BEER INDUSTRY IN INDIA

Presented by Group 2

HISTORY & OVERVIEW

• Beer began to be exported to India in days of the early 1700s.

• Led to creation of a new style of beer by George Hodgson in his London brewery — “India Pale Ale” also known as IPA.

• First modern brewery in India was set up in Kasauli

• Today no brewer in India makes India Pale Ale. All Indian Beers are either:

Lagers (4.3% alcohol) Strong lagers (15 % alcohol)

• Indian beer market was estimated to be 6.7 million hectoliters in 2002-03

• Beer consumption is growing rapidly at a CAGR of 7% over last 9 years

• Indian beer market is valued at INR 35 bn with volume sales of 172 mn cases for FY 2008-09

• The market is expected to grow at an annual rate of 17.2% till 2011

• Foreign brewers are eyeing the Indian beer market which is largely untapped and has growth potential

• Drivers:– Huge market potential– Rising income levels– Entry of international brands

• Challenges:– Regulatory Environment– High tax structure

MARKET

DRIVERS &CHALLENGE

S

INDUSTRY OVERVIEW

• With current duopoly situation and entry of foreign players, beer industry in India will quickly witness consolidation

• Premium beer segment is outpacing the mainstream beer market touching a growth rate of 40-50%

• Emerging new sub-categories of beer with consumers in India open for experimenting

• Growing demand for barley and evolving contract farming

• More than 80% of the market is controlled by two major players United Breweries Limited (48%) and SABMiller India (35%)

• With InBev acquiring Anheuser-Busch, it has potential to emerge as the third major player

• The market is set to flourish with 15 new breweries and 10 international brands in next 3 years

TRENDS

COMPETITION

Indian consumers prefer strong lagers which has higher alcoholic content

Categories of beer

Lager Brewed using bottom-fermenting yeast that ferments slowly at a low temperature to create a smoother, mellow beer

Ale Uses top-fermenting yeast, is a more aromatic and fruity product

Stout Dark and heavy, with roasted unmalted barley and, often caramel malt or sugar

Mild Beer Developed as a sweeter and cheaper alternative to dark ales

Bitter Highly hopped for a more dry and aromatic beer. It is pale in color but strong

Dark Beer Barley is kilned for a long period of time which creates richer flavors

Fruit Beer Fruit, usually berries, is added either during primary fermentation or later

Wheat Beer(Weizen)

Malted wheat and barley are used for this German style beerIndian beer market is dominated by Lager and its various

shades

HISTORY & OVERVIEW

MAJOR PLAYERS

1) UB (United Breweries Ltd.) - Market leader in the Indian beer market with a 47.5% market share. Its flagship Kingfisher brand alone commands 25% market share

2) SAB Miller - 38.3% market share; has 10 breweries located strategically across India to serve the beer markets efficiently

3) Carlsberg - At the end of 2006, Carlsberg entered into a joint venture - called Carlsberg India Private Limited - to build a green field brewery in the state of Rajasthan, India. 

UNITED BREWERIES GROUP

(UB)

UNITED BREWERIES

• Based in Bangalore, is a conglomerate of different companies with a major focus on the brewery (beer) & alcoholic beverages industry.

• India's largest producer of beer - market share of 48% by volume; headed by Dr.Vijay Mallya

• UB Group today controls 60% of the total manufacturing capacity for Beer in India.

• Brands:– Kingfisher Blue– Kingfisher Strong– Kingfisher Premium– Kingfisher ultra– Zingaro– Sand Piper– UB Premium Ice– Kalyani Black Label Premium– Kingfisher Draught

• Kingfisher, most visible and profitable brand, made a modest entry in the sixties.

PORTER’S FIVE FORCE MODEL

• Model developed by Michael Porter, this model analyzes the nature and intensity of competition

• In an industry through five forces (rivalry, customers, supplier, new entrants, and substitutes). These five forces are explained as below –

1) Bargaining Power Of Suppliers

• With increasing cost of raw material and decreasing cost of barley suppliers bargaining power was high

• Shifting their production of beer on malt company has achieved a hold on its raw material and considerable reduced the supplier strength and dependency

2) Rivalry Among Existing Firms - Means through which competitors fight for position by using tactics such as price, competition, advertisement battles, and new product introduction, to lower the profits of competitors in the industry.

– CAGR of 11% is expected for beer in the next 5 years

– Currently the major rivalry for kingfisher premium is Budweiser, Carlsberg, Foster and Tiger and for kingfisher strong it’s Hayward 2000, Hayward 5000, Palone.

