Call for More Cheer for Beer

Beer business in India is underdeveloped by any reckoning.The millstone around beer’s neck in India is really the perception that it is similar to and an add-on to liquor. It perhaps goes back to the time when beer and liquor were produced by the same companies and it helped them to have the same regulatory framework and operational structure. Also, having the same retail structure for beer and liquor is an issue. As such, the coming together of the brewing giants to constitute Brewers Association of India could not have happened at a more opportune time since behavioural changes at a macro scale need collective efforts of the industry. Given this context, Bishan Kumar speaks with Vinod Giri, Director General, Brewers Association of India (BAI), to know more about how the challenges around beer are being tackled and understand the strategies that will tilt the balance in favour of beer.

Between leading CIABC and BAI, which role has presented the greater personal challenge for you and why? Given your strong presence in the public eye, what is your unique strategy or USP for seamlessly transitioning between these influential trade organisations?

A comparison in this case is neither warranted nor possible. Each role has its own circumstances, own immediate challenges and own long-term priorities. When I came to CIABC, the immediate challenge was to stabilise it following the departure of a number of members and then nurture it back to strength in clarity of thought and its execution. Thanks to the commitment and support from the domestic industry, I can confidently say that I have left behind a strong CIABC. As regards the BAI, we are building a new association. While it has the backing of some of the world’s largest alcoholic beverage companies, we still have to put together, from scratch, a robust industry chamber that believes in a common roadmap ahead for beer and is aligned in delivering it. This involves a great amount of groundwork, resourcing and consensus building. I believe that advocacy is more strategic in nature. It needs an understanding about the goals, decision-making chain, points of influence therein, and an understanding of how those points can be triggered off. The rest lies in effective execution, customising and juxtaposing it in the given context. If one walks in with that clarity, the transition need not be anything but smooth.

What prompted the formation of the BAI and what specific objectives does it aim to achieve in advancing the beer industry in India? Will there be some synergies between BAI and the AIB (All India Brewers’ Association) for achieving a common objective?

Beer is globally the most dominant form of alcoholic beverage. It is widely perceived as moderate, more responsible form of alcohol acceptable as every day, every occasion drink. Whereas in India it is not so. Just to frame the context, beer sells little over 30 million hectolitres in India every year, compared to 420 million in China or 206 million in the US. Even Vietnam consumes 58 million cases of beer every year. Beer in India is not in the same league. But rising incomes, better awareness and increasing interaction with the rest of the world are now setting up India for a shift towards more responsible alcohol consumption, in line with the global consensus. The coming together of the brewing giants could not have happened at a more opportune time since behavioural changes at a macro scale need collective efforts of the industry. It helps that BAI is backed by the World Brewing Alliance (WBA), the global body whose members account for 70 percent of the beer sold in the world; which shares the belief in India’s massive potential for beer.

As the head of BAI, what do you perceive as the major challenges facing the Indian brewing industry today, and what steps do you believe are necessary to address these challenges and realise the industry’s full potential?

The millstone around beer’s neck in India is really the perception that it’s similar to and an add-on to the liquor. It perhaps goes back to the time when beer and liquor were produced by the same companies and it helped them to have the same regulatory framework and operational structure. Thus, even in recent times the laws in India are made for liquor and are tweaked here and there to accommodate beer in it. This is despite the fact that there is very little in common between liquor and beer. Even on the only one factor in common between the two, i.e. the alcohol content, there is massive difference of 43 percent upwards in liquor versus 5-6 percent in beer. That aside, there is nothing even remotely in common. Beer is, in fact, much closer to the soft drinks – both are low-value, high-volume products, carbonated, need chillers and cold supply chain, are sold in cans and bottles of similar sizes, consumed without additives, and share a younger demographic user base. Thus, the whole thought process around beer needs to undergo a fundamental shift to separate it from liquor and treat it more like a ‘harder’ soft drink. That’s the way it is in most of the world. Engineering that shift in India would bring us also on the same page with the world and open up massive growth potential for beer.

How do you view the fact that many states do not distinguish low-alcohol products like beer from stronger alcoholic beverages when setting tax rates? Is this disparity driven by intentional state policies, or are there other underlying factors? Additionally, what actions are the BAI taking to address this issue?

