UB Group and SABMiller have India's beer market on tap

A colourful page in recent Indian history was the Malt March, involving a group of bottle-touting citizens who paraded to end alcohol prohibition in Gujarat a few years back. The movement’s name was a pun on the Salt March that Mahatma Gandhi undertook in 1930, walking 200 miles to the sea to collect salt in defiance of the Salt Monopoly. India would later declare a nationwide prohibition on alcohol after the abstemious Gandhi took the nation’s helm, only to quickly repeal the law nearly everywhere except for his home state, Gujarat.

Today a beer version of the Malt March is unfolding in the living-rooms of affluent households across the subcontinent.

“Beer is the alcoholic drink of initiation,” says H. N. Kiran, research director, TNS India. “There are young drinkers, perhaps even below the legal age of their state. They drink beer with friends when parents are away.”

Indians are re-appraising the role of alcohol in everyday life, according to Kiran. “In the past, if a son was caught drinking, he would be reprimanded. Now, parents are fine with a college-age son having a beer with friends.”

Yet, for most Indians, beer is a rare indulgence. Per-capita annual income was US$831 last year. By local standards, beer prices are astronomical, primarily due to taxes, which vary from state to state. The cost of a glass of beer ranges from $0.51in Panaji to $1.83 in Channai, according to the voluntary data posted on pintprice.com. Euromonitor data shows a higher national average of $2.58 per litre.

Instead, working class Indians tend to turn to whisky - 99 per cent of it distilled domestically. In fact, populous India is the world’s largest whisky market. Or they rely on traditional rural brews such as arrack, desi sharab and tharra.

Beer, in contrast, holds less than a 10 per cent share of the country’s alcohol market. Last year, 1.5 billion litres were sold, according to Euromonitor, putting per-capita consumption at just 1.3 litres annually.

Yet this is still a bonanza for two firms - the native United Breweries Group, and foreign newcomer SABMiller - that command nearly 80 per cent of beer sales.

The UB name is synonymous with beer in India. Its origins go back to 1857, the year of the Indian Mutiny, when its corporate forebear, Castle Breweries, was selling hogsheads of beer to British Troops. Today, UB is one of India's largest corporations, and over the years has added wine and spirits, and claims to be the world's third largest distiller. In 1978, it introduced the Kingfisher brand, using the slogan ‘King of good times’ - perhaps apt as Euromonitor computed a 38.9 per cent market share for Kingfisher beer in 2008.

Global giant SABMiller arrived in India in July 2000, and promptly went on a shopping spree, buying up the subcontinent’s most venerable beer brands. By 2006, its acquisitions included Narang Breweries, Mysore Brewers, Shaw Wallace, Royal Challenge, Rochees Beweries and Fosters India.

When the dust settled, UB was still on top, but SABMiller wasn't far behind. UB Group had a 43.7 per cent share last year, compared to SABMiller’s 34.3 percent, according to Euromonitor. Bringing up the rear were Millennium Alcobev, Mohan Meakin and Cobra beer. Carlsberg and Anheuser-Busch InBev also had minor shares.

These trailing brands face a formidable challenge. Not helping their marketing is the fact that ATL advertising is banned in India.

“All liquor companies resort to what is known as surrogate advertising”, says Basabdatta Chowdhuri, CEO at Madison Media Plus. “The Information and Broadcasting Ministry watches this closely. Last year a lot of changes in regulation were proposed and things are still in a flux - no new communication has happened for a while.”

Chowdhuri refers to recent ministry warnings issued in April 2008. But the biggest change for the beer market came earlier in 2000 with the passing of the Cable Television Network Amendment Bill, which closed well-worn loopholes in existing legislation that enabled surrogate marketing, and which could easily explain the timing of SABMiller's arrival in India that year.”

Analyst comment

Yvonne Kok, research manager at Euromonitor International:
“Last year, imported beers accounted for a minuscule one percent of the beer sold in India. While Heineken remains the largest such brand, there certainly is a rising presence of other imports such as Asahi, Corona, Hoegaarden and more recently, Victoria Bitters, among others.

Most are consumed in on-trade channels such as upscale hotels, bars and clubs. High price separates them from domestic brews and aids in their status and allure.

Yet, as small as their market share may be, imported beers are kept under constant watch by India’s two major brewers, United Breweries and SABMiller. Two such imports under the crosshairs are Carlsberg and Budweiser, each of which graduated to local production in 2007, and which currently command a percentage point of market share.

Local production allowed Carlsberg and Budweiser to close the price gap with domestic rivals. To defend against these intruding foreign brands, UB launched Kingfisher Blue and Kingfisher Ultra, while SABMiller created Indus Pride - all upmarket domestic offerings - in the hope that they would stem the exodus of drinkers toward the more aspirational Carlsberg and Budweiser.

Local production will be the preferred option of all but the most glamourous foreign beers arriving in India. Upscale, on-trade channels offer limited sales opportunity and wrought with risk due to the unpredictability of hikes in taxes and the uncertainty of the business cycle. Little wonder that United Breweries and Heineken inked a deal last year for the former to brew and market the Dutch beer in India.”

This article was originally published in the 11 March 2010 issue of Media.