The country’s top beer maker is gearing up for the future of alcohol consumption in India: craft brews and imported drinks.
United Breweries (UB), partly owned by Dutch brewer Heineken, on May 24 rolled out the brewer’s Amstel brand in India. It is gearing up for more launches, especially as it anticipates intense competition from newer brands like Bira 91 and global companies such as Ab InBev.
In a market where the per capita consumption of beer remains low, UB is investing in new brands, including a craft beer expected to hit the market by the year-end, said Samar Singh Sheikhawat, UB’s senior vice president of marketing.
India’s alcohol market has been battered over the last two years thanks to several policy moves such as the liquor ban on the country’s highways and demonetisation. But things are now beginning to look up.
Also, UB’s launches come as the company, on May 24 (PDF), reported a strong set of numbers for the financial year 2018: 10% growth in volume, 71.6% rise in profit to Rs394 crore, and 21% jump in revenue to Rs12,443 crore.
Edited excerpts from the interview with Sheikhawat:
The last two years look to have been very challenging for the alcohol market…
In 2016, there was demonetisation—95% of the beer industry sales are in cash. Then, in Tamil Nadu, the political situation (with the death of Jayalalithaa) had an impact on us. In 2017, there was the entire goods and services tax (GST) situation and the relative lack of clarity until the last minute. While we knew that alcohol would not come under the GST purview, what was anticipated was that a lot of our input prices will increase with no set-off available to us on the output side. And lastly, and potentially the most damaging, was the whole highway ban on outlets. As a result, 2016 and 2017 were bad for the alcohol industry with negative growth rates (in some categories).
But we continued with our focus on driving distribution, marketing activities, and launching new products.
Did that help mitigate sluggish sales?
The financial year 2018 has rebounded spectacularly. There was enough clarity on GST eventually, and the initial impact has been mitigated by certain actions we have taken and the clarity provided by the state and central governments. Lastly, the whole highway ban has been largely resolved (barring in a few states) as state governments were very proactive and most moved with alacrity.
You’ve now launched Amstel, after adding another Kingfisher brand. Where does your portfolio stand today?
Last year we launched Kingfisher Storm. We’ve done a million cases in the first year and we are optimistic about that product. It is part of our strong beer portfolio. And we also started work on Amstel (part of Heineken’s international portfolio). The gap in our portfolio was that we did not have an international super premium strong beer to compete with the likes of Budweiser Magnum, Carlsberg Elephant, and Bira strong.
So, you are acknowledging the impact from newer beer brands?
They exist in our conversation. The thing where Bira has done a super job is the conversation, but the volumes they have achieved are still low. Because, at the end of the day, they still have losses. For a big company like ours, anything less than 10 million cases is not even considered a success. And we can’t do business the way startups will do it. There will always be brands like these in the market but for a large company like us it opens up our eyes to the potential market there is. Clearly, there exists a kind of consumer who is looking for such an experience.
We have already made an announcement that we will have Kingfisher craft beer by the end of the year.
So, it’s small fish for you?
Not to say that volumes don’t matter. We have brands that are smaller than that. It is not the volume but how much time, effort, and money you spend to get that volume. They have done a great job on marketing, they are present on tables, but from a financial point of view, it doesn’t make any sense.
And why are you launching Amstel in India now?
So it took a while to develop this product. If you see, unlike Heineken (that owns Amstel), which is one beer sold across the world with the same packaging, marketing, brew etc, Amstel is more local in flavour. It is being developed by the Heineken brewmaster currently based in India. We decided to customise it into a strong beer because globally it is largely a mild bitter beer. So, like I said, the only gap in our portfolio was that we did not have an international super premium strong beer. With this now our portfolio, at least in the mainstream, is complete.
Going forward, what do you see as the top trends in the Indian beer market?
You will see super-premium brands continue to grow, there is enough appetite from consumers to upgrade. The whole craft beer thing is big, too. At the moment there are some 150-200 micro-breweries around the country. While that number is still small for a country of our size, this was non-existent about five years ago. So it’s something you cannot ignore.
The third thing that we will see is a massive backlash (comeback) from the competition. Because the last one or two years were not very good for global beer companies. Now, I expect a severe backlash from the likes of Ab InBev in terms of new beer launches and significant money being spent on mainstream media.
One more thing we have noticed is that in the last three to four years, the sales from premium institutions, i.e., bars, restaurants, clubs, and pubs have been growing at 20-30% (for the industry). That leads me to believe that the nature of consumption in India is changing, that many more people are buying more expensive products from more expensive places, which reinforces the whole trend of premium products.