India. Kingfisher turns to flavoured malts as beer sales stall

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Don’t like beer for its bitter taste? India’s largest beer maker is offering a choice to consumers who can’t stand the brew. United Breweries Ltd has just launched a malt-based alcopop—called the Kingfisher Buzz—that aims to take on the Bacardi Breezer, a fruit wine-based drink much favoured by young women.

Faced with a prolonged slump in the demand for beer, United Breweries anticipates young drinkers, specially women, will spend more on malts and beers that are flavoured.
“There are enough young above-legal-age people who don’t like drinking beer,” said Samar Singh Sheikhawat, senior vice-president, marketing, United Breweries. “Say women—we have nothing in our portfolio that is for women.”

Indian liquor companies have been swiftly expanding their portfolio of alcopops, with rum and vodka makers such as Bacardi and Radico Khaitan Ltd adding flavours to low alcohol drinks that come in attractive bottles. Still, it’s a fairly small category in India.

United Breweries, which makes more than half the beer sold in India, is trying to fend off rivals such as Carlsberg and AB InBev that have been gaining share in a market that has seen sluggish growth over the past few quarters.

The launch, its second in less than 12 months—it launched a premium version of its Kingfisher Max beer in March last year—is aimed at taking on the Bacardi Breezer. As it has done in markets in Europe, particularly the UK, Bacardi can be credited with building the alcopop segment in India.

“One brand has dominated the market for a decade, there has been no alternative,” added Sheikhawat. The planned alternative, Buzz, will for now be available in two flavours— lychee and berry—in Mumbai, Pune and Thane.

This so-called ready-to-drink, or RTD, market, dominated by Bacardi, is growing at 11-12% annually in India, with roughly two million cases sold every year, according to data sourced from Euromonitor.

Buzz will be made available across India over a period 12 months—the other priority markets are Delhi, Manipal, Chandigarh and Bengaluru. “We will go in markets where there is significant Breezer volume,” Sheikhawat said.

Industry experts reckoned that while the RTD category has been growing, not many companies have invested in it.

“While it is a growth category, specially among the young and affluent, it has inherent distribution challenges,” said a top industry executive who did not want to be named. “Also India is still a small in-home alcohol consumption market, a challenge that has stalled the growth of beer too. So not many companies have been able to persistently pursue the RTD category,” the person added.

In a recent move, United Spirits Ltd (now controlled by Diageo Plc.) rolled back its ready-to-drink brand Smirnoff Ice (a pre-mixed vodka drink) on account of “insufficient volumes”.

The rapid expansion of United Breweries’ portfolio comes at a time when volume growth for the beer industry in general has been tepid although alcohol consumption among Indians is increasing at a rapid pace.

In the first half of 2015, volumes for the beer industry dropped by 1% from the year ago period.

“The beer industry lacked lustre in the first half of the financial year with a 1% drop in volume,” United Breweries said in a statement to the BSE during its quarterly result announcement.

Volumes at United Breweries dropped by 2.4% in the quarter ended 30 September from the same period a year ago, even as margins expanded by 100 basis points on the back of price increases in select markets and stable input costs. One basis point is one-hundredth of a percentage point.

United Breweries’ move to launch more products comes at a time when AB InBev’s planned takeover of SABMiller is set to create the world’s largest beer company, which is likely to impact the dominance of large brewers globally, including in Asian and African markets.

“Yes we have been more aggressive in launching newer products, we have to grow the market,” Sheikhawat said.