Dmitry Nekrasov’s Philosophy — on the Past, Present and Future of Ukrainian Brewing IndustryA meeting with Dmitry Nekrasov always turns into a training course: “Introduction to brewing business“. We are talking to a clever “playing trainer“ a person that can be called a godfather of the Ukrainian craft. He has a dozen of successful projects to his name. Dmitry told us about craft beer in Ukraine, on market cycles, on specifity of operating in retail and HoReCa, on union of Ukrainian brewers and certainly, how a brewery of his own, First Dnipro Brewery is doing.
The market of import beer in Russia: review and databasesThe market of import beer is rapidly growing and changing. But while in the past years it was growing due to brands variety, in 2019 major and affordable brands from TOP-10 were developing actively. It seems that the fact of a brand origin from far abroad counties, even if it is not well known but has moderate price and good distribution provides for million liters of sales in the territory of Russia. Among distributors AB InBev Efes was far behind, yet the role of Baltika and suppliers of the second row got more important. The boom of German brands was followed by stagnation of import from other traditional regions (and Belarus) instead the supplies from Mexico, Lithuania and Asian countries grew considerably.
Russia: Positions of Brewing CompaniesThe review contains an analysis of interim performance of brewers in the first half of 2019. There are rather dynamic changes behind a modest industry growth. Baltika is again experiencing a stage of volumes and market share slid due to competition with AB InBev Efes. Because of the price competition and presence expansion in the modern trade company #2. has come close to the leading position. At the same time sales of Heineken Russia have continued growing which makes the premium part of the portfolio heavier. The market premiumization trend had been also confirmed by import brands. MBC and Zavod Trekhsosenskiy have been the most successful among federal market players. The market share of independent regional brewers and Ochakovo have continued falling as they are being squeezed out by the market leaders at their competitive fields.
Ukrainian beer market 2019: companies and brandsIn 2019 beer production and market have been still fluctuating about zero point. However, the past season was successful for brewers judging by the sales profitability. The price mix has improved due to rapid general market premiumization, as well as its particular aspect, the growth of import beer sales. By the season end AB InBev Efes improved its positions considerably. It turned out that consumers had not forgot Efes brands that had to leave the market, but started to recover rapidly. Against the stagnating market that meant sales decline of other companies, in the first place Carlsberg Group that most of all beneficiated from Efes exiting the market. PPB turned out to be stable to branding activity of its competitor and Obolon kept the same volumes and at the moment it is the absolute leader of the economy segment. The share growth of independent producers took place thanks to leading craft breweries, that so far do not have a big market weight, but they are rapidly gaining it.
Brewing industry in Kazakhstan 2019During the first half of 2019, the majority of Kazakh brewers made their contribution into positive dynamics. Yet it was companies of the lower division, not the two transnational leaders that raised their production and sales. The shares of draft beer and aluminum can which is rapidly squeezing glass bottle out of the market, have been growing. The price segmentation has remained stable despite the substantial rise of retail prices and fluctuations of brand market shares, while the borders between segments have become blurred. The main events in the industry have been: the announced revision of the beer excise policy, launch of BeerKhan brand in the strong beer segment, and most important – purchasing assets of Shymkentbeer by Arasan.
The trend of complication of Russian beer market is going on and in several directions at the same time. The range has got wider, the import and small segments are growing, namely craft beer, alcohol-free beer and special flavor beer. At the same time, all ex-mega brands and light lagers by Russian brewers are experiencing a decline of their shares. AB InBev Efes, Heineken, MBC and Pivzavod Trekhsosenskiy have exceeded the market, Carlsberg was developing slower than the market and Ochakovo as well as some other mid-sized breweries have been cutting down their volumes. To a big extent brewers’ performance was connected to their ability to reach agreement with networks, sacrifice their margin and enter new markets. Craft brewers are facing a serious danger of producers’ registration introduction – de facto licensing. ...
Analysis of beer market in India. “Journal.Beer 3-2015″
- Indian beer market in figures
- Who and how drinks beer in India
- Expensive and hard-to-get
- Premarital ties
- Religion and philosophy
- 29 markets with their own rules
- Seasonal factor
- Raw material base
- Foreign trade
- Leading companies
- United Breweries (Heineken)
- SABMiller India
- Carlsberg India
- Mohan Meakin
- SOM Distilleries and Breweries
- Molson Coors (Cobra Beer)
- AB InBev
- Indian craft
Indian beer market in figures
Under our estimate based on regional statistics data, in 2014-15 financial year beer market in India has grown by 6% to 22.3 mln hl (or to 286 mln cases). On the one hand, this growth rate is twice faster as compared to the previous year; on the other hand, it is twice slower than the average rate over the last 10 years.
Uneven dynamics of the beer market in 2011 and 2012 as well as higher growth rates in 2014 and 2015 reflect changes in the factual growth dynamics of GNP. The last years demonstrated that the beer market has switched from riot growth to jump growth, depending on the combination of inner factors.
The average retail price for a beer liter in 2014-2015 was about … rupees (nearly … in dollars). The price grew by …% having substantially exceeded CPI inflation.
In the current 2015-16 financial year, average increase in retail prices will be approximately at the same rate, the cost of a beer liter will be about … rupees per liter ($...) and already twice faster than inflation.
Based on the data on beer price and natural volumes, we can calculate the beer market size in monetary terms. In 2014-2015 beer sales in the inner market grew by …% up to … bln rupees. In dollar equivalent due to rupee strengthening in the previous financial year, the market grew by …% to $... bln.
Under our calculations in 2014-2015, the net profit of Indian companies from beer sales, excluding excises, grew by …% and reached nearly … bln rupees. In dollar terms, the growth amounted to about …% up to $... bln because of the rupee strengthening. However, this year the currency effect on the profits of foreign companies is likely to be negative resulting from the devaluation.
The 2015-16 financial year began with …% market reduction in April-June, the peak season for beer sales. According to the management of United Brewers, the decline was due to the temporary suspension of beer supply to the state of Odisha, tax problems in the state of Andhra Pradesh and heavy rainfall in Eastern India. However, at year-end market is expected to grow by …%..
What you need to keep in mind when reading reports of Indian companies
Reading reports of Indian companies and official services, you should take into account national peculiarities of evaluation of periods and volumes.
1) In most countries of the world fiscal (financial, business) year usually coincides with the calendar one. India still has the system, when the financial year starts on 1 April and ends 31 March. For example, the financial year analyzed above represents the "2014-15" and the period by 2/3 falls for the 2014 calendar year.
2) In India European units of measure (millions, billions) are less common than traditional Indian decimal units for measuring large quantities. You can often find the unit Lakh - equal to 100,000 units and Crore - equal to 10,000,000 units. Although the European measures are starting to be used more often.
3) In India, as in many other countries, the volume of packaged drinks is often stated in cases. The most common amount of a beer bottle is 650 ml. One case contains 12 of these bottles. Accordingly, the volume of one case of beer in India is 7.8 liters (unless specified otherwise).
India is the second most populous country in the world. It is home to 1.287 billion people, or 18% of the population of our planet, and by 2022 it is expected to be the most populated country.
