United Breweries Ltd. — Call Transcript 2021

Aug 6, 2021

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August 06, 2021

1. The Secretary-Listing Department 2. The Manager-Listing Department BSE Limited National Stock Exchange of India Limited Phiroze Jeejeebhoy Towers, Exchange Plaza, 5th Floor, Plot. C/1, G Bl. Dalal Street, Fort Bandra-Kurla Complex, Bandra (East) Mumbai - 400 023 Mumbai – 400 051 Scrip Code: 532478 Symbol: UBL

Dear Sir,

Sub: Written Transcript of Financial Results Earning Conference Call

Pursuant to Regulation 30(6) read with Para-A of Part-A of Schedule-III and Regulation 46(2)(o) of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 and second amendment thereon by SEBI notification No. SEBI/LAD-NRO/GN/2021/18 effective May 05, 2021, please find attached herewith copy of Written transcript of Quarter1 FY21-22 Financial Results Earnings call which was held on Thursday, July 29, 2021 @ 05:00 p.m. IST, by way of conference call with Investors and analysts, hosted by Investec India.

Kindly take the same into record.

Thanking You,

Yours faithfully, For UNITED BREWERIES LIMITED

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GOVIND IYENGAR

Senior Vice President – Legal & Company Secretary

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“United Breweries Limited

Q1 FY2022 Earnings Conference Call”

July 29, 2021

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ANALYST: MANAGEMENT:

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MR. HARIT KAPOOR - INVESTEC CAPITAL SERVICES

MR. BEREND ODINK – CHIEF FINANCIAL OFFICER - UNITED BREWERIES LIMITED MR. PA POONACHA - FINANCE AND INVESTOR RELATIONS

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Moderator :

Harit Kapoor:

Berend Odink :

United Breweries Limited July 29, 2021

Ladies and gentlemen, good day and welcome to the United Breweries Q1 FY2022 Earning Conference Call, hosted by Investec Capital Services. As a reminder, all participant lines will be in the listen-only mode and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing ‘*’ then ‘0’on your touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Harit Kapoor. Thank you and over to you Sir!

Thanks Rio. On behalf of Investec Capital Services, we would like to welcome you all this evening to this Q1 FY2022 conference call United Breweries Limited. From the senior management at United Breweries, we have with us Mr. Berend Odink, CFO and Mr. PA Poonacha, Finance and Investor Relations. At the outset, we would like to thank the senior management for giving Investec Capital Services the opportunity to host this call. I will now hand over the call to Berend for his opening remarks post which we can open the floor for Q&A. Over to you Berend!

Thank you Harit. Thank you for hosting us. Good evening everybody on the call. Thank you for joining today. I hope everybody is safe and healthy after what has been a very challenging quarter given the situation in the country. Today, we will discuss the Q1 results and after some brief opening comments, Poonacha and I will be happy to take any questions that there might be.

Turning first to the results highlight, Q1 was again heavily impacted by the second wave of COVID-19. We continue to focus on safety while ensuring an agile approach on cost and investments considering the dynamic environment. Our volumes more than doubled versus prior year Q1 reflecting the different nature of the second wave related trade restrictions and healthy underlying company performance.

Restrictions in the quarter were less stringent when compared to the similar period of the prior year with almost all the markets partially functional in some form; however, our June 2021 volumes were at about half that of our volumes in June

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United Breweries Limited July 29, 2021

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1. We realized positive sales and price mix for the quarter, combined with continued cost management and adaptation to new ways of working, the bottomline results turned positive with an EBITDA of Rs.102 Cores and a 9.1% EBITDA margin.

Slide #5 shows the volume performance by region. In general, the growth figures differ by region and by state due to different impacts and timing of the second COVID-19 wave and differences in markets opening up both this year and last year.

North saw good trading particularly in Rajasthan and Delhi. In West we saw broad recovery in nearly all markets. East posted the highest growth that is mainly due to a lower base last year due to late opening of markets during that time. In South we saw broad recovery as some markets opened relatively later or were fully closed such as Kerala in the month of May.

