Som Distilleries Aims 10-Fold Revenue Growth In Five-Six Years
The company handled 1.5 crore cases in FY23 and expects this figure to continue growing, JK Arora said.
In fiscal 2024, the alcoholic beverage industry is projected to reach a volume of 40 crore cases, with Som Distilleries and Breweries Ltd. holding a 12% market share within this forecasted volume, according to top executive JK Arora.
"If we look at it from a large perspective, the industry is to reach a level of 70–80 crore cases in 5-7 years time," said Arora, managing director at Som Distilleries, the maker of Hunter beer.
Assuming that the company had a 20% all-India market share at that time, Som Distilleries could easily become a Rs 10,000 crore company from its current Rs 1,000 crore value, Arora told BQ Prime.
The company handled 1.5 crore cases in FY23 and expected this figure to continue growing, ultimately contributing to 20% of the projected volume in the range of 70–80 crore, 5–6 years down the line, the MD said.
Market Growth and Capacities
Arora is optimistic in terms of future growth. Although the company has only 35–40% of all India's presence, the firm is doing well in the limited markets, according to him.
India has three large players, and the fourth is Som Distilleries, Arora said. He also highlighted that the company is one of the fastest-growing beer companies because their brands have been very well accepted by the market.
Madhya Pradesh, Karnataka, and Odisha are the company's three core markets. In terms of capacity, the units in Madhya Pradesh and Karnataka are being employed at 100% capacity, Arora said. The Odisha unit's expansion was completed in July 2023 and is currently covering more than 50% of the state's market. Furthermore, Som's recent tie-up with Carlsberg beer will result in 100% capacity utilisation in the state, he said.
The company has identified seven to eight states that have a large potential for future expansions. The states of Maharashtra, Uttar Pradesh, Telangana, Andhra Pradesh, Rajasthan, and Tamil Nadu have a three-crore case market currently, Arora said.
According to him, Som Distilleries' approach to entering and expanding in these markets will involve either acquiring existing businesses or making greenfield investments. Given that their current facilities are operating at full capacity, leveraging local production through either establishing their own manufacturing units or collaborating with local manufacturers would be more advantageous, Arora said. This approach is preferred due to the drawbacks associated with import and export taxation when sourcing products from other states, which, as Arora pointed out, can dilute profit margins.
As for how the company plans to fund the expansion, Som Distilleries has a lot of surplus accruals, despite its recent expansions in all of its three major units, the MD said.
The company is actively reducing debt and has brought down its Rs 250 crore debt level last year to the Rs 100–150 crore level currently, Arora said.
Arora anticipates the firm's Rs 350 crore qualified institutional preference issue, due this month, to help with fund raising for its future and existing plans.
Raw Material Price Trend
Two major raw materials were under pressure last year, which resulted in price hikes, according to Arora.
The first one was malt, which used to be sourced in large quantities from Ukraine and was impacted by the war. The second was on the bottle packaging front. Hindustan National Glass & Industries Ltd., which produced around 70% of glass bottles for the industry, faced insolvency last year.
However, the situation is now better, according to Arora. The glass production capacity has now increased, and the situation surrounding the Ukraine war has fairly settled.
This has led to prices coming down a bit this year. Despite difficulties, the company's profits are up this year due to better capacity utilisation, which has brought overall costs down, Arora said.