But, how does this huge figure measure up with the size of the beer market? The approximate size of the consumer audience was calculated by Samar Singh Sheikhawat, senior Vice President of United Breweries in one interview:
"From 1.28 billion, remove approximately 600 million people who are below the poverty line. They barely have food to eat, forget liquor. That's half the population. From (the remaining) 600 million, remove 400 million who are below the drinking age. That leaves you with 200 million. From that, remove women. Women in India don't drink beer; they may drink alcohol. Those who do are a very very small proportion. So you remove another 100 million. That means only a 100 million are actually drinking beer in this country".
This estimate is consistent with the polls. Globally, about 68% of people do not drink alcohol* according to WHO 2010. But in India this percentage is much higher - about …%.
* During 12 months preceding the survey
ТIndia is an unusually young country (the average age is 25.1 years, and the portion of people aged up to 24 years of age is 47%), and this fact significantly restricts the consumption of beer today, but makes the market more promising for the brewers. The number of potential consumers of beer increases by about a million people a year only due to the balance of growth/loss of population.
Therefore, even with a light drinking audience India became the second largest world consumer of alcohol, with a share of about …% if you count it in pure alcohol, and this share will grow. India already drinks more than the U.S. and Russia combined. The average person over 15 years old in India drinks about … liters of pure alcohol per year, which is slightly below the world average.
At the same time, people in India drink very little beer - per capita consumption over the last ten years has …, but still did not reach … liters per year in 2014-15. For these reasons, the weight of India on the global beer market is very small - only …% for 2014 and is comparable to the markets of several countries of the EU or, for example, the beer market of Vietnam. This percentage reflects both the potential and the problems of beer producers in India.
Although in India there is little tradition of beer consumption, it can be formed in youth. An illustrative example of a fundamental change in preference is the consumption of tea, which was reluctantly accepted by many Indians in the 20-ies of the last century, and today has become the most popular drink of the nation.
Expensive and hard-to-get
Official statistics by many estimates captures less than half of alcohol consumed. A significant part of it falls on the traditional home-made drinks of different strength, which people do not produce for sale, but for themselves, their friends and relatives, sometimes mixing them with purchased alcohol. Each state has its own drink recipes from various raw materials.
Official alcohol market includes the following categories:
- Country Liquor (CL) - traded low priced traditional Indian alcoholic beverages, for example, arrack;
- Indian Made Foreign Liquor (IMFL) - whiskey, vodka, rum, gin and other traditional European drinks produced in India, as well as
These three sales categories are constantly competing with each other.
Countrywide, the proportion of beer is about …% of the total volume of alcohol consumed, according to All India Brewers' Association (AIBA). About the same falls on IMFL, a category competing with beer. CL category is only …% and its share is decreasing due to the pressure of IMFL.
If we evaluate the advantage of the drink as many Indians do - by the cost of pure alcohol consumed, beer loses the competition completely, yielding to strong drinks by … times. This is due to the disproportionately high excise taxes on beer, which in various states of India account for …-…% of its value. As a result, the average cost of a liter of beer in India in 2014-15 was … rupees, and a liter of hard liquor cost about … rupees, according to our estimates.
This situation led to the fact that in recent years, a growing preference has been given by the Indians to the beer with alcoholic content over 7%. While in 2008-09 its share was …%, in 2014-15 it was around …%.
Beer in India is sold in the same shops and often stands on the same shelves with alcoholic beverages (except in Maharashtra). The number of stores that sell alcohol is very small. According to AIBA, in India one licensed retail outlet selling alcohol accounts for … people, while in China - one for … people. In India, the total number of retail outlets has remained virtually unchanged for many years because of the conservative policy in relation to licensing of alcohol trade.
Poorly developed retail network means that the ordinary consumer needs to have a very strong desire to drink beer to buy it, because to get it, as a rule, you'll have to go a long way, and to stand in queues at the liquor store.
As a consequence, for most Indians beer is a luxury item, an expensive product of Western culture. So the majority of beer drinkers are fairly affluent people with non-conservative views who aspire to Western-style consumption. The core consumers are young professionals belonging to the middle class, mostly living in cities.
For this reason, the economy and the income of people play a very important role in the development of the beer market. India, according to the World Bank classification belongs to the group of Lower middle income (which, for example, also includes Sri Lanka, Vietnam, Indonesia, Morocco, Egypt, etc.).
Poverty can be explained by the fact that 69% of Indians reside in rural areas with poorly developed economy and infrastructure, although in recent decades migration to larger cities has led to a sharp increase in the number of city dwellers. AIBA estimated that over the next 40 years the urban population will grow by 379 million.
The correlation between GDP and the volume of beer consumption in developing countries with low incomes is well-known. Indeed, in Sri Lanka, which is twice ahead of India in terms of GDP, beer consumption per capita is also threefold more. At that, beer markets in India (in general) and Sri Lanka are regulated in a similar manner.
But even though India is … times behind the world average for GDP per capita, this fact cannot fully explain the …-fold gap in the consumption of beer. A major role in restraining the growth of the beer market is played by the government regulation.
An important feature of Indian society is a great respect for traditional family values. Young people are serious about their future family life, prepare for it in advance. This is due to the fact that the joint life of men and women is permissible only in marriage from the point of view of public morality.
Regardless of religion, an arranged marriage when the decision is made by parents is prevalent in India. In this case the decisive role is played by the reputation and behavior of young people, especially those living in rural areas. Parents' doubts regarding whether their prospective son-in-law is inclined to alcoholism may often be the reason for refusal in marriage. In this regard, young people in India consume less alcohol than in other countries, although general views in the country are becoming less strict.
In addition, incomes of many young people simply are not enough for beer. All this "flips" the statistics of Western countries, where people who are not married drink more alcohol.
Religion and philosophy
Modern India cannot be designated as the country where religious beliefs of the consumers have a decisive influence on the beer market, but this influence is present.
It is known that Islam and Sikh religions prohibit the consumption of alcohol, and in Christianity and Hinduism there are no strict prohibitions for most people, although alcohol consumption is not encouraged. Therefore, in India, according to sociological research the percentage of alcohol consumers is …-… times higher among Hindus and Christians than Muslims.
In particular, the data of the survey carried out in the state of Tamil Nadu show that alcohol is consumed by every … adult who consider themselves Hindu, every … related to Christianity. And only …% of Muslims admitted to drinking alcohol.
Note that some of the Muslims and Sikhs do not strictly adhere to the nondrinking rule, although of course, they try not to advertise it. Therefore, self-censorship can affect poll results.
Hinduism is the dominant religion, including 78.35% of residents of India. In the established caste system, the highest level of society, the Brahmin, traditionally do not consume alcohol; likewise people from other castes who are serious about their faith don't drink either.
The proportion of Muslims in India is quite high - 14.9% according to the census of 2012, and continues to grow. In the states of Jammu and Kashmir, where the Muslim population is about 66%, average beer consumption per capita is considerably lower than the national average.