In summary, all major markets were partially closed during the first quarter and into July. Limitations in opening hours and for example weekend lockdowns continue in most of the markets. If we look at the net sales build up it was driven by 115% volume growth and 6% price mix.

The next slide shows the EBITDA breakdown. Gross profit improvement was driven by better volume performance. Employee expenses lower by 1% despite the higher volumes. Other expenses have increased by 51% due to learning’s from prior year which led to better management of COVID related disruptions and associated costs, continued cost savings partially offset by higher commercial investments.

Finally, turning to the slide on “Outlook and Summary”, we have observed progressive recovery of underlying consumer demand post the first COVID-19 wave and see no reason why there should not be any structural changes post second wave.

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United Breweries Limited July 29, 2021

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Health and safety of employees and stakeholders remains paramount, while operations are fully in compliance with regulations as they are introduced from time to time.

We are monitoring the changing environment on a continuous basis and will take appropriate actions for steering the business profitably by dynamically managing all elements of costs and investments.

While the industry outlook continues to be volatile given the uncertain trajectory of the pandemic, the company continues to be optimistic about the long-term growth drivers of the industry and is committed to strengthen its market position.

That concludes the opening comments and let us move to the Q&A, please go ahead.

Moderator :

Aditya Soman :

Berend Odink :

Thank you very much. We will now begin the question and answer session. The first question is from the line of Aditya Soman from Goldman Sachs Asset Management. Please go ahead.

Good evening Sir. Two questions from my end. Sir firstly can you give us a sense of how the reopen is progressing by region I mean you have given a sense of the performance say up to June in your slide but can you give us what is happening in July by region? Secondly in terms of where you see July end up compared with July 2019 any sort of commentary on that will also be extremely useful?

Thank you, Aditya. The situation on restrictions and lifting off lockdowns is of course very state specific, sometimes even district specific, but I think the broad thing here is that we have seen in June the restrictions started to be lifted with subsequent steps in July being seen in most of the states. Of course some states went to full lockdown, some states were partially open. Some states were less impacted and that has been definitely differentiated and very different from prior year Q1. The picture here today is that we have seen retail mostly come back while the recovery on-trade is at a staggered pace with limited opening hours and limited seating capacity in most of the states. That is a picture broadly state by state and on July trading we do not put out the figures but definitely the picture is

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United Breweries Limited July 29, 2021

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one that where we have seen last year recovery of the markets month by month quarter by quarter again this trend is very strongly visible today. At the same time, we all read the news, the trajectory of the pandemic is very difficult to make any estimates about but at least where we are today, we do see recovery and that has been manifesting itself in July.

Aditya Soman :

Berend Odink :

PA Poonacha:

Aditya Soman :

Moderator :

Avnish Roy :

I understand that is clear and in terms of sequential gross margins we see a compression there. Now is this a function of higher input cost or was this just largely state mix and lower utilization?

If you compare to last year’s Q1, we of course made an improvement. If you compare it sequentially to Q4, we are a bit lower on gross margin. It has to do partly also with state mix with a few states for example, where cans have been having a larger share of business in the total company result. We expect that to normalize as the state mix and the recovery continues in months to come.

Also some costs with respect to the failure of the reverse logistics on used bottles because when we ended March last financial year, our used bottle returns had come back to almost normal but this quarter again with the pandemic hitting the infusion of new bottles has gone up because of the used bottles return system having failed.

Thank you. That is very clear. That is it from my end.

Thank you. The next question is from the line of Avnish Roy from Edelweiss. Please go ahead.

Thanks for the opportunity. My first question is from your presentation you have said June sales were half of June 2019, two years back so, I wanted to understand this number so would you be a bit disappointed given the pent-up demand would have been there and in-home consumption has also taken some shift in favor of from pubs and bars, pubs and bars will be 25% of the sales but why should the sales be, half of June 2019 because in most other sectors in consumption we have seen a pent up demand of the loss of May coming out in June so that is not visible in your case?

