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Faculty Marketing

  
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c e Indian beer market was estimated to be 6.7 million ectoliters ( l) in 2002-03. As seen in figure 1,
beer consumption as been growing rapidly at a CAGR (Compound Annual Growt Rate) of 7 per cent
over t e last 9 years, w ile growt in 2002 -03 was 11 per cent.

Indian growt rates compare favorably wit t e global beer industry, w ic grew by about 2.6 per cent in
2001-02 Apart from providing strong growt , India also provides attractive profit margins due to t e
consolidated nature of t e industry ± a comparison between C ina and India, for example, reveals t at
t e C inese beer market is marked by intense competition, wit several players being marginalized. In
C ina t ere are about 400 brewers, of w ic t e top 10 account for only 45 per cent of t e market. c is
as resulted in low profit margins for t e C inese bee r players. In contrast, t e top two beer players in
India account for about 75 per cent of beer sales in India and t e industry stands a c ance to see more
consolidation in t e near future. c e effect of t is consolidation can be seen in t e fact t at beer prices in
India rarely go down wit t e competitive pressures of new product or brand launc es. In t e past,
w enever beer prices ave gone down, it as been due to eit er t e lowering of duties by t e
government or t e deregulation of distribution (leadi ng to lower margins for t e distribution c annel
partners). In neit er scenario ave t e margins or revenues of beer manufacturers been affected. Ê

Per capita consumption in India is overing around a measly 0.5 litres per annum. c ese figures pale into
insignificance if one compares t em wit t ose of Czec Republic t at as t e ig est per capita
consumption of 156.9 litres per annum (see box)

Per capita consumption is directly related to t e taxation, according to an industry observer. For instance,
in Ma aras tra t ere is a direct 100% excise duty on Beer. An equivalent 650 ml bottle is available for
approximately Rs 8 in C ina. W ic is w y t e per capita consumption in C ina is a ig 16 litres per
annum. Ê

c e Indian beer market as been growing rapidl y over t e last 10 years, due to t e positive impact of
demograp ic trends and expected c anges, like:

Π


!India is ome to nearly one-sixt of t e global population and is one of t e most
attractive consumer markets in t e world today. Various researc studies ave s own t at a rise in t e
income levels as a direct positive effect on beer consumption. c e National Council for Applied Economic
Researc (NCAER) projects India's 'very ric ', 'consuming' and 'climbers' classes to grow at a CAGR of 15
per cent, 10 per cent and 2 per cent respectively. Wit t is growt in income levels, Indian beer
consumption is expected to continue growing, at t e very minimum, at t e growt rates witnessed in t e
last decade.ÊÊ

  

! As a consequence of t e ig birt rates prevalent until t e 1990s, a large

proportion of t e Indian population is in t e age group of 20 -34 years. c is age group is t e most
appropriate target for beer marketers. c is population trend will give a furt er boost to t e growt of
beer consumption in India.

Many global players are planning to enter t e Indian beer sector and t ey realise t at a partners ip wit
a local player is important to establis a successful presence in India in a s ort time frame.ÊÊ
  


!A deep-seated traditional social aversion to alco ol consumption as been a
traditional feature of t e Indian society. However, as urban consumers become more exposed to western
lifestyles, t roug overseas travel and t e media, t eir attitude towards alco ol is relaxing. Social abits
are undergoing a transformation as mixed drinks are becoming more popular. c e greatest evidence of
t is trend is t e increase in beer consumption among women. More and more women are consuming beer
± t e penetration in metropolitan areas is almost twice as ig as t e penetration in ot er large cities ±
implying t at t e greater tolerance towards alco ol consumption in metropolitan areas facilitates t e
consumption of beer. Wit increasing urbanisation, t i s acceptance is only going to rise.

Œ




! c e Indian consumer typically values an alco olic beverage on t e basis of its
'kick' factor versus its price. c e following two factors t erefore, affect t e market for beer. Firstly, as
most states do not ave a differential tax structure based on t e alco ol content, strong beer... Ê

As far as t e Lig t beer segment goes, t ere is no existing competition in t e market. However, a number
of well-establis ed brands, especially lagers, ave a significant market presence. C iefly ± Kingfis er -
India's celebrated malty draug t lager since 1857; voted 'c e World's Best Lager' in Stock olm and
C icago.

In India t e future of beer industry is very muc optimistic because:

1. India as predominantly a warm/ ot climate

2. c e beer-drinkers in t e country are muc younger t an t e average beer-drinker elsew ere in t e

world. c is makes t em more likely to carry t e brand wit t em for a lifetime.

3. Increasing exposure to beer and wine drinking, mainl y due to media and consumer mobility.

All t ese factors combined make t e scenario very promising for beer industry and are 'in sync' wit t eir
strategy for India.

