The Beer Story

The beer drinking culture is surely on an upswing in India. The industry, today, produces about 250 million cases in a year and is growing at a figure of 15 per cent. As per ASSOCHAM, beer consumption is about 2.4 billion litre.

Strong beer dominates beer drinking in the country with 84 per cent share to its name. Draught beer has an essential preference whereas bottled beer offers wider choice for customers to pick from.  According to Shabori Das, Research Analyst at Euromonitor International, “Metal cans are growing faster than bottles. While the market for non-alcoholic beer in India is negligible, imported beer accounted for less than one per cent of beer volume sales last year.”  

Global contrast

India’s beer drinking numbers have a contrasting difference when we look at its consumption globally. It is the third most preferred drink in the world and ranks right below water and tea.  India’s beer consumption stands at a mere 1.5 litre per person per year as compared to the average world consumption of 22 litre. With the lowest beer consumption levels, the industry is poised for growth but to reach the 22 litre mark calls for a long wait.

Transition

Though India’s consumption figures are really low, the trend today points towards a high. There has been a significant switch in the industry and many reasons clubbed together have changed the way the country drinks beer today. Samar Singh Shekhawat, Senior VP, Marketing, United Breweries Ltd tells, “India has a population of about 700 million below the age of 25, the Indian climate is hot across 80 per cent of the country for 80 per cent of the time, and the social acceptance of drinking beer are acting as enablers for the growth of this industry.” Adding to this, Pravesh Pandey, Regional General Manager, North, JSM Corporation says, “Beer is a very versatile drink and caters to almost every segment who likes celebrating happiness. “I drink beer only on two occasions – one, when it rains, and second, when it doesn’t!” Not just men but women too have taken to beer drinking and are enjoying it too. Around 32 per cent of men and 18 per cent of women prefer beer as an alcoholic beverage. The trend is also shifting towards beer being consumed in afternoons and at brunches along with being a favourite in the night. Happy hours (usually in the afternoon) have been introduced in pubs. This sees a noteworthy rise in sale of beer. According to Das, “Beers which can be opened with an opener attached have become quite popular in India. Tuborg was launched with this unique packaging, which United Breweries now uses for Kingfisher Ultra.”

Market structure

Beer retailing is a complex business. In India, the complexity of the business is what hampers its growth to an extent. There are four major avenues through which beer is retailed in India.

Liquor shops

Major chunk of the business for any brand comes from the liquor shops that we see at every nook and corner. As per Shekhawat, “Not just for Kingfisher but for every liquor brand, maximum business is driven by the sales at liquor stores. They contribute to about 98 per cent of the sales for a brand.”

Modern retail gives the kick

Modern retail has added greatly to the sale of beer especially amongst women who can now walk into a store and buy alcohol which was previously a taboo. Modern retail outlets boast of an exclusive liquor section and have seen a rise in sales over time. Shekhawat tells, “At present the contribution is very less at about one to two per cent except for Bangalore where it is about four per cent. It is slow at present but will catch up.”

Pubs and bars add to fizz

Pubs and bars have been around forever and have been acting as the stage for the sale of alcohol. The sale of beer has increased over the years and now forms a significant share of the profits. The numbers have gone up to as much as 50 per cent as compared to other liquors sold in pubs. Draught beer is enjoyed by people but has supply issues. Rajiv Choudhary, Owner, 100% Rock says, “Draught has availability issues. The shelf life of draught beer is two to three days; this may be one of the reasons why there is a problem in the supply chain.” Bottled beer has an edge today because of the varieties that are available in the market. A number of international labels are available on Indian shores today, but Indians prefer to pick up an Indian make in most cases. Kingfisher rules the scenario hands down across bars. Pandey reiterates, “The choice of international beers is more but the fact that Indian beers like Kingfisher have a very strong brand affinity in our local market, they give quite a good competition to the international ones.”

However at Route 04, it’s not the case. Manish Chaudhary, Owner, Route 04 says, “In domestic beers, the most selling ones are Budweiser, Carlsberg and Tuborg.” Ashish Ahuja, Owner, Pebble Street adds, “Well travelled Indians, who have developed a taste of other beers, are the ones who look for imported beer, but mostly people go for domestic beer. Strong beer is the largest selling in India and most of the beer drinkers drink it for a kick and not for taste.” Sale of beer is also facilitated by sporting events like Cricket and football.

Micro-breweries: New found love

Micro-brewery is a trend of the West, but is fast catching up in India. Though still at the beginner stage, people are enjoying freshly brewed beer. Gurgaon, Bangalore and Pune are the trendsetters. Rockman’s Beer Island in Gurgaon was amongst the first players to enter the business. With a production capacity of about 4000 litre, they offer three light and one strong beer. Pradeep Gidwani, Founder at The Pint Room, says, “Micro breweries have a limited scope as they can offer only a limited variety. Today, people want choices when they go out.” In coming times, these can been seen moving to tier II and III cities.  Das adds, “Young adults of today have started to travel and experiment. They are looking for better tastes in the beer they drink. Hence, premium and handcrafted beer have strong potential for growth.”

Hung by taxes

The beer industry’s biggest hurdle is the tax structure that hauls the movement of beer across state borders. Commenting on the same, Das says, “Due to the differing tax regimes employed across different regions, the final unit price of beer tends to vary across states. Beer unit prices grew by seven per cent in 2011.” Beer is taxed 60 per cent higher than hard liquor. Export and import fees are levied on beer moving out of one state and moving into another. Certain states allow the sale of beer manufactured within that state only. Shekhawat explains, “If a bottle costs `100, then `75-80 goes to the middlemen, government and so on and about `20 comes to the company.”

Consumer stance

Sixty per cent of the customers prefer strong beer over light beer. Beer consumption in 650 ml bottles is the most preferred with 55 per cent people taking it up in this form. Sixty-four per cent people drink both, Indian and imported beer, whereas individually Indian beer gets nine per cent votes and international liquor has 26 per cent share to its name.  Bars and pubs are the most preferred for beer consumption with 77 per cent people in favour of it. Forty per cent people consume 500-100 ml of beer at a single drinking session.

The way ahead

The industry is poised for growth with a long way to go to be able to compete with its international counterparts. It is witnessing double digit growth and is on the path for progressive growth. Beer price for sure will see an increase owing to inflation, state taxes and high cost of raw materials.      

Some inputs by Ankur Gaurav

 

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