THE RIDE OF CRAFT BEER IN INDIA

It is Crafted for success

Komban, a crafted beer made by Kochi native Vivek Pillai, is one of the most preferred beers in the UK. The beer, launched in 2016 has another Kerala connection too as it is brewed from Kerala’s own Palakkadan matta rice. The name Komban evokes the image of a majestic male elephant, has two variants, Blonde (Cloudy) and Premium Black, and was a hit at the craft beer festival, London, 2018.

Pillai, who runs a small South Indian restaurant, Cochin Heritage in Manchester, always wanted to create a beer that could be proudly presented as a product of Kerala. “Matta is one of the healthiest rice varieties. So, I always had this idea of mixing it with beer", Pillai said. He asserts that the rice variety imparts a unique flavour to the beer The credit for the beer’s name goes to his wife, Sandhya. “A tusker is a strong and royal animal that is synonymous with Kerala. It is majestic and magnificent." Komban is the only authentic Indian craft beer available in the UK now. It has only four per cent alcohol and it is made from one of our staple foods.

Back home in India, the storm brewing in the beer mug is not going to subside. It’s been more than a decade since the first few microbreweries sprung up in India, and today there are more than 200 brewpubs and breweries around the country.

Two IIM graduates, Suketu Talekar and Pratheek Chaturvedi, after a stint in Procter & Gamble in Singapore, returned to India in 2006, with a fresh idea: brewing their own good beer.

Both of them began frequenting a brewpub named Brewerkz, which tasted exotic beer. Chaturvedi left his high-paying job and worked as an unpaid intern in the same pub. They returned a year later, and Brewcrafts India, the startup that produces Doolally, the first craft beer in India was born in 2009. They were joined by Oliver Schauff, a German brewmaster as a partner, later. Out of the initial investment of 2.5 Crore, one crore came from three angel investors.

Doolally gets its name from the word ‘Deolali’, a small army cantonment near Nashik and it means ‘going insane’- British soldiers who were stationed in Deolali were mostly jobless and Talekar had seen them going mad after several drinks. Doolally, which began selling its beers at The Corinthians Resort & Club in Pune in 2009, brought its brews to Mumbai in 2015. The Bandra Taproom, owned and run by Doolally, was their first outlet, and they opened four more- one in Andheri, Kher, Kemps Corner and Navi Mumbai. There was no going back and it has grown manyfold ever since. But, Belinda D’Souza, community manager at Doolally commented with humility: “ We are a scrappy little beer company”.

The first IPO is coming

Six years later, another entrepreneur, Ankur Jain launched the now popular Bira91. He sold his venture in health care management, In New York,  in 2007, and he moved back to India, and started a beer venture in Delhi, importing craft beers from Europe and the U S.  He launched Bira91, in 2015. The first brewery unit was located in Flanders, Belgium and after its success, was moved to India.

Craft beers are made in limited quantities, ideally for immediate consumption, by small or medium-scale brewers. Urbanization and changes in social perspectives propelled its market growth.  Inspired by travelogues and treks, the emerging craft beer culture has been influenced by the West. They come in fresh flavours, tastes, and unique ingredients. From being a drink primarily reserved for the elite of society, beer has become a social drink. No longer satisfied with mass-produced commercial beer, they are looking for artisanal brews, locally made and sourced with fresh local ingredients. This has paved the way for the growth of craft beer in India. The emergence of western culture in India has brought craft beer along with it. The entitled millennials are experimental and the culture of the party, evening and night hangouts, are seen to arise among them. Craft beer is considered healthier than bottled beer. Bottled beer contains preservatives and glycerine, whereas the craft has none. 

Maharashtra and Haryana were the first states to open up the space for microbreweries, while the majority of the states in India have not still opened up for microbreweries and pubs. A slew of microbreweries have sprung up in India in the last decade and today there are more than 250 brewpubs and breweries around the country. Bengaluru has become India’s microbrewery capital with more than 50 startups. 

