Business Times

Cargills to look at winery, expand beer capacity

By Duruthu Edirimuni Chandrasekera

The expanding Cargills Group, on the back of launching its biscuit range, is exploring the possibility of producing wines through its Three Coins beer company acquired seven months ago, officials said.
“We could be looking at (manufacturing) wine (as well), as it’s a completely underdeveloped market in Sri Lanka," Stuart Young, Chairman, Cargills Quality Confectionaries (Pvt) Ltd told the Business Times on the sidelines of a media conference to launch its KIST biscuits range this week.

He added that there’re only about 100,000 cases of wine sold each year in the country and the potential is ‘huge’ in terms of developing this market. “But at the same time, we’re only ‘scratching’ the surface of Sri Lanka’s beer market and a lot more in this area can be done,” Mr. Stuart explained.

Cargills acquired the Three Coins beer brand in February throught its subsidiary Millers for Rs 1.4 billion. Mr. Young added that the brewery will see a staged expansion and the first stage will begin by year end. “We have witnessed a consumer migration to soft liquor in the country. This has translated into the total beer market growing,” he added. He noted that Cargills got into this business as this segment of the market offers good long term growth potential since soft liquor is relatively undeveloped in Sri Lanka compared to markets in other countries.

The country currently has three beer brewers – Lion, which has the biggest market share with Asia Pacific Breweries and Cargills’ McCallum Breweries following it. Analysts say that all three brewers are facing production capacity issues as the demand has increased considerably. They say that increase in tourism is driving these numbers.

"The tourists are driving growth in the mild beer market considerably,” an analyst said. Mild beer has 4.8% alcohol content while ‘hard’ beer with 8.8% alcohol content is consumed by the lower-end consumer.

According to analysts Colombo’s beer market has grown by 60% over the past year. “All three brewers will double their production capacities within the next 18 months which will cost them US$ 30 to 40 million,” the analyst added.

Mr. Young said that having acquired Diana Biscuits Manufacturers, which has now been renamed as Cargills Quality Confectionaries (Pvt) Ltd late last year, the company made a Rs 350 million investment to launch its biscuits range under the KIST brand name.

He said that a further Rs 500 million will be put in for staged expansion in this company. According to statistics, the biscuits industry in the country is valued at Rs 25 million, while the annual consumption is 55, 000 metric tonnes annually.

On Thursday the Group began work on a 500 million-rupee shopping and entertaiment complex with some 74,000 square feet of space in Jaffna. The mall will have a food, three cinemas and a supermarket.

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