Sikhism has no significant effect on alcohol consumption on the national scale, as it is professed by less than 2% of India's population. But, in Punjab, where 60% of the population identify themselves as Sikhs, beer sales in terms of per capita are also relatively small.
In some Indian states, religion has not only direct (self-restraint), but also indirect (through government regulation) influence on alcohol consumption.
The philosophy of Mahatma Gandhi is of utmost importance in the anti-alcohol movement of India. Gandhi, who not only encouraged people to sobriety, but believed that many of those suffering from alcohol have no capacity to refuse it unassisted. Even before India's independence, propositions to ban alcohol completely were made in some states and anti-alcohol meetings took place. With independence, the nation's commitment to abstinence from alcohol was expressly stipulated in the amendment to the Constitution, which is still effective. In the homeland of Mahatma Gandhi in Gujarat, a ban on sale and consumption of alcohol for any purpose, except for medical, is preserved to this day.
Today many politicians in India are becoming popular through establishing themselves as spiritual leaders. They often return to the idea of limiting the consumption of alcohol, finding response from conservatives, women and religious organizations. Exactly this happened in Kerala, which recently restricted the sale of alcohol.
29 markets with their own rules
Each of the 29 states of India is a unique and separate market. A company can simultaneously show an excellent growth in certain regions, but fail to sell in the neighboring. After a year the situation can change dramatically for the better or worse. Almost all of the sharp fluctuations in the dynamics of regional markets are attributable to administrative reasons.
The main problem of Indian brewers is lack of control over pricing, as it may be regulated by state governments on many stages. In addition to common for consumer goods agreement of maximum permissible retail prices (MRP) there is an excise, special VAT for alcohol drinks, different licenses, etc. Protecting the profitability of sales, brewers sometimes have to conduct exhausting negotiations with the state government, accept the rules of the game or boycott them, which is very dangerous and can result in the loss of market.
In addition, the regulation of the alcohol market of India has a pronounced dualism. The Constitution expressly declares the aspiration for the prohibition of intoxicating drinks and drugs. But excise tax revenues are vital for many regions, and a complete ban would likely lead to transition to shadow markets, growth of artisan alcohol production and mass poisonings.
This dualism is usually resolved in such a way - consumption can be restrained by permanent tax increases, and accordingly, retail prices. And in order to stop taxes from flowing away and to make it easier to negotiate with the producers, the state government controls the sales. Therefore, in India more than 2/3 of the sales of beer come through the state companies. State-owned companies sell alcohol in the states of Andhra Pradesh, Tamil Nadu, Kerala, Odisha and some other, controlling all or a part of the sales chain.
It is possible to select a state with a comfortable operation environment for the company and to conduct trade from there; but it is uneconomic because of the restrictions on the free movement of alcoholic products. On one side of the state border export, and on the other side, import is charged fees high enough to avoid outflow of taxes, jobs, etc. In addition, transporting beer over long distances in India is unprofitable due to high cost of fuel and state regulation of transportation of alcohol.
For these reasons, the company with a claim to national coverage needs to have its own production if not in each of the states, then at least in the largest markets. Limited coverage threatens the volatility of sales, as it happened with SABMiller India. Conversely, good dynamics of sales of United Breweries was provided by a broad network of private and contract facilities.
The government of each state has a variety of methods of regulation, which had been the causes of downturns in regional markets. They will be discussed below.
Lowering of the selling price of the manufacturer
The decline in the first quarter of the current (2015-16) financial year was partly due to a sharp decline in beer shipments in Odisha. Moreover, the reduction falls on those months when beer trade is the most intense.
The shipments were cut because the brewers did not agree to the proposal of Odisha State Beverages Corporation (OSBC), the only wholesale distributor in the state, to reduce the selling price by 20%, that way increasing its own margins. Five brewing companies that control 70% of the market of the state - United Breweries, SABMiller India, Carlsberg India and Fortune Spirit limited has not signed a contract with the state company for the 2015-16 fiscal year, stating that they will not operate at a loss. They suspended the shipments and appealed to the High Court of Odisha in order to determine a fair price.
The court helped the brewers and the state-owned company to adopt an interim agreement until the trial, which allowed to unblock deliveries. Potentially, the brewers can lose 3.5% of national sales falling on the beer market of Odisha and the state government can forgo the budget inflow. It is therefore very likely that the final agreement will be found.
The increase of excise duties and taxes
Uneven dynamics of the beer market in Maharashtra is a reflection of the tax policy of the state government. Once beer drinkers were getting used to a certain price level, there was a sharp increase in excise duties. As a consequence, rapid growth of retail prices in 2011-12 and in 2013-14 led to downturns in the market. Today the beer market in Maharashtra is close to stagnation, and the prices for beer in the state are among the highest in India. Another factor has been the constant increase of fees for alcohol retail licenses and HoReCa.
Of course, the high cost of beer is to some extent compensated by the high standards of living and very liberal for India market regulation. In addition, the slowdown in physical quantity is set off by increased sales of premium grades. It is possible to believe that moderate increase of excise taxes in the current fiscal year can result in the growth of the market.
A 28% drop of beer sales in Punjab, which occurred in 2013-14, is fully explained by the doubling of excise tax from 25 to 50 rupees per liter. In addition, the excise on strong spirits rose slightly, which further exacerbated the position of beer as an alcoholic beverage.
Moreover the tax policy of Delhi - a separate administrative unit in India - significantly affects the sale of beer and the structure of alcohol sales. With the growth of retail prices in 2010-11 and 2011-12, a part of consumers, according to the report of the excise department, switched to stronger drinks - especially the sales of Scotch and wine increased. Sales growth in the following 2 years can be attributed to low growth in prices and a 3.6% decline in 2014-15 is associated with the increase of beer prices by 21% at once.
Shifts in product mix
In 2009-10 at the largest beer market in India - the states of Andhra Pradesh and Telangana - an event occurred that has profoundly influenced the position of brewers, and has led to a slowdown in the growth dynamics of the whole market. State company Andhra Pradesh Beverage Corporation (APBCL) - the only official distributor of alcohol - decided to change its purchase policy. This decision was a continuation of the conflict between the APBCL and the two leading companies, which occurred a year earlier.
By 2008-09, Andhra Pradesh had a situation where 95% of the market was accounted for by the brands of United Breweries and SABMiller India. In the peak season of sales beer supplies were blocked for 38 days, as the brewers demanded establishing a more adequate purchase price for their products. The brewers' outrage was caused by the fact that since 1997 purchase prices rose 9%, while retail price and production costs have increased several times. Beer sales as of the end of the financial year fell by 14.5%, which had a negative impact on the state budget, but an agreement on price was reached.
In 2009-10, APBCL decided to reduce the share of market leaders to 75% for the purpose of destruction of the existing duopoly due to the increase in sales of small companies. The alignment needed to be conducted in accordance with the average data on shares of companies in other states. As a result, the company SABMiller India has lost its leading position in the region, giving way to United Breweries.
In 2013-14, the brewers got a new problem - the states of Andhra Pradesh and Telangana were divided into two separate administrative units. In the state of Andhra Pradesh there were 2 breweries left, and 6 in Telangana. After the separation, the states have limited mutual trade of beer, introducing a duty on export and import.