UB (United Breweries Ltd.) is t e market leader in t e Indian beer market wit a 40% market s are. Its
flags ip Kingfis er brand alone commands 25% market s are. c e company as owever been focussing
on strong beer, w ic as driven growt . c e company introduced its strong beer, d
 


during t e year 2000 in t e selected market of Ma aras tra and Karnataka. c e move came as a reactive
move following increasing s ift of consumers towards strong beer, a trend started by S aw Wallace.
W ile t e overall market grew marginally by 2%, t e strong beer market grew at 8-10% during t e year
at t e expense of lager beer. c e market is now skewed towards strong beer wit more t an 60% of t e
market being strong beer market.

Beer mix today is approximately 60 percent lager beer and 40 percent strong beer. c is ratio was very
different 4 years ago. Over t e last four years strong beer as been t e fastest growing segment. c is
was completely usurped by S aw Wallace. As of today w ile S aw Wallace as approximately 28 to 30
percent of t e strong beer market, UB already as ac ieved 14 to 15 percent of t at strong beer market
and is growing very fast. It launc ed d
 

only in May of 2001. And once it is able to take
d
 

 national, it will try to matc S aw Wallace's market s are over t e next few years.

Apart from d
  , and Foster's Beer, t e ot er brands in t e Indian market are  
  
 

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 and,
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c e major brands w ic belong to large groups in t e industr y (apart from UB) are ± S aw Wallace -
%  
    !"""    #""" +

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 &
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Sout African Breweries India Ltd. - d
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 and & 
, a new brand t at was
launc ed in t e autumn of 2001 by SAB in Uttar Prades , C andigar and Himac al Prades .

Ot er possible competition ±Radico K aitan and beer international Interbrew ave formed a joint venture
to distribute Interbrew's Beck's brand of beer in India. c e premium lager beer segment in India will be
targeted. Radico as also announced t e launc of its international division.

c e beer-drinkers in t e country are muc younger t an t e average beer-drinker elsew ere in t e world.
c is makes t em more likely to carry t e brand wit t em for a lifetime. Also, as t e target audience
becomes younger, a lig t beer is expected to attract first-time drinkers, since it is muc milder t an any
of t e ot er beers in t e country.

A lot of new variants promise to gain prominen ce, but mainly in nic e urban segments. c e sop isticated
consumer w o drinks beer for t e experience and not to get drunk will lap up ice beer or lig t beer. In
urban centers, apart from first time users companies are also targeting women, w o as 't e times t ey
are a c anging,' are entering t e market for beer. Essentially, women s y away from beer consumption
because it is associated wit calories, and as traditionally been a buddy drink, associated wit pot-
bellied men sitting at bars and s ooting dart s. Ê

å
 
   

å   Ê

Categories Ê 1995 Ê 1996 Ê 1997 Ê 1998 Ê 1999 Ê 2000 Ê

BeerÊ Ê
0.5 Ê
0.5 Ê
0.6 Ê
0.6 Ê
0.7 0.7 Ê
Bottled Water Ê Ê
0.1 Ê
0.1 Ê
0.1 Ê
0.2 Ê
0.3 0.5 Ê
CSDs Ê Ê
1.0 Ê
1.2 Ê
1.2 Ê
1.5 Ê
1.6 1.8 Ê
Coffee Ê Ê
2.0 Ê
1.2 Ê
1.3 Ê
1.3 Ê
1.3 1.2 Ê
Distilled Spirits Ê Ê
0.3 Ê
0.3 Ê
0.4 Ê
0.5 Ê
0.6 0.6 Ê
Fruit Beverages Ê Ê
0.1 Ê
0.1 Ê
0.1 Ê
0.2 Ê
0.2 0.2 Ê
Ê
Milk 41.2 Ê 41.7 Ê 40.2 Ê 40.7 Ê 40.1 Ê 40.5 Ê
ceaÊ 49.7 Ê 50.9 Ê 49.2 Ê 52.5 Ê 48.2 Ê 44.2 Ê
Wine Ê Ê
0.0 Ê
0.0 Ê
0.0 Ê
0.0 Ê
0.0 0.0 Ê
Subtotal Ê 94.8 Ê 96.1 Ê 93.1 Ê 97.4 Ê 93.0 Ê 89.7 Ê
All Ot ers* Ê 631.9 Ê 630.6 Ê 633.6 Ê 629.3 Ê 633.7 Ê 637.0 Ê
cOcAL Ê 726.7 Ê 726.7 Ê 726.7 Ê 726.7 Ê 726.7 Ê 726.7 Ê
Ê
* Includes tap water, vegetable juices, powders, and miscellaneous ot ers. Ê

.(  

+




 "  !