Several home-grown craft beer brands have been brewed in the last couple of years, in places as diverse as Pune, Goa, Bengaluru, Madhyapradesh, and Chhattisgarh. Chhattisgarh's Simba, founded in 2016, is the first brewery to offer bottled stout. Wheat beers are a hit and every craft brewer will have a Belgian Witbier or German Hefeweizen on the list.

Jain of Bira91 had raised USD 1.5 million initially, from Snapdeal, Zomato and Chrys Capital, and in October 2015,  Sequoia India invested USD 6 million in his B9 Beverages, just nine months after it was launched-Sequoia’s first investment in the alcohol beverage segment. Four years later, Bira91 raised USD 4.2 million from Sixth Sense Ventures. The transaction valued the company at USD 246 million, up to USD 36 million from the valuation made by Belgian VC firm, Sofina, in 2018, when it made an investment of USD 50 million. Bira also raised a debt funding of USD 10 million, in 2019.

Currently, Bira91 is the country’s fourth-largest brewer, after three big commercial breweries. With an annual turnover of $ 170 million, Bira91 is planning the fifth brewery in Madhya Pradesh, ahead of an IPO. The brewery will add 400,000 hectolitres (a hectoliter is equal to 100 litres or 26.4 gallons) a year. It can be expanded to 1 million hectoliters hiking Bira’s existing capacity of 2 million hectoliters.

The company plans the first IPO in the craft beer industry at 4x of the current valuation by 2024-2025. The share has traded at upwards of Rs 800-900 in the unlisted market and it came down to half the price during COVID. The current price is Rs 850. With six crore shares outstanding, the valuation is 5000 crores.

But it was Harvard Business School graduate Javed Murad's White Owl Brewery was one of the first to tap into the market, a year ahead of Bira91. Started as a restaurant in Mumbai in 2013 and expanded into a brewery in 2014, it got USD 1.4 million (INR 10 crore) in Mumbai from RAAY in 2015 and USD 5.7 million from IIFL Asset Management, in 2019. These moves proved that something positive is brewing for the industry as a whole. 

Brewed in Bhutan, for India

Herbs are part of Indian life, and the country has its own Ayurvedic centres. In a report prepared by Kshma Raj of GlobalData, an analytical platform, and published by Bloomberg Quint, it has been suggested that the craft beer industry in India can survive the COVID storm by adding “immunity-boosting” ingredients. An experiment with dragon herb, in a white beer brand in Japan, has been cited as an example. Delhi-based Boer 360 has the chamomile plant as its ingredient.

 

Like the water from the river Ganga, Himalayan water has an emotional connection with Indians, and using the natural spring water from the Himalayas as the main ingredient in several Indian craft beers is a new trend. Indian breweries like Elfa and Kati Patang are discovering Bhutan now and selling  ‘Made in Bhutan’ beers. Bhutan scores ahead in contract brewing, bottling and procuring licenses.  

Competing with the monoliths

The craft beer segment is competing with the traditional beer industry and  India’s beer major, UB, had no other option but to roll out its first craft beer, the Ultra Witbier under its popular brand, Kingfisher. UB in its annual report had to admit that the "beer industry has evolved from manufacturing standard beers to flavoured and variety beers' '. The beer industry would reach 2,025.9 m litres in 2024, representing a volume of CAGR of 0.8 % from 2020, according to the Mintel Beer Report for India. The strong beer industry has been doing extremely well with a market share of 82% with the craft beer industry in India and internationally doing no less, with a CAGR of 304% during 2014-2018.

The craft beer segment is expected to grow at a rate of 108.59 % in terms of volume during the next four years. According to  BMI Research, craft beer sales are growing at a rate of 20% per year. India’s craft beer industry has acquired close to 2-3 % of the country’s beer market share. 