– SABMiller’s who came to India by acquiring small breweries and made its hold as Best-selling strong beer brand

– Still kingfisher being largest-selling strong beer brand (29%market share) is currently being supplied in 55 country.

– There are also some small local players that are in the market but does not provide much threat to kingfisher.

3) Threat Of New Entrance

– CAGR of 11%; sure makes attractive for the new players. But strong brands like kingfisher and haywards which already have their brand recall and extensive advertisement, new entrants are expected to struggle to expand their consumer base as they try to penetrate the beer market in India

– Several international brewers have currently built brand associations and are marketing their brands aggressively through various point-of-sale promotions throughout their distribution networks.

– But with strong players in the market the new entrant will face problems as following:

a) Economies of scale For example benefit associated with bulk purchases and sales

b) Cost of entry For example investment in technologyc) Distribution channel For example ease of access for competitorsd) Government Legislations introduction of new laws might

weaken companies positione) Differentiation For example certain brands that cannot be

copiedf) Supplier power Possibility of forward integration by supplier

4) Bargaining Power Of Customers

– It is the extent to which customers are successful in forcing prices down, or securing high quality or more service at the same price

– Customers tend to be powerful when the quantities they purchase form a large portion of the seller's total sales.

– Buyer do not understand the quality of the beverages and as there are not many players in the market the customers has less command over price.

5) Threat Of Substitute

– India is predominantly a spirits market and beer is a minority preference for those who consume beverage alcohol. So substitute is biggest threat as preference for beer among beverage drinker is less

– But the low penetration in beer consumption in comparison to international levels offers the expectation of substantial and sustainable growth in demand for beer in years to come, particularly given the youthful age of India’s population.

SWOT ANALYSIS

STRENGTHS

Strongest Worldwide Distribution System Huge Finances backing from UB Group Oldest & Largest Player In India Worldwide known Brand

WEAKNESS

High Concentration on Strong Beer Market Too much diversified

OPPORTUNITIES

Beer consumption is increasing Per capita beer consumption in India -0.5 litres which is very low Brand Extension Benefits Changing lifestyles of middle class Increase in disposable income

THREATS

High Taxes & Regulations Prohibition on Advertising Indian Culture is a Major Hindrance Negative perceptions about alcoholic beverages widely prevalent Many International Player Entering In India This is a ‘regulated’ industry

COMPETITIVE ADVANTAGE

• Management Team– Professional Managed– Seasoned Professionals with Significant Industry Experience

• Segment Market Presence– Least Vulnerable to Policy Volatility due to Large Spread

• Local Sourcing• Almost Completely Locally Sourced• Manufacturing Technology

– Largest Manufacturing Space– Maximum Capital Utilization

• Branding– Value Chain Ownership– Initiatives Planned for Integrating into Retailing

• Core Competency– Strong brand image with continuous innovation and

technology along– with good marketing and distribution channel are the core

strength of the company

CARLSBERG

OVERVIEW

• Danish brewing company founded in 1847 by J. C. Jacobsen

• Entered Indian market in 2006 & operates here through a joint venture named South Asia Breweries. Positioned itself as a premium mild beer. With the launch of its flagship brand, the company is trying to create a premium, all-malt beer category.

• In 2009 Carlsberg is the 4th largest brewery group in the world. Products are sold in more than 150 markets. In 2008 the Group sold more than 120 million hectolitres of beer, nearly 100 million bottles of beer a day.

• Carlsberg India Pvt. Ltd. headquartered in Gurgaon, National Capital Region, India is a Foreign direct investment company formed to brew and market Carlsberg beer in India.

• Brought Tuborg and Palone brands into India. Palone is sold as a 'strong' beer with 7.5% alcohol by volume. Strong beers dominate the Indian market, estimated in 2008 to total approximately 17 million hectolitres with over a 72% share.

SEGMENTATION, TARGETING & POSITIONING

Segmentation

International beer companies have a good enough reason to tap markets like India. That their main markets, North America and Europe, are either flat or in a state of decline is no secret.

Carlsberg has segmented the Indian market in following ways: a) Geographical

• Major consumer for alcoholic beverages is Southern India.

• Consciously chosen the north, east and west regions of the country to set up its breweries

• Strategy adopted by Carlsberg is to concentrate on to the untapped market of north and west India in the initial stage of the production. Moreover, since it has positioned itself as a premium product, it is only catering to the urban cities of India.

b) Demographic• India is becoming younger. Population of youth is high in

India. With its international image as the sponsor of a football team, it has created an impression in young ones’ mind.