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Berend Odink :

Avnish Roy :

Berend Odink :

PA Poonacha:

United Breweries Limited July 29, 2021

One has to recognize that even in June there were a lot of restrictions so most of the opening of the trade for example On- trade in certain states continued to be closed for the full month, other states had On-trade opening towards maybe June 21, 2021 so only a small part of the month and, even in retail we saw restrictions on opening hours, for example if the opening hours are only from 9 to 3 or 9 to 1 given that the beer is a product that needs to be chilled, while you consume the same towards the latter part of the day, these restrictions as such are not supporting immediate good recovery. But having said that as we have seen in July, further opening of trade and restrictions continue to be lifted and we are hopeful that recovery will continue on a good play.

My second question is, in some of the states like Bengal and Rajasthan, there has been favorable regulatory action for beer industry versus the spirit so, if you could elaborate on those two states and any other states you can get this benefit why should it be restricted to only two states?

In those two states, as discussed we have seen favorable regulatory changes with that we have also seen very good trading. I would say in the case of Rajasthan it is probably a little bit early to really conclude as we need a couple of months to really get a picture, which is not impacted by restrictions on opening hours to get the full visibility, but at the same time to the second part of your question the states each of them make their own decision as to what the policies are going forward so, it is good to know that a couple of these policies are moving in the right direction but this discussion remains very much a state-by-state discussion and policy but definitely we are using those examples with other states as to frame what future policy could look like and, what could be we think the win wins are for the industry participants but, also to comment that if other states move and by when, etc., that is not in our hands.

Just to add Uttar Pradesh there was a duty reduction effective April 1, 2021 you have not taken note of that, so in addition to West Bengal and Rajasthan in Uttar Pradesh also there is a duty reduction and a subsequent drop in MRP which is leading to a buoyant market in UP also.

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United Breweries Limited July 29, 2021

Avnish Roy :

Thanks for that info but do you see any risk that these three markets could reverse because we know how state governments operate so when they see good volumes coming back they become quite greedy to increase the taxes again so, is there some risk or do you see this financial year that risk is low. Based on your understanding we cannot predict how state governments operate?

Berend Odink :

Yes, what I can see is that states made a conscious call to move in this direction of course you never can rule out some of this might be like a change in due course but I would also refer to last year when we had many states introducing a kind of COVID tax, COVID type taxation which was quite large in a number of the states. All of those examples showed that those kind of big duty increases did not really work and were rolled back fully or sometimes partially in subsequent months so this has also shown many of the states that you have to be with a long-term approach with careful rationale in terms of your excise policies. All those learning’s hopefully bear fruit in the years to come.

Avnish Roy : Sure and one last one so on Delhi liquor policy any comments what will be the changes what will be the benefit?

Berend Odink : In general, it is going to be good for consumers in the sense that are increased opening hours, reduction of the drinking age, moving the trade, in fact all of it, to private hands. I think that is a move towards consumer choice and that is something we certainly support. So, we are hopeful that it brings new growth introduced to the Delhi market and with that we fully support it.

PA Poonacha:

In addition to that in Delhi, the rule also says that the manufacturers of beers can no longer have their depots in Delhi because there is no manufacturing facility in Delhi so as such today, the manufacturer needs to have their depot, so going forward those depots will have to go, hence the smaller players in the immediate will be in some sort of a tight situation so the major players will tend to gain with this New Delhi policy.

Avnish Roy :

Your depot will be where in the UP, how do you support in?

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PA Poonacha:

Avnish Roy :

Moderator :

Ashit Desai :

Berend Odink :

United Breweries Limited July 29, 2021

In Delhi, manufacturers cannot have manufacturing facilities in the vicinity of Delhi but need to have them outside City, so the rule now says that you have to have a manufacturer owned depot inside Delhi so your production facility invoices the depot from which you sell to Delhi market, now going forward the manufacturer cannot have this depot facility so this has to be done by a large distributor who has a previous track record and financial strength. In the immediate future, the large players will tend to gain because the smaller players will not be able to identify a strong player to do their distribution with immediate effect.

That is very helpful. That is all from me. Thanks Sir.

