Bangalore: International brewers are attempting to expand India’s beer market with a choice of mild lagers styled as lifestyle beverages and targeting brand-conscious consumers, overriding concerns about rising costs of raw materials such as barley and hops.
Wider choice: Customers at a beer and wine outlet in New Delhi. Annual per capita consumption of beer in India is estimated at less than 1 litre.
Singapore-based Asia-Pacific Breweries Ltd’s (APB) Tiger, US brewer Anheuser-Busch Cos Inc.’s Budweiser and Danish Carlsberg AS’ eponymous brew are competing for a share of the market that is now dominated by UB Group’s Kingfisher Premium and SABMiller Plc.’s Foster’s.
Three-fourths of the beer consumed in India is the strong variety with an alcohol content of more than 5%, but brewers such as APB are banking on their brand power to win over beer lovers to a milder brew.
“The (Indian) market is price-conscious, but there is also a section that is brand-conscious,” says Chetan Gupta, marketing manager at the Indian unit of APB, which last month launched Tiger, bottled at breweries in Hyderabad in the south and Aurangabad in the west of India.
Gupta says sales had exceeded expectations. “Even people drinking strong beer are willing to believe in aspirational value. A foreign brand straig-htaway gives that,” says Gupta, whose company is looking for breweries in north India to expand. Brands become status symbols that are coveted as affordability and aspirations in the consumer market grows, says Ranjan Mishra, an analyst at audit and consultancy firm Ernst and Young.
India’s beer market is small by global standards, with annual per capita consumption estimated at less than one litre, compared with a world average of 24 litres, leaving ample room for growth as the economy expands and middle-class incomes rise. The biggest beer markets are in the four southern states and Maharashtra, while consumption of the beverage in the northern states is seasonal, confined mainly to the summer months.
To be sure, brewers are not neglecting the strong beer market while trying to nurture light lagers. SABMiller sells Knock Out, competing with Kingfisher Strong, and APB markets Barons Strong Brew.
The milder beverages are targeted at a different market segment catering to youthful consumers, who can afford to pay more.
In April, SABMiller began selling its so-called super premium beer Peroni in Bangalore, the third city after Mumbai and New Delhi where the brand has been introduced since its launch a year ago.
Peroni, a brand SABMiller acquired in 2003 after purchasing Italian brewer Birra Peroni, sells at Rs122 for a 330ml bottle in India’s tech city, nearly three times what most beers cost. A 650ml bottle of beer in India sells for about Rs60 in most states.
“It’s not a beer everybody can afford,” says Apurv Nagpal, director of marketing at SABMiller India. Peroni is being positioned as a lifestyle product, not just a beverage, he adds.
The premium beer market in India hasn’t yet evolved, says Shekhar Ramamurthy, deputy president of United Breweries Ltd of the UB Group.
“Today, most beers operate in a common price band and there’s not much of a difference between a Kingfisher, a Foster’s, or a Budweiser,” he adds.
As demographics change and incomes rise, it is reasonable to expect that a market for premium beer will develop, says Ramamurthy. “As of now, it hasn’t happened,” he adds.
UB’s beer sales in the year that ended on 31 March reached Rs1,340 crore. Ramamurthy estimates the beer market to be at 155 million cases, with each case containing 12 bottles of 650ml each.
Pricing in India has been a tricky issue because beer is taxed at par with stronger spirits. Unlike whisky or rum, beer drinkers do not have a range of prices to choose from.
“Taxes on beer are 70% higher than on IMFL (Indian-made foreign liquor) on a per alcohol unit basis,” says Sundeep Kumar, director of corporate affairs and communications at SABMiller’s Indian unit, who is also the spokesman for the All India Brewers Association.
Beer firms have raised prices in states such as Maharashtra that allow some freedom in pricing, but they have not been able to do so in Andhra Pradesh, the biggest consumer, though state taxes have raised the cost to the consumer.
Over the past two years, brewers have also been battling rising prices of key inputs such as barley and hops, used as the flavouring agent in beer. “There has been a doubling of the price of inputs,” says SABMiller’s Kumar. “Growth over the last three years was 15-18%. It (the industry) will probably grow 11% this year.”