United Breweries Holdings

It gives me great pleasure to greet you all at this 93rd Annual General
 Meeting of the Company. Since we last met in the immediate aftermath of
 the global melt down, India has been, along with China, the first to
 emerge from the shadows of this global malaise. Even as the economies
 of the developed Western world struggle to cope with an aging
 population, breakdown of financial systems, steep fall in asset values
 and corresponding destruction of wealth and employment prospects, we
 are seeing yet another step in the inevitable shift of the global
 economy from Europe and America towards Asia.
 
 Leading this seismic shift are the economic power houses of India and
 China, though both economies have different triggers. While China
 benefited from a unilateralist command economy, which enabled the
 Government to take economic steps without consultation, India, blessed
 with a vibrant democracy, must necessarily pay the price of this
 democracy in the form of consensus building. The pace of Indias growth
 is more measured, but, for that reason is more assured. The other
 significant difference between the two Asian giants is the dependence
 of the Chinese economy on exports and Government spending, whereas our
 own country is powered by the natural entrepreneurial spirit of our
 people and growth in market demand fuelled by domestic consumption. If
 one billion people were used to stretching two billion palms for alms
 in the past, I now see 2 billion hands reaching out for a fair share of
 well being.
 
 Despite the impressive growth recorded by our economy in the last
 several years, in no mean measure due to deregulation and empowerment,
 we are indeed two economies (i) a middle class one comprising perhaps
 300 million people, which is growing at double digits and powering
 demand led growth across categories and (ii) a much larger 800 million
 people strong economy that still survives from hand to mouth and sees
 only marginal growth. You will share my view that sustainable
 prosperity and double digit growth requires this section of our country
 to participate in the fruits of growth. Even as our metropolitan cities
 are creaking under the burden of unplanned growth, enterprise will need
 to relocate, or at the very minimum, cater to future growth in our
 smaller towns. These towns numbering in the several hundreds across the
 length and breadth of the country are by no means less prone to
 entrepreneurial spirit or consumer aspiration. We need, as a nation, to
 ensure that the green shoots of economic activity take root in our
 towns and villages.
 
 Our country is fortunate that after a protracted period of highly
 fractured political mandates driven by narrow factionalism, the recent
 general elections have provided a reasonable mandate to a single
 secular party, even while
 
 retaining the federal structure that has added so much to the vibrancy
 of our political process. Early indications are that the newly
 installed Government under the leadership of Prime Minister Man Mohan
 Singh, has recognized the need to drive reforms in an inclusive manner.
 Focus on rural employment, education and health, farm productivity,
 along with a much awaited overhaul of an archaic legal and taxation
 structure are all important steps along the path to sustained growth
 that touches all Indians and not just a small section. And, unlike the
 earlier torch bearers of a socialist India, the attempt now is to raise
 the standards of the poorest and make them active participants in the
 economic process rather than bringing down the affluent to the lowest
 common denominator.
 
 As I visualize the UB Group and its prospects for the near and middle
 term, I am enthused by the backdrop which I have detailed above. The
 per capita consumption of almost any product or service in our trillion
 dollar economy is still below Sub Saharan African levels. The
 combination of higher incomes resulting from guaranteed employment,
 investment in social infrastructure and rising consumption, fuelled by
 the near global access to media in the country are all indicators of a
 nation that can continue to build on domestic consumption, while
 prospering at both individual and corporate levels.
 
 We, the UB Group, have over the last several years attempted
 consciously to create a power house of branded consumer goods and
 services. United Breweries (Holdings) Limited (UBHL) as the parent,
 holds controlling stakes in market leading companies across extremely
 fast growing consumer sectors namely beer, spirits and civil aviation.
 These are our core businesses and all of them meet our exacting
 standards of domestic leadership and global relevance. We are justly
 proud of the fact that Kingfisher is widely acknowledged as the first
 global consumer brand of Indian origin. I am pleased to recall for your
 attention the fact that the McDowell range of products has become
 Indias largest consumer brand calculated by value of retail sales,
 overtaking Amul during the course of last year.  Similarly, Kingfisher
 Airlines (KFA) has raised the level of service to new heights and this
 has been acknowledged by KFA being voted, for the second consecutive
 year as the Best Airline in Asia Pacific and also its continued Five
 Star hospitality rating.
 
 Friends, I have personally long believed in the value of branding and
 UB Group companies started investments in brands in an era when most
 Indian companies were traditionally in the commodities business, while
 brands were created by multinationals. If today our companies can stand
 proud as acknowledged leaders in their fields, not just in India but on
 a global footing, it is largely due to this decades old commitment.
 