In 2014-15, the brewers of the state again began to express dissatisfaction with low purchase and retail prices, in view of rising production costs. The price of beer in the state is indeed one of the lowest in India, given the high tax burden. The price increase did not compensate for the market decline, which continues in 2015-16.
However, volumes can also grow thanks to the decision to allow the sale of beer in malls and hypermarkets. It is also planned to create conditions for the development of craft breweries. Along with this, the government decided to join the trading process directly - out of 4 380 retail outlets that sell alcohol, 10% will now be owned by the state administration.
Prohibition of export/import
Until recently Tamil Nadu had a complete ban on the sales of alcohol produced in other regions. Within the state drinks are sold only by Tamil Nadu State Marketing Corporation Ltd (Tasmac), private companies do not have access to the market.
Profit from retail sales of alcohol provides huge revenues to the state budget, but the government sought to get the maximum benefit, constantly raising the prices. At the same time within four years prior to 2013-14 there was a ban on export/import of beer from other regions of India, and a ban on tin filling, with the aim to increase the turnover of returnable packaging.
To some extent, prohibition of foreign supplies has had its effect - today there are 7 breweries in the state, with a capacity of 5.9 million hectoliters. But these powers are redundant, as even in the year 2012-13, when beer sales peaked, the enterprises were loaded by half. In the press the government was accused of lobbying the interests of certain producers, when the consumer was hard-sold not the popular and affordable brands, but little-known and expensive ones.
The closed nature of the market, inadequate policy of supplier selection and manual control led to a serious drop in sales in 2013-14 and the government decided to make some changes. The lifting of the ban on the import/export of beer was aimed at loading the idle plants.
But beer sales (and production) in the state continued falling to 1.96 million hectoliters in 2014-15, which is not surprising, because the prices during 4 years increased by 53% to 177 rupees per liter, with an average growth in India totaling 32% to 155 rupees.
The high cost of beer and administrative constraints led to the fact that consumers are drinking more strong liquor. From 2012-13 through 2014-15 financial year, the share of beer in the structure of production of alcohol decreased from 33% to 27.6% in terms of liters (production and consumption of alcohol in Tamil Nadu are very close). IMFL consumption increased inversely.
Note that the government of the state, apparently, wants to get out of the "spin" of the compensation of income at the expense of the consumer wallet, because in 2015-16 price growth, as far as we know, was twice slower than the national average. If this stops the prolonged recession, the state of Tamil Nadu, being one of the largest markets, will give an impetus to the dynamics of the entire beer market.
The reduction in the number of retail outlets
Kerala stands out among many other southern states due to high income of the population and active political life. In 2014, various parties as well as Christian and Muslim religious organizations have united around the idea to reduce consumption of alcohol, which in Kerala is above the average for India.
Wholesale and retail sales of alcoholic beverages in Kerala are fully controlled by the state company Kerala State Beverages Corporation Ltd (BEVCO). The number of government outlets, which across the state has been 338, was agreed to be reduced each year by 10%. At the same time, the private sector has suffered more, that is, 300 establishments of HoReCa lost their licenses for alcohol trade in 2014-15. The exception was made only for expensive restaurants at five-star hotels, in order not to undermine the tourism business.
However, the pressure on the sales of breweries has increased also in the field of price regulation. Anticipating the likely decrease in excise tax revenues, the state government has increased the excise duty on beer from 50 to 70% of the selling price, and on IMFL - from 115 to 135%, while the maximum retail price, judging by the BEVCO circulars, continued to hold back at the level of previous years. Perhaps this was the cause of the shortage of beer and the search for suppliers. In addition, the logical consequence of the beer price increase and limitation of the availability of alcohol was the fact that consumers switched to IMFL.
The consequences of the measures taken were the growing queues at the remaining outlets and an 11% drop in beer sales by the end of 2014-15.
Despite the fact that India is a country with a hot climate, the seasonal factor plays in beer sales no less important role than, for example, in Europe.
In most parts of the country three main seasons can be distinguished: winter (October - February), summer (March - June) and monsoon or rainy season (June - September). Sometimes there is also a fourth season - postmonsoon, which lasts from October to December.
Four summer months between March and June are the most important ones for brewers in all states, because they provide an average of …% of the annual volume of sales. This percentage is higher in the southern regions, where it can reach up to …%, and lower in the North.
High seasonality often leads to beer shortage in the summer, when local businesses are not keeping pace with demand, and recycled packaging is not enough, although at the moment this problem is not as acute. Year 2015-16 was marked with anomalous summer heat in India and can be expected to increase beer sales.
The duration of monsoons can vary and also significantly affects sales, as beer consumption in this period drops sharply. In particular, the year 2013-14 was not very successful for brewers not only due to rapidly rising prices, but also because of early rains and intense precipitation in the Northern states. The current 2015-16 year had bad weather in the Eastern states.
Raw material base
According to our estimates, the expenses of brewing companies for raw materials in 2014-15 was about …% of the selling price of the company until payment of excise duty. At the same time, the share of expenditures in the retail price of beer is very small - about …%, it is much more dependent on taxes.
One of the bottlenecks for Indian brewers is beer packing, first of all, the glass bottle (the proportion of aluminum cans on the market is not large). The quick growth of beer production has led to a shortage of glass bottles and created the conditions for its rapid price growth, despite the current rotation system of glass containers. Additional problems arose with the return of branded bottles, which the brewers have begun to use en masse in 2013. So today the cost of a new bottle is three times higher than that of a reused one.
With the growth of capacities of the bottle producers and increase of the amount of reusable branded packaging, the price increase on the bottle slowed down, according to reports of the companies. The share of beer packaging in the expense of the brewers on raw materials has been gradually reducing and by the end of 2014-15 on the average it amounted to about …%, i.e. about … billion rupees ($... million).
Among a dozen prominent manufacturers of amber glass and containers, beer packaging is produced by a few companies. The largest of them - Hindustan National Glass, which is capable of producing 4,800 tons of glass products per day. With 7 production facilities, the company controls more than half of the supply of beer glass bottles. Second manufacturer in capacity (1600 tons per day) and sales is AGI Glaspac (Andhra Pradesh), which controls about a third of the market. Closes the top three Piramal Glass (Gujarat) with a capacity of 860 tons per day.
The second important item of expenditure is barley malt. Its share in the expense of the brewers on raw materials according to the results of 2014-15 amounted to about …% (… billion rupees, or $... million).
According to our estimate based on the companies' reports, today the average malt consumption rate in beer production in India is about … kg. per hectoliter. Accordingly, the calculated malt demand of the brewers amounted to … thousand tons in 2014-15 financial year. This estimate is approximate, as different companies use different amounts of unmalted raw materials (barley, rice, sugar). The volume of malt imports in India is very low.
Along with breweries, the malt in large volumes is purchased by the whisky industry, and also processed into extracts for the food industry. The largest volume of malt for sale on the free market is produced by two companies - Barmalt and PMV Maltings (Malt Company).
