Thread by @LnprCapital

Som Distilleries & Breweries Ltd.

Mcap : ₹ 1,928 Cr.

5Yrs Sales CAGR : 18%

5Yrs PAT CAGR : 19%

Som Distilleries and Breweries, incorporated on March 26, 1993, is engaged in manufacturing beer and Indian made foreign liquor. The co owns brands such as Hunter Extra Strong https://t.co/DyMgI1r5QZtwitter.com/i/web/status/1…

Premium Beer, Legend Premium Beer and Legend Premium Lager Beer. It has manufacturing facilities in Bhopal, where it has brewing, storing and layering facilities. The company’s manufacturing facilities are spread over 20 acres in the Raisen district of Madhya Pradesh

with an annual capacity of 3.6 million cases.

A joint collaboration with Falcon Traders in Goa will enable the co to venture in the Goan markets for the very first time with its own & other brands. Sales would be promoted in the western & southern markets through this alliance.

Among the few companies which have production and marketing infrastructure for Indian Made Foreign Liquor (IMFL) and beer products, the company develops export markets for its products in Europe, Middle East and CIS countries and has been exporting products to London.

It undertakes contract manufacturing for clients including Mendoza Vino , USA and United Breweries.

INVESTMENT THESIS :

~ Improving market share in key states.
~ Capacity expansion to aid market penetration
~ Experience of promoter established track record in industry

~ Expanding Exports
~ Selectively Pursue Strategic Acquisitions in the medium term

1. Improving market share in key states -
SDBL has a strong presence in the states where it operates. The co has regained its market share of 35% in the beer segment in Madhya Pradesh in FY2023,

which it had lost during the pandemic. The reduction in excise duty and maximum retail prices by 10% each in Madhya Pradesh has supported the revival in demand in the state. The company also increased its market share in Karnataka to more than 16% in FY2023 compared to 12% in

FY2022, while it held ~12% market share in Odisha. In FY2023, the company witnessed healthy demand for its budget brand, Power Cool, particularly in Karnataka. The company is in the process of adding capacities, particularly in canning, which will enable it to capture the

associated market share in certain states and augurs well for long-term growth prospects.
Company announced remarkable market share growth in the Odisha region. As of the middle of June 2023 the company has captured a market share of 18.4% making us the second largest player in

terms of market share in the state. Market share in May 2023 was 14.7%. Historically market share in May 2022 was 12.4% and in June 2022 was 12% in Odisha.

2. Capacity expansion to aid market penetration -
Co had increased the capacity of its Karnataka plant from 34 lakh cases

p.a. in FY22 to 45 lakh cases p.a. in FY23 through de-bottlenecking. It was able to quickly ramp up the utilisation on the back of continued strong demand. The company further undertook the brownfield expansion and doubled its capacity in Karnataka to 90 lakh cases p.a. which was

commercialized in May 2023. Further, the company is increasing the capacity of Odisha plant from 42 lakh cases to 60 lakh cases at ~Rs 35 crore (Rs 25 Cr through debt). With the launch of the Canning line at Bhopal, SDBL is well-positioned to meet the growing demand for canned

beers in the market. Noticeably, the realisations for canned beers are 20% higher (due to lesser content compared to glass bottles) and can prices for the same are less volatile compared to glass bottles. Additionally, Uttar Pradesh market has higher sales of canned beers and

new canning lines shall help companies sell more in the state. SDBL incurred ~Rs 100 cr for brownfield expansion in Karnataka and Odisha and setting up of canning lines in Bhopal.

3. Experience of promoter established track record in industry -
The promoters have been involved in the alcobev business for more than three decades. The Group’s other company, Som Distilleries Private Limited (SDPL), has been involved in manufacturing extra neutral alcohol,

Indian made Indian liquor, and Indian made foreign liquor (IMFL) since 1986. The promoter also has other companies operating in the same business segment.

4. Expanding Exports -
Besides expanding its presence in the domestic market, the company is also focused on expanding its

exports portfolio. Recently, SDBL signed a Memorandum of Understanding with Indian Fashion FZE, based out of the UAE for export of Beer and IMFL for West and Central Africa. Initially, the company plans to start supply of ‘Blackfort’ beer and based on the traction will gradually

start supplying other brands over the period. Currently, exports contribute ~2% of FY23 sales.

5. Selectively Pursue Strategic Acquisitions in the medium term -
SDBL is looking at strategic expansion plans through inorganic growth opportunities. Through strategic acquisitions,

the company aims to increase scale of operations, access new clients and enter high growth geographies in a cost effective manner. In 2018, SDBL acquired a brewery plant (for Rs 46 Cr with capacity of 42 lakh cases per annum) in Odisha which generated ~9-10% of revenues in FY23.

BUSINESS OVERVIEW

The only listed Beer and IMFL company in India, SOM Distilleries & Breweries Limited is based in Bhopal & is one of the leading alcoholic beverages manufacturers in India. SDBL is primarily engaged in the production of the beer and blending & bottling of IMFL.

SOM offers a broad portfolio of products at every price point to cater to varied preferences of consumers. The product portfolio consists of various options across beer, rum, brandy, vodka and whisky categories.

Company’s flagship brands include Hunter, Black Fort, Power Cool and Woodpecker in the Beer segment and Pentagon, Milestone 100 whisky and White Fox vodka in the IMFL segment. Other popular IMFL brands of SOM include Legend, Genius, Sunny, Gypsy and Blue Chip. With around 90% of

the topline coming from beer, the Company has three key millionaire brands (with sales more than 1 million cases per annum) – Hunter, Black Fort and Power Cool. Hunter and Woodpecker brands are supplied as draught beer to all major hotels in Madhya Pradesh

The Company has launched ‘Woodpecker’ Wheat Beer, India’s first filtered wheat beer. The initial response has been encouraging and the brand sold over 1 lakh cases in its first year of launch, despite the pandemic related challenges.

BEER Portfolio -
• Hunter Refreshing Strong Premium Beer
• Black Fort Super Strong Beer
• Black Fort Lager Premium Beer
• Woodpecker Lager Beer
• Power Cool Beer
• Power 10000 Beer

IMFL -
• Pentagon Gold Edition Whisky
• Milestone Blue Whisky
• Legend Premium Whisky

FUTURE OUTLOOK -

The co is optimistic about the coming peak season, which is expected to further drive better capacity utilization and result in further margin improvements in the coming quarters. The company is confident in its ability to sustain growth momentum and capitalize… twitter.com/i/web/status/1…