 Turning to each of our Businesses:
 
 UNITED BREWERIES LIMITED (UBL):
 
 UBL continues to rule the roost in the brewing industry.  Widely
 acknowledged as being the last major growth market for beer in the
 world, India has been seeing the entry of all major brewers who have
 brought their flagship international brands to the Indian market. Such
 is the dominant presence of Kingfisher in this sector, that all these
 international brands are retailed at prices cross line with Kingfisher
 rather than at a significant premium.  Despite the efforts of these
 international companies, with deep pockets and international brands,
 our unstinting commitment to understanding and fulfilling the needs of
 our Indian consumers has helped UBL to not just retain its leadership,
 but to garner market share, which in the first quarter of the financial
 year has for the first time ever crossed 50%.
 
 As market leader, UBL is deeply conscious of the companys
 responsibility towards agriculturalists as well as communities in which
 it operates. UBL has been in the forefront of encouraging modern
 farming techniques for barley in Northern India. The company has also
 invested heavily in health care, primary education and water quality in
 all locations where the company has manufacturing facilities, in the
 process raising the standard of living of local communities.
 
 A young country with more than half a billion people yet to reach the
 legal drinking age, I believe that the brewing industry is set to
 achieve stellar growth, which could be accelerated by a supportive
 regulatory framework. Our company continues to engage with Government
 in this regard.
 
 Access to international brands and technology through Heineken, which
 is a joint shareholder in the company, will help UBL to garner
 additional strengths and capitalize on the inherent growth potential.
 
 UNITED SPIRITS LIMITED (USL) :
 
 With total sales approaching 90 million cases last year, growing in
 double digits, USL is well set to become the second largest spirits
 company in the world by the end of the current financial year. I have
 already remarked upon the rare distinction of McDowells becoming
 Indias largest consumer brand. We are continuing to foster other
 market leading brands across all flavours and price segments.
 
 Over the last several years, the industry has witnessed steady growth
 coming from a combination of new entrants reaching legal drinking age,
 those who choose to upgrade from country liquor, (which has inherent
 health risks) to branded products offered by the IMFL industry.
 Additionally, aspiration and increased disposable income
 
 has also accelerated growth. USL, as market leader, has been able to
 capitalize on these underlying trends and continuously grow both
 volumes and profits. The company runs one of the most complex
 manufacturing and distribution setups with over 74 manufacturing units
 spread across 24 states, with over 80 brands in 19 types of packs. The
 scale is humungous and it is a credit to the management team that we
 continue to wring efficiencies out of the system in order to sustain
 profit growth in double digits year after year.
 
 The Indian consumer for beverages is becoming increasingly
 sophisticated and demanding in terms of international flavours and
 brands. In this context, USLs acquisition of Whyte & Mackay Ltd, the
 fourth largest Scotch distiller in the world was a very timely and
 strategically important decision. Worldwide demand for mature scotch is
 increasing rapidly due to emerging demand in Asia, with India slated to
 be the worlds largest Scotch whisky market in a few years. This
 burgeoning new demand has led to a global shortage of liquid and a
 hardening of scotch whisky prices. As per recent evaluation by an
 independent expert, the value of Whyte & Mackay inventory has gone up
 significantly since the acquisition.
 
 The Indian consumer is steadily showing a strong affinity to the
 consumption of wine and new categories of consumers are coming to the
 market who, exclusively franchise wines. USL has set up Indias largest
 winery in the Baramati district of Maharashtra and introduced the Four
 Seasons and Zinzi range of wines to the delight of the consumers.
 The acquisition of the French winery Bouvet-Ladubay in the Loire valley
 of France has helped the company to not only offer a series of Bottled
 in Origin high quality French wines but also to assimilate viticulture
 technology at the new Baramati Winery.
 
 KINGFISHER AIRLINES LIMITED (KFA):
 
 We are proud to have redefined the flying experience for the benefit of
 the guests of KFA. In less than five years since inception, KFA has
 grown into not only Indian largest domestic carrier serving 10.7
 million passengers last fiscal, through an average of 412 flights a
 day, connecting 67 cities; we are even more proud of the number of
 prestigious awards bagged by the company both for engineering
 excellence as well as on board service excellence. KFA is one of only
 six airlines globally (and the only domestic carrier) to be awarded the
 Five Star Hospitality rating by Sky Trax. KFA is also proud to have
 been accorded the Best Airline in Asia Pacific in a survey conducted by
 TNS on Asia Pacifics Top 1,000 Brands for 2008 for the second
 consecutive year displacing Singapore Airlines who had held this
 position for several years.
 
