TR Capital is likely to invest $10 million in B9 Beverages, which will use the funds for expansion of Bira 91 craft beer
Mumbai: Hong Kong-based private equity (PE) firm TR Capital Partners LLC is close to investing about $10 million in B9 Beverages Pvt. Ltd, maker of the popular Bira 91 craft beer, two persons close to the development said.
TR Capital has been in talks with B9 Beverages to buy a minority stake in the company, which intends to use the money to fund the expansion of Bira 91 to new markets both at home and overseas, one of the two persons said on condition of anonymity. B9 Beverages had hired KPMG to find a PE investor, said the second person, also requesting not to be named.
Founded in 2015 by Ankur Jain, founder and chief executive officer, B9 Beverages has angel investors on board such as Snapdeal founders Kunal Bahl and Rohit Bansal, Zomato founder Deepinder Goyal and ChrysCapital co-founder Ashish Dhawan. Silicon Valley venture capital firm Sequoia Capital invested $6 million in Bira in January.
Jain did not respond to phone calls and e-mails sent on Tuesday. An e-mail sent to TR Capital on Tuesday did not elicit a response. A KPMG spokesperson declined to comment.
TR Capital has invested in Indian companies such as Flipkart, Lenskart, Urban Ladder and Vivimed Labs Ltd. It currently manages three funds with capital commitments of $300 million.
Mint reported in June that Jain was looking for at least $10 million in funding to build efficient back-end and logistics systems to meet demand for Bira 91, India’s first handcrafted beer. Jain said then that he expected to close the investment round “within the next 2-4 weeks".
Sales of Bira 91 (the number stands for India’s country code) have grown rapidly since its launch in February 2015. According to a 3 July report in DealStreetAsia, sales of Bira reached 35,000 cases a month by January 2016, and by June, had touched 50,000 cases a month.
According to a 3 July DealStreetAsia report, Jain has now signed up brewers in Indore and Mysore to boost production.
“With Indore starting production next month, we will add 2.2 lakh cases a month. The Mysore facility will go live next summer, and then we will have 6 lakh cases a month," the report quotes Jain as saying.
The beer-maker was investing $800,000 to upgrade the Indore plant, the report added.
According to data from market researcher Euromonitor International, the beer market in India grew from 1.7 billion litres in 2010 to 2.5 billion litres in 2015.
Craft brewing is a niche category in India and has been gaining popularity in cities such as Bengaluru, Mumbai and Delhi. Young consumers have contributed to the popularity of craft beer.
Regulations, sourcing of malts, and the creation of niches catering to local tastes are key challenges confronting this micro category, a July 2015 Euromonitor International report said.
According to Euromonitor International, the term “craft beer" usually signifies a superior beer product that is freshly produced every day, free from preservatives and served from a tap.
The handcrafted method is used to churn out brews in a variety of flavours ranging from Irish Red ale, English Porter, American pale ale, to Indian pale ale and wheat beer to incorporate the taste of in-season-fruits such as mangoes.
Bira 91 makes two kinds of Belgian beers. Bira 91 White Ale is a low-bitterness wheat beer, while Bira 91 Blonde Lager is a craft lager made from barley. Both are available in draft and bottle formats.
Sales of alcoholic beverages, or alcobev, like other fast-moving consumer goods (FMCG), are “driven by deep distribution," said Santosh Kanekar, former marketing head at the Indian unit of liquor maker Diageo Plc. and founder of investment advisory firm BeLive Corp.
“At the other extreme are the high-value brands which may not have reach but their higher margins compensate for the small market size. However given outspends in any FMCG category,even the niche segments have to reach a certain scale to break even," he said.
To take advantage of the increasing demand for craft beer, several micro breweries have opened in India over the last couple of years and a few existing brewers have strengthened their presence with the launch of new variants.
The names include Bengaluru-based Arbor Brewing Company, Pune-based breweries such as Irish Village, Doolally Brewing Company, Effingut Brewerkz, TJ’s BreWorks, Mumbai-based Gateway Brewing Company, The Barking Deer, The White Owl Pvt. Ltd and Brewbot.
Only a handful of venture capital and private equity deals have taken place in the alcobev space in India. They include Everstone Capital’s investment in Nashik Vintners Pvt. Ltd (owner of Sula Wines) and Gaja Capital’s minority investment in Bengaluru-based John’s Distillery. Last year, RAAY Global, the family office of Amit Patni, invested in The White Owl.
“These investments are niche plays which allow investors to make pure consumer plays in high end, where differentiation is more important than distribution. Whether they will get a good return on their money will depend on improvement in investing sentiment than consumer traction," Kanekar said.
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