The benchmark for the prices of malt in India is data feeds of barley traded on NCDEX. For the last year (by August 2015) Canadian barley with a shipment in Jaipur (Rajasthan) decreased by …% to … rupees per quintal.
Note that over the last years the price of barley grew, respectively, the cost of malt also increased. Barley prices fell sharply in January 2015 (i.e., at the end of the 2014-15 financial year), when the market received large amounts of raw materials. According to our estimates, if in 2013-14 the price of malt used in the beer production was about … rupees per ton in 2014-15 year, it dropped by about …% to … thousand rupees.
The brewers make a significant contribution to the sustainability of the resource base. In 2005, SABMiller launched the program "Saanjhi Unnati" to support farmers, which included 1 500 thousand households in 5 states (mainly in Rajasthan). According to the company, today the program involves 9 500 households, which allows to provide for 65% of the company's demand in malting barley.
The dependence of Indian brewers from imports is very small, amounting to about …% of total expenditure on raw materials. Most of the import is hop and hop products, which are scarcely produced in India.
Customs duties on imported beer almost block the way for deliveries from abroad. After paying 150% of the customs cost of the beer, the importer will have to pay excise tax to the Treasury of the state. As a consequence, the retail price of imported beer is becoming at least 50% higher than the licensed brands and all imported brands can be attributed to the super-premium segment. Many additional permits and licenses from the excise department of the state become an additional barrier for importers.
In 2014 calendar year, India imported only about … million liters of beer (… million in 2013). The share of imported beer in the market is only …%. The largest imported brand is Mexican beer Corona, which, though included in the AB InBev portfolio, isn't manufactured abroad on principle. About … million liters of it were delivered in 2014-15 financial year. The remaining volume of imports is about 50 global brands with a very small share in the Indian market.
Probable liberalization of international alcohol trade under pressure from the WTO may lead to cancellation of ultra-high fees. According to unconfirmed information, this process is already happening. As a result, there will be a manifold increase in imports and the increase in market share to approximately …% during the year. As far as we know, the supply of Corona beer, … and … can grow significantly by the end of the current fiscal year.
The export of Indian beer in other countries greatly exceeds the import and is currently at about …% of the national production. In 2014 calendar year exports declined by …% to … million liters.
Slightly more than … of export deliveries are provided by UB with brand Kingfisher. About … falls for the leading brands of SABMiller - Haywards and Knock Out. Less than …% of the exports fall for beer Taj Mahal, Kalyani and many little-known outside India brands.
In 2014 calendar year … million liters were shipped to Singapore, … million to the UAE, … million to Malaysia and … million to Bahrain, … million to the United States. The reduction in exports was due to the US and many countries with small volumes of trade.
Today, the brewing company cannot be called transnational if it is not represented in the Indian market. However, 10 years ago things were very different. And now India is an attractive, loved by the shareholders, but a very difficult market for international brewing companies.
Until the early 90-ies the beer market in India was developing very slowly. The country had a ban on expansion of capacities of alcohol producers, which completely cut off the brewing industry from joining multinational companies.
But even after the abolition of the ban international companies could enter the Indian market only in the form of joint ventures (as did Scottish & Newcastle, Foster's and SABMiller) or through contracts with local producers. Direct foreign investments in the alcohol industry were blocked by the government. New transnational players, who were ready to enter the Indian market, didn't do so through acquisitions, as the prospects of control over business were vague.
After the government of India has removed investment restrictions in 2006, the brewing sector in India began to grow and within a few years, world leaders came to the market - Heineken, Carlsberg and AB InBev.
United Breweries (Heineken)
Despite the growing competition from international groups, the phrase "Indian beer is synonymous to Kingfisher" is still relevant. United Breweries (UB) owns "a controlling stake" - more than half of the market; and the Kingfisher brand occupies more than a third of the market. The company is confident in its coverage area, which makes its work stable even in difficult times. And the combination of the experience of a large Indian businessman and Member of Parliament Vijay Mallya with Heineken's marketing technologies and financial resources have a synergetic effect.
National coverage of United Breweries is impressive. To date, the production network of the company includes 21 brewery *. In addition, 10 independent producers are engaged in contract bottling, 2 of these enterprises produce more than 1 million liters of beer for UB.
* 21st company in Rajasthan was supposed to start working in August 2015-16.
United Breweries was founded by a Scotsman, Thomas Leishman in 1915. The company was established as a joint group, consisting of five breweries located in the South of India. The oldest of them - Castle Breweries was founded in 1897. In a nutshell, the further history of the company is the path of many acquisitions that we cannot describe in this article. The brand Kingfisher appeared in the portfolio of United Breweries in 1978 and quickly became a market leader, thanks to an advanced production and distribution network.
Vijay Mallya, the current head of United Breweries took over the company in 1983 at the age of 28, having received it from the hands of his father. He expanded the liquor business greatly, invested in various sectors, in particular, founded the premium class airline Kingfisher. Initially, the airline has been very successful, but in 2011 the business of air transportation faced problems associated with the state regulation.
The controlling stake of United Spirits - Vijay Mallya's company for the production of hard liquor, gradually passed under the control of an international giant Diageo, moreover, the co-owners have a very strained relationship. Therefore, brewing remains a core business for Vijay Mallya, and his relationship with the Heineken family is characterized in the press as good.
In July 2015, United Spirits sold its stake in United Breweries. Heineken bought out the entire stake, raising its total shareholding to 42%. Vijay Mallya's stake in the company went down to 32%.
Heineken entered the business of United Breweries indirectly. Ten years ago, the rapid growth of market share was the main purpose of UB. This growth could be prevented by SABMiller and other international players actively investing in Indian business. To succeed in the market, UB needed to increase the existing production capacity, to create and acquire new ones. This required large investments, and the best option was a strategic partnership with a foreign investor. Scottish company Scottish& Newcastle (S& N) became that investor.
In 2004 S& N acquired a 37.5% stake in UB. The companies have entered into an agreement that Vijay Mallya, remaining Chairman of the Board of Directors, can appoint the Executive Director, and S& N will be able to appoint the Finance Director.
In 2008 S& N was merged - its assets were taken over by Carlsberg (which was a strategic partner) and Heineken. As a result of this division, S& N's part in the capital stock of United Breweries went to Heineken; the process of transfer of assets was completed in 2009.
Further rapid growth in sales and market share of UB has been largely associated with the strategy of reducing dependence on contract bottling. The acquisitions of partner companies in emerging markets, where the sales of the company's brands were growing, were taking place. Trying to load the production capacity, local producers de facto lost their independence because their own brands were losing market attractiveness and weight.
United Breweries did not avoid the problems associated with the pricing regulation in the state of Andhra Pradesh, the largest market of India. But the suspension of deliveries during sale season affected other companies to a greater extent (see Chapter SABMiller India). UB was not the market leader in the state at that time, and the dynamic growth in other regions enabled the company to rapidly increase market share. For the same reason, the decision of the distributor (APBCL) to reallocate purchase volumes according to market shares of the brewers in other states primarily benefited the UB. At the end of the year 2009-10, in Andhra Pradesh UB started its own strong brewery, which created the preconditions for future growth.