 Although the aviation sector is going through a challenging period
 caused by unplanned capacity expansion and a
 
 regulatory framework which imposes unreasonable costs on Indian airline
 companies, I am a strong believer in the future of this industry and
 KFAs position as market leader.  Flying has long been viewed by the
 Government of India as something that only rich people indulged in and
 therefore not accorded it proper policy status. An independent
 authority - International Air Travel Association (IATA) has confirmed
 that the cost of running an airline in India is more than 60% higher
 than in other jurisdiction in the world.
 
 In fact, with economic growth shifting rapidly to smaller towns and
 cities across India and the lack of alternate transport infrastructure
 such as modern railway or high speed road network, I feel it is
 inevitable that people will take increasingly to flying. In this
 process, civil aviation acts as a force multiplier for economic growth.
 In comparison to the potential of the industry, India has amongst the
 lowest penetration of air traffic in the world, with less that 3% of
 Indians having ever got on a plane.  This is clearly not sustainable
 and I believe that with a little regulatory support the Indian aviation
 industry is set to witness boom times. On their part, the industry, led
 by KFA has rationalized capacity and cut costs, which are within its
 control, so as to be able to offer the flying public a competitive
 pricing option.
 
 UB GLOBAL:
 
 Despite difficult conditions in world markets caused by the financial
 meltdown and recession, UB Global has put up an impressive performance
 recording growth in both revenues as well as profits. This division
 continues to hedge itself by calibration of the product mix and markets
 that are served.
 
 UB Global received the APEDA Trophy for the tenth consecutive year for
 best performance and also the Silver Award for Merchant Exporters from
 the Federation of Karnataka Chamber of Commerce and Industry.
 
 MANGALORE CHEMICALS & FERTILIZERS LIMITED (MCF):
 
 MCF the only fertilizer company in the State of Karnataka, registered
 significant growth during the year with sales and other income
 recording an increase of 49% over the previous year and EBITDA increase
 by 28%.
 
 Under its Integrated Nutrient Management (INM) program, MCF continued
 its efforts to develop awareness about the advantages of balanced use
 of fertilizers. As a result of the sustained focus of the company in
 this area over the last few years, the revenue from the INM business
 for the year under review doubled during the year.
 
 MCF, through the wholly owned MCF International Limited, started an
 AGRI project initiative for the benefit of farmers in its operating
 territory. The project is aimed at providing comprehensive services to
 farmers that include farm advisory, soil / water management and
 nutrition management, aimed at improving the yield, quality and
 consequently the returns to the farmer. The company sources the staples
 and vegetables from the farmers at market prices and supplies these to
 modern retailers and other bulk buyers.
 
 Pilot projects have been started at Hassan and Chickamagalur and
 state-of-the-art processing and packaging facilities have been
 established at these centres as well as in Bangalore to process and
 pack vegetables and staples. The company has started test marketing of
 staples in select markets under the brand Navodaya and sale of
 vegetables at Bangalore and Mangalore to retail chains, hotels and
 industrial canteens.
 
 UB CITY:
 
 The completion of the UB City project has redefined not only the
 skyline of Bangalore but also become the throbbing heart of the
 citizens who meet here to work, shop, eat and play. The tenants at UB
 City include some of the top multi national and Indian companies, while
 the retail sector branded The Collection is home to the super luxury
 brands from around the world including Louis Vuitton, Canali, Todds,
 Daum, etc. Of course the general economic conditions have had some
 temporary negative impact on the yields from this real estate but
 values have continued to hold firm. I do believe that recovery in the
 economy which is now increasingly visible, will soon result in an
 upswing in fortunes.
 
 Due to changes in zoning levels in Bangalore city, we will now be
 entitled to build approximately an additional half million sqft within
 the premises of UB City. We are currently evaluating a proposal to set
 up a high end high rise residential complex, though we would time the
 launch to coincide with the economic recovery.
 
 Friends, in conclusion, I would state that I am optimistic about the
 future of our company and the various businesses that we have
 incubated. All of them are market leaders in their field and built upon
 the foundation of quality and value. These are abiding virtues, which
 will stand us in good stead inspite of the ups and downs.
 
 I would like to thank all those who have made this possible, including
 our employees, suppliers, customers, bankers and of course my dear
 fellow shareholders, all of you for your consistent support.
 
                                                     Dr. Vijay Mallya
 
                                                             Chairman