations. The two new breweries add over 8.5
 million cases per annum to our capacity whereas expansion at other
 locations will increase the capacity of existing breweries by about
 20%.
 
 We all have reason to be proud of Kingfisher Strong, which in eight
 short years since introduction, has overtaken Kingfisher Premium Lager
 to become Indias top selling brand of beer, with sales of over 26
 million cases. The brand witnessed a growth of 45% during the period
 under review.
 
 Kingfisher Premium Lager continues to be Indias leading mild beer,
 commanding a market share of nearly 66% of the mild beer market.
 Overall, the Kingfisher brand soars over the industry with nearly 2 out
 of every 5 beers consumed in the country being a Kingfisher.
 
 Many innovations are under way including the Kingfisher Strong 330ML
 Can, the Kingfisher 330ML pint bottle, the 500ML King Can and also a
 multi-can pack.
 
 I have long believed in brand building and over the years, our Company
 has been in the forefront of Indian FMCG companies in this regard,
 making Kingfisher one of the most well known and respected aspirational
 consumer brands in the country. Survey after survey has demonstrated
 the close links that the brand has successfully formed with the youth
 of India, who are emerging as a large consuming base for the future.
 Kingfisher continues to be the iconic representation of the good things
 in life, which the youth of India aspire to.
 
 These investments in building up the brand equity of Kingfisher in a
 multiplicity of ways will stand the Company in good stead particularly
 with the entry of a number of multinationals into the Indian market, in
 anticipation of explosive growth over the next decade. Several
 international brands have made forays in the past only to meet with
 very limited success in the face of our Companys offering as well as
 our dominance over the Indian distribution infrastructure.
 
 In keeping with our caring traditions, United Breweries has also made
 significant investments in socially desirable areas. Rainwater
 harvesting, protection of ground water, investment in bio-mass boilers,
 which use agricultural waste as fuel, and establishment of primary
 health and education facilities in villages adjoining the Companys
 breweries, are examples of various such initiatives.
 
 As a consequence of all the foregoing, the capital market recognizes
 our Company as one of the leaders in the field, and all of us, as
 shareholders, are being rewarded appropriately by the markets. The
 market capitalization of United Breweries last September was about
 Rs.3000 crores, which has more than doubled itself currently to be in
 excess of Rs. 6600 crores, despite trying market conditions. I am sure
 that you all share my happiness in this reward and recognition.
 
 It remains for me to say thank you to all who have contributed to our
 success, namely, our staff, directors, customers, suppliers, bankers
 and most importantly all of you - our shareholders.
 
 Dr Vijay Mallya 
 Chairman