United Breweries to enter craft beer market by year end

BENGALURU:

United Breweries

(UB) said it will enter the

craft beer

market towards the end of this year to address the small but growing segment of the industry which has appealed to the young millennial customers of cities with higher disposable income.


Craft beer, though niche, has gained popularity in India with companies such as B9 Beverages, which owns the

Bira

91 brand and White Rhino taking the lead but the volume is extremely small, roughly about 1% of the nearly 3 billion litre beer market in the country. A large number of microbreweries have opened across the country, helping consumers to develop a taste for this kind of beer with low alcohol content.

“There is a potential. It is appealing to a different consumer segment and premium brands and people are looking for something different. We have recognised this and will come out with our own offering later this year,” UB chief executive officer Shekhar Ramamurthy said.

The move by UB, known for its popular Kingfisher beer, will put in direct competition with New Delh-based B9 Beverages which has annual production of 300,000 barrels of five different beers and revenue of about $30 million. It has also raised nearly $30 million from investors led by Sequoia till last year.

“The further rise of craft beer is expected to be the main trend in the category over the forecast period. The huge success of B9 Beverages’ Bira 91 is expected to further encourage many global players to introduce their own craft beers. Additionally, with this category being largely underdeveloped, many new players are also expected to emerge,” market research firm Euromonitor said last year.

Ramamurthy said he expects the beer industry to grow at mid-single digits for the next few years with UB poised to grow twice as fast as the market helped by strong presence across categories such as strong, mild and premium. “We are by far the market leaders with 52% share. The Kingfisher Ultra and Ultra Max, for example, are growing at about 40% year over year.” He, however, declined to comment on the individual market share held by the 7 brands.

Growth in the industry has been stymied over the last few years due to duty hikes across various states leading to price rise, government policies such as demonetisation and the highway ban on liquor and an overall sluggish economy. While the industry grew at 6% in the third quarter, UB, controlled by Dutch beer giant Heineken, grew at about 12% in the same period.

“The more recent past up to last year there was even a small decline of the industry and that is all related to the regulatory framework or regulatory environment we are working in, with constant excise increases, and issues related to the availability of beer. So there are some regulatory/excise related issues that do continue to hinder further growth,” chief financial officer Steven Bosch said in an investor call in February.

“Such headwinds are behind us and if policies stable then the industry will grow,” said Ramamurthy.

Ready to Master Stock Valuation? ET’s Workshop is just around the corner!