Thank you. The next question is from the line of Ashit Desai from Emkay Global. Please go ahead.

Thanks for the opportunity. Just two questions, we have seen a lot of cost savings from you over the last two quarters, so when we look at the overhead cost line item, could you help us understand how much of these are structural in nature and if you could split that into the major costs where you have seen a lot of savings that will be helpful?

Yes. You are right. We have been running let us say comprehensive cost savings program since the start of pandemic. This is actually a continuation of all of those savings which are of a structural nature but, at the same time we have always said we do not put out figures on this especially what moves to the bottom-line as we always have to also take into account other types of inflation that come from time to time in the different cost items. Secondly, we also decide to reinvest part of that into commercial activities whether it is in the topline or in the A&P spend so, those elements will be there from time to time but definitely the cost savings that we have done are of a structural nature and we continue that program to reach further efficiencies and, as we said we dynamically look at costs in the sense that we have seen of course a very volatile topline and with that we aim to manage also the cost elements in that space.

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United Breweries Limited July 29, 2021

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Ashit Desai :

Is there a target which you all work on internally to save costs every year like some other companies do?

Berend Odink :

We have a program where we have a rolling forecast of what are all the initiatives in the pipeline, what is the realization and of course when we identify those initiatives we have in mind certain absolute targets, which can also be fully moved to the bottom-line. Let us say depending on where other cost moves, what is the competitiveness in the market that is how we operate but again we do not put one figure out there because I think that might be partially misleading, if we decide to reinvest some of that behind brands or behind innovation then it might give the wrong signal if we talk about those numbers. But rest assured that on all the main cost items we have those programs running and we will continue to identify new initiatives and move those along going forward as well.

Ashit Desai : Got it and lastly with Heineken increase in stake and you becoming a subsidiary of Heineken do we see any changes in operations or more collaboration or some synergies cost efficiencies due to that?

Berend Odink : We will of course explore in the coming months as to where we will closely seek further cooperation with Heineken. I do not expect huge changes in how we operate or what we do but of course Heineken has been a long-term shareholder in the business, has been long time representative on the board, we have the brands and cooperation but of course we can always take next steps and further levels of cooperation so, that is something we will definitely explore but if you ask me is there immediately going to be a huge change? I do not think so but we are happy with the kind of confidence Heineken has in the business. Heineken is confident in the beer market potential for India and we will work together to unlock that further growth potential.

Ashit Desai :

Thanks. That is it for me all the best to you guys.

Moderator :

Thank you.. The next question is from the line of Arnab Mitra from Credit Suisse. Please go ahead.

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United Breweries Limited July 29, 2021

Arnab Mitra :

• Good evening. My first question was on input cost. So if you could give us some sense of the outlook on barley prices that you see for this year and also, do you anticipate increases in glass prices given the inflation that we have seen in crude oil and gas prices? So some output on both these commodities that you can share with us?

• Berend Odink : On barley the picture is still similar as we have been discussing in last calls, this crop year it has moved up by around 15%. This crop versus last year crop, both the quantity and the quality this year around is a little bit below normal than what we would see in prior years. On glass we see more or less stable input prices there. Much of course will depend on the collections that we get back out of the markets, but all in all for input cost, the picture is similar as we said in our last call that we look at kind of mid single digits in terms of a costs per case basis the input cost inflation.

• Arnab Mitra : In terms of possibly mitigating the cost pressure is there some pricing you have from some of the states that you have got versus last year and also, if you look at it versus FY2020 which was actually a relatively tough year for input cost also, is the margin scenario tougher than what it was pre-pandemic?

Berend Odink :

• On the pricing we have taken some price increases in some of the states. Smaller increases in Maharashtra and Karnataka and a few of the other states but, I would say probably this year it is more about volume recovery versus straight out pricing. That is a bit different maybe than traditional years. Really the emphasis is on moving the volumes back to pre-COVID levels versus straight out price increases and on the margin side of course we have mitigating cost measures in place so, we look at increasing the recollection, we look at the type of bottles we use, we look at consumer value engineering approaches on some of the input materials and then in part mitigate some of these cost increases.