During the next two years, the company first faced the increasingly serious competition. Carlsberg was quickly increasing volumes and also "skimmed the cream" off the market, focusing on the premium segment. SABMiller got over its problems with regulation and tried to compensate losses at the expense of other states. As a consequence, in 2011-12 the market share growth of UB slowed down and in 2012-13 started to fall, as the company grew twice slower than the market.
Here note that the umbrella brand Kingfisher has become a market leader thanks to its two mid-price sub-brands. Kingfisher Strong certainly dominates the "popular" segment of strong beer; Kingfisher Premium is the largest brand in the segment of mild beer. Secondary to the company from the point of view of sales brands Kalyani, UB Export, Sandpiper, Bullet, Zingaro and London were gradually pushed out to the periphery of the market, although together they provided for about one-fifth of UB sales.
The company responded quickly to the trend of premiumisation of the market and the activities of its competitors, in late 2008 expanding the margin part of its portfolio with the "unique" Kingfisher Ultra with a "special taste" and "sports" Kingfisher Blue. Soon they were joined by a special "monastic" beer Kingfisher Red.
These brands cannot be called unsuccessful, especially good was the sales growth of premium Kingfisher Ultra. However, new launches could not provide growth in sales volumes outpacing the market. In the face of the ban on beer advertising it is difficult to convey the benefits of national brands to consumers. Brands of the competitors that appeared in the international premium segment do not experience such difficulties because of their worldwide reputation. In addition, developing premium brands took away the share of the two major sub-brands. It was necessary for UB to go beyond the Kingfisher's "umbrella".
In 2011, the company launched local production of Heineken beer, the contract on distribution of which was signed in 2009. The use of powerful marketing system of UB along with the huge global popularity of the brand were the perfect prerequisites for a quick gaining of market weight. However, the proportion of beer is less than 2%, as the market niche of Heineken brand imposes severe limitations on it.
First, unlike competitors, the Dutch company has not met the habits of most consumers beginning to produce, for example, Heineken Strong. The global image of the brand is too important to the company.
Secondly, UB didn't want to risk the sales of premium Kingfisher beer and set the price of Heineken brand much higher. But that played into the hands of key international competitors ' brands - retail prices of Carlsberg Elephant, Miller High Life Beer, Budweiser, Tuborg Strong, or Foster's Strong is much lower. In fact, Heineken beer competes with imports.
In 2013-14, the company managed to stop the loss of market share through the development of non-core segments. According to the report of the company for the year the sales of Kingfisher Premiuim increased, Kingfisher Blue, Kingfisher Ultra grew dynamically.
In 2014-15 the company managed to be very successful in sales of their brands in the market of Uttar Pradesh, where growth rates were double-digit. This is due to the development of cooperation and the provision of special conditions of contract brewery.
Under our estimate, in 2014-15 the sales of United Breweries grew together with the market up to …%, to about … million liters. The market share of the company, respectively, remained at the previous year's level, amounting to …%. Net revenues of the company increased by …% to … billion rupees ($... million).
The company SABMiller came to the Indian beer market 15 years ago, when it was still not particularly interesting for international investors. In India there were many independent brewers and the easiest way of market development was through acquisitions.
In 2000 in the state of Uttar Pradesh SABMiller formed a joint venture with Narang Breweries. Then, within a few years several more breweries were absorbed along with brands which became the key ones.
That way, in 2001 two plants of Mysore Breweries (Karnataka) were bought. That company owned the brand Knock Out, which in 2012 accounted for 80% of SABMiller sales (34% in 2014). And in May 2003 the group was joined by the company Shaw Wallace's, owning brands Royal Challenge and Haywards 5000 and which at the time was already a manufacturer number 2, controlling a fifth of the beer market.
Note that Haywards and Knock Out, being among today's top three brands, appeared in 1983-1985. At the time of inclusion to the SABMiller portfolio they were already well represented in the key states of India. Haywards 5000 at the time was the leader in the strong beer segment and was already number two in the beer market.
Knock Out was third in the national market in terms of sales (which corresponds to today's situation on the market). Knock Out's position was especially strong in the states of Andhra Pradesh, Maharashtra and Karnataka - the major markets for Indian brewers.
The position of SABMiller was even more strengthened by the purchase of enterprises and the Foster's brand in 2006. This Australian company was the first multinational group which entered the Indian market in 1997. Foster's beer, respectively, became the first major international brand meeting the Indian audience. Indian beer lovers liked it though association with cricket, as both Australians and Indians love this game, and Foster's actively advertised in sporting events.
Acquisitions and launches of new production facilities have helped the company to cover the whole territory of the country. However, at the national level, it was not enough to smooth out fluctuations in some regions at the expense of others.
Thus, until 2007-08, the company grew faster than the beer market and its revenue in the period from 2003-04 increased almost 5 times. But in 2008-09, the growth slowed down; the company grew in line with the market growth rate. State regulation, a key factor in the Indian market, came into effect.
Conflict with the state distributor APBCL in Andhra Pradesh, which occurred due to attempts to influence pricing, has led to supply blocking in the peak season of 2008-09. At that time, about …% of the market was owned by SABMiller India, and the company's share of sales in the state reached …% of their total volume. Therefore, a disruption in supply impacted the results of SABMiller in 2008-09 so negatively.
In 2009-10, the sales of SABMiller India decreased, while the market continued growing at double digit rates. Three of the four states - the largest markets where the company SABMiller India showed a decline in the year 2009-10 were Andhra Pradesh, Karnataka and Rajasthan.
That year showed a continuation of conflict with APBCL, which decided to deal with the duopoly. The share of procurement at SABMiller was artificially lowered in accordance with the distribution of market shares in other states. Therefore, SABMiller lost much again and United Breweries, Carlsberg and regional brewers won big time.
During this time, the markets of Maharashtra and Tamil Nadu increased markedly, and sales were growing even faster in many other states, which, although they do not consume a lot of beer, together provide the bulk of the sales.
Administrative problems mostly affected Knock Out, which was of Karnataka, and had its key market in Andhra Pradesh. But the greater was the sales growth of the brand, when the negative effect of regulation in Andhra Pradesh was exhausted. Additional impulse for the sales of Knock Out was given by the expansion of distribution in the state of Maharashtra. However, the restyling of the brand and the competition for a place on the narrow shelf space has led to the fact that a growth in sales of Knock Out began to outstrip the dynamics of Haywards 5000, and by the end of … is already close to it in terms of sales. Roughly speaking both brands are in the same price range that leads to the effect of cannibalization.
After a small recovery SABMiller India has again fallen on hard times in 2013-14.
As a result of the administrative reform on the division of states, SABMiller India got separated from the market of Andhra Pradesh, since it had only one large enterprise in Telangana. Now, when supplying beer to Andhra Pradesh the company has to pay a fee, or else it would have to look for a partner for bottling the key brands.
Furthermore year 2013-14, in general, was problematic for the total beer market due to bad weather conditions (strong monsoon) and the sharp increase of excise taxes in the states of Maharashtra and Punjab. But SABMiller suffered to a greater extent, since it was largely focused on these regions.