1. Discuss t e rapid growt of beer industry in India in context of c anging consumer be avior.
2. W at is t e competitive scenario for beer industry in India? How it is beneficial for t e domestic
consumers?

3. W at will be t e suitable long-term marketing strategy for a beer manufacturing company in India?
W at factors s ould be kept in mind?

Additional Readings and References:

1. www.foolona ill.com/adlig tice. tml

2. www.etfoodprocessing.com/oct_nov2003/bev. tml
3. www.beerindustry.com
4. Marketing Management ± A text book by ICMRÊ
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×


 

BY Saabira Chaudhuri Tue Nov 20, 2007

Mmmmm Beer. There's nothing like a cold sip to wash things down smoothly. When recently, in passing, I asked a group people about their v iews on beer, I was offered a spectrum of different views: it's a
comfort factor, an every day drink, the beginning of (or perhaps the end to) a wild night out, a lazy Saturday afternoon in front of the TV, a frat boy's drink, and for some (like a loquacious group of old men
who ritualistically visited the pub I used to work at in London,) just a way of life.

Whatever its connotation for you, it's clear that beer, more than any other alcoholic drink, has a deeply entrenched fan following. A recent BBC article on beer got me thinking ± perhaps the lessons we
learn from beer can also be applied elsewhere.

The article lists 5 reasons as to why beer sales have slumped ± apparently they are at their lowest level since the
1930s.

3  There is a misconception that beer is less healthy, and more fattening, than other alcoholic beverages. But
studies have shown that beer drinkers and drinkers of similar volumes of other alcoholic drinks, gain the same
amount of weight around their stomachs (refuting the notion of the beer-belly.) The British Beer and Pub Association
argues that a beer with the typical 4.6% of alcohol is less fattening than wine, and significantly less fattening than
spirits, which contain 6 times more calories even without the sodas they are so often mixed with.

Dr Martin Bobak, an epidemiologist at University College London, argues that the idea that beer makes one fat stems
from the fact that less educated people show a stronger proclivity to drink beer. In the West the less educated one is,
the more obese one is likely to be, and hence, he relates beer drinking to education, and in turn to obesity.

The lesson here for everyone else is pretty obvious: people are becoming more and more health conscious. In an
age of gym memberships and organic foods, if yo ur product is labeled as having health issues, it could knock you out
of the game. Keep this in mind as your research, innovate and market.

 Over the years, pubs have boosted their emphasis on food, and as a result beer has suffered. People tend to
drink wine with their food over beer, plus nowadays people go to pubs not just to drink beer, but sometimes solely to
eat.

This is pretty specific to beer and pub food, but there is something of a takeaway: Changes in context matter.
Consider the bigger picture when you make business decisions. Is setting up a website going to erode your magazine
for instance? Is allowing customers to sit around and read at Barnes and Noble, or listen to music at Virgin going to
prevent them from wanting to make a purchase? A rise in something else's popularity, even if mandated by you,
could erode your own market, so look before you leap.

 Pubs have become more women -friendly, but sales of beer have not kept up with the increased clientele.
Women tend to avoid beer in favor of other drinks, due to cultural factors, and image association issues: beer is seen
as a "man's drink."

My thoughts after reading this -- unless you have a very specific target audience, make a conscious attempt to cast
your net wide. If your clothes aren't just for hipsters, your tofu not just for tree huggers, your social network not just for
teenagers and your beverages not just for men, well market yourself accordingly.


   The article collates several cultural reasons for beer's decline ± the decline of manual labor, the drink driving campaign of the 80s, the availability of beer in supermarkets coupled with
the rise of satellite TV at home, and a rise in club culture that has made the use of recreational drugs more common.

I don't really have much to say on this one: cultural changes will happen. Companies and marketers just need to be aware of, and possibly foresee, these -- in an attempt to engage in damage control or to
exploit potential opportunities.

 A quest to be more fashionable and adventurous, as well as an increasing range of choice in the beverages market, has also co ntributed to the slump in beer sales.

My take on this: You can't prevent other products in your market from mushrooming, but you can make an attempt to stay competitive by identifying, and where possible catering to, emerging trends, and
by innovating.

Something to be careful about however is the danger of taking a perfectly good brand or pr oduct and innovating just for the sake of a fresh look or a wider audience. (Tim Manners, one of Fast Company's
marketing columnists, wrote a post for us on this a few days ago.) Beer for instance is particularly hard to innovate with, and breweries could risk diluting their existing markets by attempting to do so. The
trick may be to leave the product untouched and attempt to influence consumer perceptions, or recruit new consumers, through smart marketing campaigns.
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