Arnab Mitra :

Sure and one last question for me any capex plans now for the next one or two years given that volumes have now come down but if you anticipate a recovery are you going to restart your capex this year or would you give it a bit of a pause to see how the volumes come back?

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Berend Odink :

Arnab Mitra :

Moderator :

Vishal Punmiya :

PA Poonacha :

United Breweries Limited July 29, 2021

Yes, it will be more the latter. It is a bit of a pause, we have completed a couple of programs that were initiated pre-COVID periods. Those are all finalized. Those have been completed so we will do the normal kind of statutory safety compliance related replacement type of capex programs so the guidance we put out last time was around Rs.250 Crores for this year but that includes not really any expansion because we have ample capacity at the moment. At the same time there will be some lead time of course when things pick up and we would look at the volume growth from pre-COVID levels but that is not yet on the table today.

Thanks so much and all the best.

Thank you. The next question is from the line of Jaykumar Doshi from Kotak. Please go ahead. We move to the next question. The next question is from Vishal Punmiya from Nirmal Bang Institutional Equities. Please go ahead.

Thank you for the opportunity. I have three questions. Firstly, on the realization as well as the price mix, during the quarter, so if I see the volume growth and then obviously minor shift from beer sales growth, the realization or the mixed growth is actually negative, what has led to that negative growth which has been positive over the last many quarters? Second question is on the premium brands if you can update in terms of how the overall performance versus the overall portfolio of the premium brands during the quarter and, any update on the wheat beer scale up as well as performance during the quarter and lastly also if you can give some highlight on the advertisement spends during the quarter. There was a sporting event during the quarter so how did I find out uh on a Y-o-Y basis and how do we see this spring on a Full year basis?

Coming to your mix, I think this an unusual quarter and an unusual year that has seen the high realization markets having more restrictions than the others. So that has resulted in an unfavorable mix and with things normalizing the sales mix should move positively with more and more profitable markets which were subdued till now bouncing back and your second question was on super premium brand, yes there was a pressure in the quarter because even now the complete opening up of the premium places of consumption is not been complete. As such super premium brands are consumed in these locations where currently we are

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United Breweries Limited July 29, 2021

finding these restrictions not fully lifted and coming to your last A&SP spends, they were subsequent spends on the IPL which has been shelved now because the event has been shifted from April so wherever the buzz for the brand is needed we are ensuring that that has been taken care of, we are using the digital media and other methods to reach out to the consumer so we should find the positive results in the coming quarters.

• Vishal Punmiya : Just couple of thoughts; firstly, in terms of price increase what would be the weighted average price increase that will flow through in the next quarter and also an update on the wheat beer scale up and performance?

• PA Poonacha :

• Wheat beer scale up will be done as and when things normalize. We had started the scaling of wheat beer but then with the pandemic, we had to pull back. It will be done in a phased manner as and when things open up and normalize. We have taken price increases in Rajasthan, in Punjab, in Assam, in Kerala, in Karnataka, Maharashtra and Chattisgarh and as and when the mix normalizes you will see improvements.

• Vishal Punmiya : But would you like to quantify the weighted average increase for the company?

• PA Poonacha : I cannot quantify that. If you start multiplying each locations largest SKU with the mix and then give you something which is a projection which I think is difficult to achieve right now.

• Vishal Punmiya :

Thank you for answering the question.

• Moderator: Thank you. The next question is from the line of Alok Shah from Ambit Capital. Please go ahead.

• Alok Shah : My first question is on capex while you partially elaborated on that that this time there is not going to be big capex but just wanted to get a sense as to what would be a typical cost for a Greenfield brewery that you setup and that should typically include premium plus your regular range of beer so what is that ballpark number?

• Berend Odink : Brewery including land might be really depending on the location, on the size on the state itself, but we talk about numbers like Rs.250 Crores to Rs.300 Crores.

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Alok Shah :

PA Poonacha :

Alok Shah:

PA Poonacha :

Alok Shah:

PA Poonacha :

Alok Shah:

Just to confirm you are saying that the earliest that you will possibly look at a Greenfield is sometime around FY2023 and not before that right?