At the same time, GlobalData's 2023 forecast for the beer and cider category in India has been revised from USD 12.9 billion to USD 10.7 billion. Around 21% of Indian consumers drink craft beer, such as Bira 91, Simba, White Owl, Kati Patang, Medusa, White Rhino, and Brewbot — all startups.

Growlers during COVID

 

The craft beer industry continued to grow, though mildly, during COVID-19. For instance, Kimaya Himalayan Beverages, founded in 2018, launched two craft beer brands in September 2019 with an investment of INR 15 crore (USD 20 million). It sold over 1,50, 000 cases in just six months. Even after being hit by COVID, it managed to generate a turnover of INR 64 crores (USD 8.5 million) from 1920-1921. During the same period, Medusa craft beer grew at a pace of 70 % and Simba with a 40% market share in the premium/craft beer category. Simba had a 20% growth in Q3 of last year. According to Ishwaraj Singh Bhatia, co-founder of Simba, the limited outdoor movement during COVID  drove people to explore new brands; people who moved from metros to their hometowns, wanted the same brands, leading to a surge in tier-2 cities. 

According to Yourstory, for FY 2021, White Owl’s sales volumes declined 30%. But it saw a recovery later and a 60% increase in sales was registered compared to Q4 of the previous year. In FY20, Delhi-based Bad Monkey clocked sales worth INR 69.3 crore USD 93 million), and in the COVID-stricken FY21, it recorded INR 59.31 crore ( USD 79.6 million), a drop of 14%. Bira 91 didn't see much decline. Although the second wave of COVID-19 in 2021 placed craft beer brands in a vulnerable situation as last year, they are now more optimistic.

The craft beer breweries, during COVID, pivoted their business models by opening growler stations and offering home delivery across India.

“In the initial days of the pandemic we were at a standstill like all the other breweries, since we only served the beers at our taprooms and bottled craft beer wasn’t yet an option for us,” Tresha Guha, brand manager, Doolally, said. After the first three months of lockdown, the government granted permission for the microbreweries to sell craft beer growlers." The second lockdown got us back to where we were initially during the pandemic. Now slowly the sector is getting the lift as things are opening up,” she said.

The challenges ahead

Post-COVID, the major concerns for the industry are going to be the excessive state government regulations, the licensing imbroglio and the limited infrastructure.

The main raw material used for making and packaging beer is wheat or barley, glass and aluminium. The prices of these commodities are soaring in the market. Barley prices have surged 65% in the last one year due to the Russia-Ukraine war, as Ukraine exports 18% of barley, globally. 

Belinda D’Souza, community manager at Doolally feels that there are two major challenges the industry is facing at the moment: One, consumers who choose to compromise on quality by opting for commercial beer instead of craft beers because they are cheap. Two, regulations that restrict the promotion of craft beer in the states and the country. The industry needs care, support and nurture from the states and central government. Only with the support of the government, the smooth running of microbreweries will be guaranteed. The two challenges depend on each other; commercial beer is cheap because they are produced on a large scale and also promoted and marketed. The same doesn’t work with craft beer. 

Anand Morwani, co-founder of Brewbot feels that there are two major challenges the industry is facing at the moment: One, consumers who choose to compromise on quality by opting for commercial beer instead of craft beers because they are cheap. Two, regulations that restrict the promotion of craft beer in the states and the country. The industry needs care, support and nurture from the states and central government. Only with the support of the government, the smooth running of microbreweries will be guaranteed. The two challenges depend on each other; commercial beer is cheap because they are produced on a large scale and also promoted and marketed. The same doesn’t work with craft beer. 

The politicians never want the industry to grow under their belt, and the Kerala cabinet on February 25, 2020, decided against the proposal to set up pubs and microbreweries. Thus, if craft beer startups have to survive and thrive, India will have to open up more and change its liquor policy. The states are hands in glove with the commercial beer satraps, since the bonhomie is mutually beneficial.

© Ramachandran