• Rise in disposable income of the urban middle classc) Psychographic- The culture, the lifestyle, the personality of

an Indian is changing which is good for international brands like Carlsberg

Targeting – Urban cities ; It may not be called a niche marketing because

of the nature of the product but yes the product is placed at a higher price because of the image of the brand it wants to cash on.

Positioning – Carlsberg has positioned itself as a premium beer in the Indian

market. Most expensive beer compared with its competitors Budweiser, the UB Group's Kingfisher and Tiger beer by Asia Pacific Breweries

– Betting on the shift in urban consumers to spend on quality. – Under the process of test-marketing its strong beer brand

Okocim Palone from Poland. As its long-term strategy for the Indian market, it plans to deploy a portfolio

PESTEL ANALYSIS

Political

– Different states have different rules for liquor. Some states like Gujrat are Dry states where the sales of liquor are completely banned. Some states have time limits i.e., after 9 the sales of liquor are prohibited.

– Even the age limit for drinking in India is under discussion. Right now it is 25, so Carlsberg has to be very specific when targeting its consumer.

– As the advertisement of liquor is banned in India, Carlsberg has cashed its international image to boost its sales in the domestic market. They have targeted the public houses and discotheques for their promotion which is very apt.

Economic

– Disposable income of people specially living in urban cities is also increasing rapidly. The Carlsberg group has realized this potential and thus has targeted only the urban cities of India in their early stage to penetrate the market. According to the MD of the Carlsberg Group, Mr. Gidwani, Carlsberg has aimed to grab a market share of approx. 10 % by next 2 years, once that target is achieved, they will expand their base to other cities and the rest of the country.

Social

– Per capita income is rising, but at the same time the gap between the haves and have-nots is also widening. Though we hope that this gap will be narrowing in the near future, but the scenario is a bit bitter right now. There is a school of thought against the so called pub culture and then there are rest, but as they say change is inevitable that’s why The Carlsberg Group is relying on the change and has targeted the new Indian who is open to change.

Technological – Importing beer attracted heavy taxes from the

government resulting in higher prices of the same. Therefore to increase the base in the Indian market, it was advisable to set up plant in India itself. Carlsberg has set up four breweries in Rajasthan, Maharashtra, Himachal Pradesh &West Bengal to reduce the cost. According to the company sources, it is using an advanced technology to ensure that the beer that gets out is of better quality and great taste.

Environmental – Environmental factors include the weather and climate

change. As the climate here is generally warm, Carlsberg increases the promotions during summer time. As the company is new, we yet have to see its effect on environment and vice versa.

Legal – Again The Carlsberg Group is very careful about the

steps it takes because of the political environment which could land it in trouble. As the laws are different for different states, Carlsberg India has played smart in making a social networking website so that its purpose of marketing is also solved and it didn’t cross the line of law as well.

BRIGHT FUTURE FOR BEER INDUSTRY

a) Rising Income Levelso India's 'very rich', 'consuming' and 'climbers' classes to

grow at a CAGR of 15%, 10% & 2% respectively.

b) Changing Age Profile o Large proportion of the Indian population is in the age

group of 20-34 years - most appropriate target for beer marketers.

c) Changing Lifestyleso As urban consumers become more exposed to western

lifestyles, through overseas travel &media, their attitude towards alcohol is relaxing. Social habits are undergoing a transformation as mixed drinks are becoming more popular.

o More and more women are consuming beer – the penetration in metropolitan areas is almost twice as high as the penetration in other large cities – implying that the greater tolerance towards alcohol consumption in metropolitan areas facilitates the consumption of beer.

BRIGHT FUTURE FOR BEER INDUSTRY

d) Reduction in Beer Prices

o Indian consumer typically values an alcoholic beverage on the basis of its 'kick' factor versus its price.

o Most states do not have a differential tax structure based on the alcohol content. As far as the Light beer segment goes, there is no existing competition in the market. However, a number of well-established brands, especially lagers, have a significant market presence.

In India the future of beer industry is very much optimistic because: – India has predominantly a warm/hot climate.– The beer-drinkers in the country are much younger than the average

beer-drinker elsewhere in the world. This makes them more likely to carry the brand with them for a lifetime.

– Increasing exposure to beer and wine drinking, mainly due to media and consumer mobility.

– All these factors combined make the scenario very promising for beer industry and are 'in sync' with their strategy for India.

THANK YOU!!

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