We are talking about new investments; a Greenfield is setting up a new brewery. I mean we have breweries across almost all states where we need to have it so as such there is no tearing hurry to set up a Greenfield. When the CFO said that there will be new investments after 2023, this new investment will be in expanding capacity because the current investment is for replacement and upgradation only considering that we have sufficient capacity to meet the current demand till 2023 that is what he meant he did not mean that new investment is a Greenfield.

Thank you very much and Poonacha I wanted to clarify on the depot thing that you said so basically you are saying that now you do not require a depot but all the beer companies will have to rely on a large distributor in order to paint it well in the new retail landscape in Delhi is that understanding correct?

Your understanding is correct and most large players have depots which are currently being managed by these large distributors. So as such they have an ongoing relationship so what would happen is the large players would ensure that this billing happens through this current distributor who is managed the depot and the business will run seamlessly but the smaller players who have their own depots now which they are managing themselves may be left in the lurch because it will be difficult for them to find a distributor in a hurry.

Very quickly, if I can just squeeze in one more, I just wanted your quick remarks on the related party transactions of course it is a small amount but things like technical service pay or royalty pay so, if you can share you know the rates for the same or how does the transaction work?

Heineken brands we are paying percentage royalty and for the Amstel brand we are paying a percentage royalty these are as per income tax transfer pricing rules and it is perfectly in sync with what is done across the world.

In the related party.

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United Breweries Limited July 29, 2021

PA Poonacha :

Yes.

Alok Shah :

No, I am saying the purchase and sale transactions within the related party would essentially pertain to what?

PA Poonacha :

We are not talking about purchase and sales.

• Alok Shah : First was on the technical service and the royalty and the second part was on the purchase and sales that we see in the real party if you can just explain on that?

• PA Poonacha : I mean if you are purchasing something from anything Heineken, Heineken has a rack rate which is as per international pricing rules and it is no different whether it is sold to UBL in India or to any Heineken operating Company across the globe so that way we are completely compliant with related party transactions in all statutes.

• Berend Odink : Some components are on brands owned by Heineken where we pay a royalty. Some components is where we import brands for example a finished product like Heineken 0.0, that we buy and import and another component can be technical assistance or know how fees which are also quite possible.

• Alok Shah: I was saying because the absolute amounts were going up year after year, so I thought I will just clarify on the transaction screen?

• PA Poonacha : Because the number of transactions going up, royalty is going up, the volume is going up.

Alok Shah:

Thank you.

• Moderator : Thank you. The next question is from Jaykumar Doshi from Kotak. Please go ahead.

• Jaykumar Doshi : Good evening. A part of my question has already been answered earlier just a quick one follow so, you mentioned about roughly mid single digit increase in input cost based on where barley prices are current as of now and you do not see any material inflation in glass prices, my question is, has this inflation already

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reflected in Q1 FY2022 results or will we see incremental input cost pressure over the next one or two quarters?

• Berend Odink :

Now this guidance is for full year including Q1. I think behind your question is of course barley that will take a bit more time to flow through the full P&L on the other hand we also see a couple of other commodities where we saw earlier inflation for example on carton, or secondary packaging that is already built into the current pricing so in that sense the guidance is a composite of all those input cost materials.

• Jaykumar Doshi : Second is around the price increases that is in a few states including Karnataka, Maharashtra, Rajasthan, Punjab, Kerala. Has this reflected in the current quarter or will we see full benefit of those price increases over the next one or two quarters as state mix and product mix normalizes?

• PA Poonacha : I mean partially, because some have come in April, some wherein May, some in June but all these states have had some effect in the first quarter already, now you will see the complete effect in the second quarter onwards.

• Jaykumar Doshi : Understood as you sort of move towards normalized environment and state mix reasonable to expect that gross margins should go back to 51%-52% levels from the current quarter’s 48?

• PA Poonacha : If the mix remains as it was as of March, achieving March quarters margin percentage with these price increases should be achievable.

