United Breweries to enter craft beer market by 2018-end
UBL is also placing on hold plans to expand Kingfisher Buzz to newer markets as response to the ready-to-drink flavoured beer has not been as strong as it expected
Bengaluru: India’s largest beer maker United Breweries Ltd (UBL) will enter the craft beer market by the end of 2018 to tap into a growing base of consumers willing to pay a premium for the brew, a top company executive said.
UBL is also placing on hold plans to expand Kingfisher Buzz to newer markets as response to the ready-to-drink (RTD) flavoured beer has not been as strong as it expected. The company will continue to sell Buzz in markets where it had initially launched it—mostly the top metros—and will take a call on what to do with it in some time, the executive said.
The entry into craft beer will put the Kingfisher maker in direct competition with smaller firms such as B9 Beverages Pvt. Ltd, which is at the helm of the craft beer movement in India with its Bira91 brand.
Craft beer is a new category in India but is growing at around 20% per year according to the All India Brewers’ Association. UBL’s managing director Shekhar Ramamurthy has often been asked questions about the company’s absence in the space.
“By definition a craft beer company is a small company and for a big company which has market leading brands, it takes time to reorient our business and create structures to come out with a craft beer,” UBL’s managing director Shekhar Ramamurthy said in an interview.
B9 Beverages’ Bira91 was launched only in 2015 but has already become a popular label in the metros, and the company expects to earn Rs150 crore in revenue by end 2017-18, Mint reported in December.
The craft beer space has also garnered investor interest with B9 Beverages alone raising more than $30 million from several investors by end-2017.
“Although craft beer remained a niche, demand has been growing significantly. A large number of microbreweries have opened across the country, helping consumers to develop a taste for this kind of beer,” analysts at research firm Euromonitor International wrote in their annual liquor industry report last August.
Ramamurthy recognizes the opportunity craft beer could present, but said Kingfisher and Kingfisher Strong in particular remain its flagship brands even today and the company will continue to invest heavily in them.
“Sometimes craft beers get far more visibility and share of mind than others. Not just in India, it’s a global phenomenon. Still, 85% of all beer sold in India are strong beer and there is growth there too,” Ramamurthy said. Strong beer is typically classified as that which has over 5% alcohol by volume (ABV).
The bulk of the beer sold in India is in the same segment as Kingfisher Strong and that segment is growing in the mid-single digits, with Kingfisher Strong growing at a faster clip of about 10% over the past 2 years.
The company’s mild beers, Kingfisher Ultra and Heineken, have grown even faster at around 30-40% year-on-year over the last 2-3 years. Dutch brewer Heineken NV owns a 43% stake in UBL.
Ramamurthy expects volume growth in the beer industry to continue to be in the mid single-digits, which he says is a good recovery considering the industry has been almost flat over the last three years.
It was when the overall beer market was stagnant, in early 2016, that UBL decided to enter the RTD space with Buzz to diversify and offset the sluggish market. At that point, alcopops (flavored alcoholic beverages with relatively low alcohol content) were also thought to be gaining popularity with companies like Bacardi Ltd and Radico Khaitan Ltd expanding their RTD portfolios. But Kingfisher Buzz did not enthuse consumers as much as UBL had anticipated.
“Not everything succeeds all the time...so we felt that rather than pushing water uphill, we will take stock of the situation and see what to do with it. It is not to say that it (Buzz) won’t succeed. It will have a slower trajectory,” Ramamurthy said.
- Gujarat farmers can now produce, sell solar power under Suryashakti Kishan Yojana
- BoM chief’s arrest unwarranted, allegations inaccurate: bankers’ body
- Skoda’s India comeback project receives Volkswagen approval
- Opec moves towards raising oil supply as Iran softens stance
- Mongolia launches construction of first oil refinery with India aid