In September 2014, the marketing director of SABMiller India said that the company will continue to focus on key states with high margin and will not chase the sales volume growth.
In addition to dependence on a number of key markets, in our opinion, there is another problem that limits the growth of the company. This structural change is associated with rising prices that make premium brands more attractive to consumers than Haywards 5000 and greater rise resistance of premium beer prices due to high income of urban consumers. Although SABMiller tries to stay in trend of these changes and brought Miller Ace to the market, this step is not yet an adequate response because of the inability to support the launch of active advertising.
The key international brand in the company's portfolio is Foster's. It had quickly developed until the known problems in the states of Andhra Pradesh and Uttar Pradesh, i.e. before 2008-09. But after the situation was resolved, a new problem arose - the unexpectedly rapid growth of a competitor. The emergence of Tuborg Strong threatened SABMiller's positions in premium/upper mainstream segment, and demanded a response. In 2010-11, the sale of Foster's declined by …%, while the market grew by …%. So the company's portfolio added Foster's Strong, which contributed to the development of the strong international category and gave a new impetus to the brand. In 2011-12 amid the …% market growth Foster's sales increased by …%. However, one cannot expect the resumption of the former positions of the brand, as competitors exert a strong pressure on sales.
At year-end 2014-15, the company's sales according to the report of SABMiller Plc., increased by …% to … million liters. However, the market grew faster, so the company's market share continued to decline, amounting to …%, by our estimates. The net revenues from the sale of manufactured and traded beer, according to the report of SABMiller India, have not changed for the year, amounting to … billion rupees ($... million).
Carlsberg Group entered the Indian market almost simultaneously with Heineken in 2006, but not so loudly. For realization of its ambitious plans, the company had to use all of the growth mechanisms gradually.
South Asia Breweries appeared as the Indian division of Carlsberg Group in May 2006. The company soon acquired the controlling stake of its first brewery in the state of Himachal Pradesh. In the summer of 2007 it started local production of beer, little known outside Poland - Okocim Palone, in the main market segment (average price, strong) and Carlsberg Green beer. Simultaneously, the construction of two new breweries was under way.
In March 2008 the brewery in the city of Alwar (Rajasthan), started operating, which allowed to penetrate the Northern part of India. And in August a factory in the city of Aurangabad (Maharashtra) started working. The output of both breweries was 0.45 million hectoliters. In calendar 2009, the company has further strengthened its positions in the North of the country, creating the enterprise in West Bengal.
Also in 2009 the company introduced a sub-brand Tuborg in the variation of medium strength (Green/mild). Today it is obvious that attempts to accustom the wide audience of Indians to expensive weak lager were clearly premature at the moment, these varieties have a small weight in the Carlsberg India portfolio of brands. Therefore, the company decided to localize their Tuborg brand, which had been developed in accordance with uniform global positioning.
Tuborg Strong, which appeared in the summer of 2010, quite accurately corresponds to the core of Indian beer consumers: 1) loud "Western" name, justifying a small premium in price 2) youth-oriented, 3) strong enough to consider the purchase of premium beer not a waste of money. It is not surprising that this sub-brand immediately became popular, and very quickly became the basis of the company's sales, despite the fact that it belongs to a premium (or upper mainstream) segment.
Also in 2010, Carlsberg India purchased the brewery with a capacity of 0.15 million hectoliters in the state of Andhra Pradesh, the second largest market in India, which also opened the way to the state of Telangana.
In 2011, encouraged by success, the company released strong beer Carlsberg Elephant in the super-premium segment of the market (before that Carlsberg Elephant was a little-known European brand).
Increased production capacity and representation in the largest regions laid the foundations for rapid growth of Tuborg Strong. Brand, far behind the strong national varieties in terms of market share, in fact, has actually formed a new category of beer market - strong international, opening it to a wider consumer audience.
The focus on premium brands has allowed the company to overcome regional barriers more efficiently than other manufacturers. Sharing margins with distributors and retailers, Carlsberg India has managed to gain a foothold in the markets of those states where it had no productions of its own. Moreover, having introduced their products to the consumer and determining development potential, the company could begin to choose the direction of expansion more precisely.
In 2013 the company opened its fifth brewery in Haryana, and in 2014 - the sixth in the state of Bihar. These markets cannot be considered very large, but they enable Carlsberg India to become a leader in the North over time. By the end of 2013 Carlsberg India moved to the second position in terms of sales in 7 states, and in 6 states it controlled 20% of the market and more, according to the report.
However, the development potential in the southern regions is still limited by tax barriers, high logistics costs, return of packaging and other complexities of the sales organization. For example, the state of Tamil Nadu is one of the largest beer markets in India, but it was closed for the brewers which do not have their own production capacities in the region, so Carlsberg India is not represented there.
According to our rough estimate, the sales of Carlsberg India in volume terms amounted to … million liters of beer, and its market share reached …% at the end of 2014-15. The company reported sales growth of …% at the end of calendar 2014, due to the growth of Tuborg Strong and Carlsberg Elephant.
If we proceed from our assessment that in most regions the retail price of the company's brands is …% above average, the net revenue from sales of Carlsberg India could be about … billion rupees (about $... million.)
Historical roots of the company Mohan Meakin date back to 1855, which allows it to be proud of its background, quite an important factor for the brewing business. Today only one third of the company's sales is accounted for by beer - Mohan Meakin became well known as a manufacturer of strong alcoholic beverages.
As a result of two centuries of mergers and transformations, according to the company's report, the composition of its brewing production today includes Solan Brewery in the state of Himachal Pradesh and Mohan Nagar in the state of Uttar Pradesh, which makes Mohan Meakin the major regional player in the North of India. In addition, the company has signed agreements for contract bottling with enterprises in different regions of India. According to Mohan Meakin reports, …-…% of revenue from beer sales is accounted for by "traded beer".
It should be noted that once the company played a big role on the national scale, but tax isolation of regions, the growth of logistics costs and the emergence of many competing companies, and also a strategic focus on sales of strong alcohol apparently caused the gradual reduction of Mohan Meakin in the beer market.
The main volume the company's sales is accounted for by the brand Golden Eagle, which for a long time, until 1980, was the largest in the Indian market. But the company's brand portfolio is quite developed and presented by many different varieties.
According to publications in the press, in 2005 the management of Mohan Meakin was seriously considering the possibility to sell its brewing business to specialized investors. In 2010, it even sold a small brewery in Lucknow (Uttar Pradesh). But the matter did not get any further, apparently foreign companies were more interested in enterprises in other regions, or they didn't like the price of the assets. Today, international companies are well represented in the North of India, with the exception of AB InBev.
According to our estimates, after a short-term increase in the production of beer backed by the rapid growth of consumption in 2010-11, Mohan Meakin continued to reduce the volume of production and consequently quickly lose market share. By the end of 2014-15, the company's share is about …%. Net revenues from the sale of beer, including traded one, have remained by our estimates at approximately the previous year's level, amounting to … billion rupees ($... million).