• Jaykumar Doshi : Thank you very much. Very clear and good luck for the next quarter.

• Moderator : Thank you. The next question is from the line of Harit Kapoor from Investec. Please go ahead.

• Harit Kapoor : Just a couple from my end. Firstly, just want to get your sense on the movement in balance sheet from net cash and net debt, is it largely led by higher working capital towards the end of the year or little bit capex that you spoke about which has been done in the first quarter. Obviously, you had lower cash flow from operations this time so just wanted to get your sense, on what the movement is there?

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PA Poonacha :

Harit Kapoor :

Berend Odink :

Harit Kapoor:

Moderator:

United Breweries Limited July 29, 2021

We should be comfortable, because if you see the start of the quarter we started with a huge opening cash balance and we also had a high working capital blockage considering the March quarter had at 9% volume growth, so you had a high level of debtors. Now that will be liquidated as we move on and go into the off season, so cash flow wise we should be comfortable as we speak and as the CFO already mentioned we will be cautious with respect to our capex considering that the capex will be limited to replacement and not for expanding the capacity, we have capacity for current volume levels, so we should be comfortable as we speak.

Got it. The other question was regarding new product. So my question was really regarding the innovation pipeline so once things settle do you see a little bit of normalcy? do you expect a higher rate of new product launches given if the market was just not conducive to rollout wheat beer or any other new agendas you were planning for the last 15 months? So is that a better way to look at it if you could see more new things from United Breweries very stable once you see signs of normalcy kind of setting in?

Yes, you are right that of course with the current trading environment it was not really conducive to launch brands or expand them. We do have plans that we had to suspend given the second wave. On Witbier and some of the other brands we still have more states and more expansion to go so that is something we will definitely pick up. Certainly, as we always said I mean the development of the beer market in India is still early days so much more will happen particularly on the premium end and that is what we are of course gearing up for and if anything the number of innovations and launches will increase with that development. So, that it is very positive that the market continues to evolve, consumers continue to experiment and look for varieties. That is all making the beer market more exciting, particularly on the value and the premium end.

Great those are my two questions. Rio we can go back to the queue. Thanks.

Thank you. The next question is from the line of Ashit Desai from Emkay Global Financial Services. Please go ahead.

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United Breweries Limited July 29, 2021

Ashit Desai :

• Just to follow up in Delhi, you talked about the changes in policy, if you could give us a sense how large is this market and also what is the share of smaller players in this? So if you remove the top three players, what is the share that the small players enjoy over there?

• PA Poonacha : Small players are less than 15% and Delhi salience for the country is approximately 3.5%-4%.

• Ashit Desai : Lastly, last year you all had some provisions after the lockdowns due to the lockdown are there any provisions in this quarter?

• Berend Odink : No. The provisions are on a very low level so there is nothing in terms of one-offs that is really impacting profit & loss this quarter.

• Ashit Desai : Looking at the inventory at depots and your plants, is it fair to assume that there will not be much provisions going ahead also?

• Berend Odink : No. The expectation is that I would say the worst is behind us in terms of markets being under a lockdown. Of course, with the experience from last year, the different nature of the lockdown and the weeks leading up to the lockdown we were able to anticipate a couple of these dynamics so where we stand today is, we do not see that risk on stocks whether it is in the market or breweries.

• Ashit Desai :

Thanks.

• Moderator : Thank you. As there are no further questions, I would like to hand the conference back to Mr. Harit Kapoor for closing comments.

• Harit Kapoor :

• Thank you Rio. Thanks once again on behalf of Investec Capital, I would like to thank all the participants who joined on this call as well as we would like to thank the management team at United Breweries. We also would now like to hand over to Berend for any closing comments. Berend over to you!

Berend Odink:

• Thank you everybody for your interest today and thank you Harit for hosting the call. We can conclude and look forward to being in touch with everybody in the next few months or otherwise in the next quarter call.

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United Breweries Limited July 29, 2021

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Moderator:

Thank you very much. On behalf of Investec Capital Services that concludes this conference. Thank you for joining us. You may now disconnect your lines.

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