It is a legacy problem created by common beer and spirit makers of the past and thereafter carried through regulatory apathy and lack of understanding about beer. With BAI, the beer industry has now created a platform to educate regulators and convince them to view beer differently and regulate it differently.

Beyond the regressive tax regime, what are the key factors impeding the growth of India’s beer market despite its significant growth potential?

The same shift is needed in trade and amongst the consumers. Having the same retail for beer and liquor is an issue. Shared retailers for liquor and beer are less interested in stocking beer. Beer is a low[1]value and high-volume product, takes too much of storage space in the shop, and requires additional equipment such as chillers, which also consume electricity. It also has limited shelf life. In short, some retailers may find beer commercially less rewarding then liquor and may cut down on it. If neither the retailing requirements are common, nor the product profile is common, then why should beer be retailed along with liquor? Beer should have its own retail environment, more aligned with soft drinks.The industry also needs to re-educate consumers regarding the stark difference between beer and liquor. There is so much about beer that consumers have not been told, such as the art and intricacies related to beer making, its history, heritage, or even its consumption occasions, way of consumption, etc. Basically, we are looking at de-hyphenating beer from liquor and recreate it as a category of its own.

What strategies are major beer players in the country employing to appeal to consumers in tier II and III cities against the backdrop of cocktail culture and with low ABV drinks gaining traction?

Beer sales per se do not have much geographical skew, but the nature of beer sold has. As one travels down the population strata, sales pattern shifts towards stronger beers. This is not entirely unexpected. Large urban centres, with higher disposable income and wider awareness of prevalent trends, tend to support experimentation, innovation and discernment. Smaller towns tend to be more cautious in following that lead. However, the social media is now bringing the two closer. New exciting developments such as low alcoholic beers are larger city-centric in India but it is only a matter of time when they start percolating down to tier II and III cities of the country .

With the rise of smaller entrepreneurs launching local craft beer brands, how do you assess their performance in terms of market sustainability and growth potential? What factors will influence their ability to advance their market share in the future?

Craft beers, as the name suggests, are expected to remain limited in scale, or else they risk of losing uniqueness. However, the important role that they play, and are playing in India, is in helping build a beer culture, generating noise around beer, getting consumers explore the width and depth of beer offerings, and bringing brewing craft beer close to consumers where they can see it. It’s an important role, and I am certain they will successfully co-exist with large packaged beer makers.

How has the Indian beer sector positioned itself in terms of policies promoting responsible drinking, and the regulatory framework and investments for socio[1]economic benefits to gain attention and support from the government?

Beer is the dominant form of alcohol worldwide by a big margin and is seen as a more moderate, responsible choice. It is not clubbed with spirits in most part of the world. In India, due to historical reasons, the separation of beer from liquor has not taken place but we hope that soon India also will follow the global consensus of encouraging beer as the more responsible alcoholic choice. The Indian beer industry is also a big investor in India. A brewery typically needs Rs 300-500 crore worth of investment and provides jobs to around 750 people directly,on an average. Our members have 36 breweries of their own. That’s a lot of investment and employment. They have also been heavily engaged with local and marginalised communities to support farming yield management, remunerative procurement and water management. The imprint of beer on society is not just economic, but also social.

What are the main challenges currently affecting the beer supply chain in India, especially in terms of raw material shortages, transportation disruptions, and changing consumer demands? How are these issues impacting the industry as a whole? Additionally, what key areas of the supply chain need improvement, and how can stakeholders optimise to enhance efficiency and resilience in India’s beer sector?

Beer is a natural agricultural product in entirety. All it contains is cereal grains, hops, yeast and water. Therefore, anything that affects availability of cereal grains, especially barley, will affect beer output. Things which affect glass, paper, aluminium and fuel will also affect beer. Having said that, what makes the beer supply chain unique is its need for a cold supply chain. Beer is a poor traveller and it is best served fresh, close to the brewery. Long distance transportation in Indian heat can affect beer quality. Beer is served cold and inadequate availability of chillers in shops or on[1]trade affect the beer experience. These are the challenges that the industry is facing and is working on.