SOM Distilleries and Breweries
Private multibusiness group SOM, which specializes in the production of alcohol, came to the beer market in 1994 by founding SOM Distilleries and Breweries. The brewery is located in the heart of India - the state of Madhya Pradesh. Besides beer the company bottles hard liquor, but its share in total revenue is only …%.
Over the past 20 years, SOM has managed to create three strong regional brands, and all three in the category of strong beer. The largest one is multibrand Black Fort - the general name for different categories of alcoholic beverages, which accounts for slightly less than half of the sales of beer. The portfolio of the group also includes the old Hunter brand and the brand Power Cool, released in 2012.
The company's production capacity as a result of a number of extensions by 2010 was increased to … million hectoliters of beer per year. In the same year the company's sales peaked at about … million hl, but since then have fluctuated along with the market near … million hl. However, the company plans to increase its capacity to … million hl.
According to its own estimates, SOM is a leader in the home region with a market share of about …%. In addition to Madhya Pradesh the company's key areas are many of the Central and Northern states of India, and the distribution network of the company includes more than 60 trading partners.
According to the results of 2014-15 estimated net revenues from beer sales, on the basis of quarterly data, increased by …% to … billion rupees ($... million). It should be noted that according to the report, the amount of excise taxes paid is very small compared to other brewing companies. Perhaps this is due to of SOM operating mainly in the home region.
Beer sales in 2014-15 increased by …% to … million hectoliters. National market share of the company, respectively, is …%.
Molson Coors (Cobra Beer)
The output of Molson Coors on the Indian beer market was a consistent development of partnerships and is closely associated with Cobra Beer.
Cobra Beer is a project of Karan Bilimoria, a businessman of Indian origin, who started his business in the UK while still studying. He invented the concept of Indian Cobra beer for the European consumers. In 1989, Karan Bilimoria offered his idea to a brewery in Bangalore, which a year later started bottling this beer. Since 1996 the company began to place contracts in an English brewery and actually had no relation to India.
Over the next ten years, the Indian market had significantly grown and attracted the attention of foreign companies. Cobra Beer returned to the market in 2004 and began production of its "Indian" brand in partnership with a major regional brewer, namely a family company Mount Shivalik.
The composition of Mount Shivalik includes two production facilities - one in the state of Haryana (with a capacity of … million hectoliters), the second in the state of Punjab (with a capacity of … million hectoliters). The portfolio of Mount Shivalik includes a strong regional brand Thunderbolt, which, according to the company, is the leading one in Punjab, Haryana and Jharkhand.
During the crisis of 2008-2009, the growing popularity of Cobra brand was superimposed by funding problems, so in 2009 Molson Coors became the co-owner of Cobra Beer, and since 2011 - its majority owner.
The best strategy for this joint venture, obviously, was to launch its own production in India. For this purpose the brewery with a capacity of … million hectoliters close to Patna (capital of Bihar) was purchased in 2010. That was also when Molson Coors announced plans for new acquisitions.
The next stage of Indian expansion was the signing in early 2013 of the agreement on mutual distribution and manufacturing of brands with the familiar Mount Shivalik. According to the results of 2013-14 more than …% of its revenues fall for contract brands, and the revenues from the sale of its own brands started to reduce. It is therefore not surprising that the continuation of cooperation ended with the acquisition of Mount Shivalik, which in the spring of 2015 joined Molson Coors.
Thus, at the moment the company Molson Coors has established itself as one of the largest regional beer producers in India, the main sales of which are formed by the states of Punjab, Haryana, Uttar Pradesh, Bihar, Jharkhand and West Bengal. Also, the company has good prospects of growth in the beer market of Delhi.
An important event in 2014 was the launch in India of the international brand Carling. It complements the company's portfolio, which is based on King Kobra and Iceberg 9000. However, this is a mild version of the famous English brand just yet.
The share of the merged company, according to our rough estimate, in 2014-15 was about …% of the Indian market.
Now united, the group AB InBev entered the Indian market as two independent companies, namely American Anheuser-Busch and Belgian InBev.
In 2007, InBev has formed a joint venture with its distributor - RKJ Group. This company has developed a strong supply chain of PepsiCo products, covering the entire territory of India.
Focusing on high-margin imported brands, InBev could overcome regional barriers and gain significant market share in the premium segment due to wide geography of deliveries. Soon the company found suitable contract manufacturers - Regent breweries in the state of Madhya Pradesh, and also Dasappa& Son Brewery in Karnataka, with which it then formed a joint venture and started the bottling of the company's brands.
Simultaneously with the Belgians, Anheuser-Busch came to the Indian market, forming a joint venture with Crown Beers International. The company was situated in Andhra Pradesh - the largest regional market in India. Simultaneously with entrance to the market, the company launched the production of the title Budweiser.
Soon Crown Beers came entirely under the control of the company. Moreover, in February 2015 a message appeared, announcing the withdrawal of AB InBev from the joint capital of RKJ Group - the company began to sell beer by itself via Crown Beers.
Due to its small production capacity, limited production network and the focus on premium brands, the proportion of AB InBev in the Indian market is about …%.
In India there are about … microbreweries altogether. This is a small number for such a large country, but the first microbreweries began to appear only 6-7 years ago. Almost all current productions are restaurant breweries, for which the upper limit of beer output volume is very strict.
Craft brewing in India can develop within the boundaries of the few states where legislation allows it to exist, allocating microbreweries in a separate group. There are only five such territories to date: Maharashtra, Karnataka, Haryana, Punjab and West Bengal.
In total, these areas account for …% of the Indian beer market. In these regions the purchasing power of the population is higher than the national average; the premium segment is well developed. It is very important for craft brewers as their products in restaurants are 2.5-4 times more expensive than popular brands.
Some craft brewers are not as focused on local audience, as on attracting consumers from neighboring regions. Such an example is the city of Gurgaon (Haryana). It can be called not only the financial center of India, but also the capital of craft breweries - there are about … small industries there. Being very close to Delhi, they collect a variety of local and Metropolitan fans of special beer.
In the South the second center of the small brewing is Bangalore (Karnataka). On the whole the metropolis accounts for … microbreweries. Such successful development of small brewing owes to the comparatively low cost of a license to open a brewery for HoReCa, progressive scale of excise tax and an opportunity for businessmen to determine the retail price themselves.
Mumbai has not yet attracted a lot of enthusiastic brewers - brewing beer here is expensive and difficult. Today within Mumbai there are up to … craft breweries, … - in nearby Pune and several other cities.
Stringent environmental standards for beer production in the precincts of Mumbai, high rent and problems retail beer sales make life difficult for small brewers. Especially because the low cost of the license is provided only for microbreweries of a restaurant format with a capacity of up to 200,000 liters. However, according to articles in the press, entrepreneurs try to convince officials to mitigate the conditions of operation.
Soon the craft area in India is likely to grow. So far, Delhi law did not allow opening a microbrewery in the city, but recently the city authorities announced an adaptation of the legislation to open them.
Also the state government of Telangana is very interested in the experience of cities where craft brewing gained popularity. In July 2015, the Commissioner of the excise committee of the state announced a change in legislation, which should open the way for small brewers.
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1 Окт. 2015