Alcohol Beverage Industry is Not for Those Who Seek Ease in Business, Says Indian Beer Maker

When I entered the beer space, there were hardly any new brands. At the time, only one or two startups, like Bira and Simba, were making their mark. The market was mostly ruled by MNCs (Multinational Corporation). Innovation in this space has been minimal.

For instance, there’s a lack of diversity in packaging and flavour profiles. Another noticeable gap was in the alcohol strength of beers available. Most beers in India were either quite mild at 4.5 per cent ABV (alcohol by volume) or very strong at 7-8 per cent ABV. I saw an opportunity to introduce options in the 5-7 per cent range, where beers could still be robust without being labelled as "strong."

When interacting with consumers, it became clear that in India, the concept of a "kick" is a major factor influencing beer preferences. To cater to the demand for a faster "kick" at a nominal spend, I decided to launch a brand with a 5.9 per cent ABV. The unique aspect of Medusa was precisely this: identifying and addressing the gap in the market.

A 5.9 per cent ABV strikes a balance—lower alcohol content increases drinkability. With higher drinkability, consumers tend to drink more, achieving the same level of "kick" as a 7 per cent ABV beer, but in a more enjoyable and sessionable manner. This approach resonated well with the target audience. We launched our product with a unique aroma and a distinct taste profile. By positioning ourselves in the middle, we managed to draw traction from both ends.

Our focus is on building a strong brand rather than rushing to unlock markets Pan-India. Expanding too quickly can complicate supply chain management, so we prioritise regions where we are seeing good traction.

Currently, we’ve planned to enter Andhra Pradesh, which will serve as our gateway to the southern market. We’re partnering with a local brewery to produce our beer directly within the state.

Additionally, we’ll be unlocking Assam, which will open the doors to the Northeast. We’ve also partnered with a brewery in Bhutan to launch a new brand that will be brewed locally. One of the main reasons for this move is the availability of exceptionally high-quality water in Bhutan, particularly spring water, which is ideal for brewing.

Beer is growing at a 12 per cent CAGR (compound annual growth rate), compared to spirits at 8 per cent. This indicates that beer consumption is increasing at a faster rate. The younger generation is becoming more health-conscious. Since beer has a lower alcohol percentage, it is perceived as a comparatively better option I would say.

India, with a median age of 29, has one of the youngest populations compared to other developing and developed nations. On top of it, rising disposable incomes are enabling people to spend more on lifestyle products like beer. Urbanisation has significantly boosted beer consumption.

Beer is also an infrastructure-linked product, as it is typically consumed chilled. In the past, the lack of infrastructure, such as reliable electricity and refrigerators in rural areas, limited beer consumption. However, with urbanisation and improved infrastructure, including widespread access to refrigeration, beer consumption is now on the rise.

India will always have a significantly lower per capita consumption due to its huge population. The current per capita beer consumption is currently 2.1 liters, where the global median is 32 liters. If this figure doubles to 4 liters, the industry will struggle to meet the demand due to limited capacities.

Moreover, if per capita consumption rises further, say from 4 to 6 liters, the industry will not even have enough water to brew the beer.

In India, 85 per cent of the market is off-trade, while only 15 per cent is Horeca (on-trade). The dynamics of on-trade sales are influenced by several factors.

First, excise policies vary from state to state, affecting whether Horeca can directly order from companies or must go through retail or wholesalers. Additionally, the relationship between Horeca establishments and wholesalers plays a significant role, particularly in terms of credit availability.

Second, many companies are reluctant to extend credit to the on-trade market due to the high turnover rate of restaurants. Given the volatility in this industry, providing credit can be risky for companies.

Horeca industry is also facing challenges from cultural shifts. Drinking is no longer seen as a taboo in homes, and as a result, people are increasingly purchasing alcohol from retail outlets and consuming it at home. The rise of the house party culture has significantly contributed to this trend, with families being more accepting of drinking in a home setting.

The craft segment is not growing. It was 0.9 per cent in 2017-18 and remains at just 1.1 per cent. There’s hardly any growth in craft beer.

The reason for this stagnation is that craft beer is not necessarily linked to premium pricing; it’s more about flavoured, small-batch brews. However, consumers in India seem to prefer traditional brewing styles like lagers and pilsners over craft beers.

While the premium segment is growing, craft beer, on the other hand, remains stagnant. This trend is also observed in the spirits market, where premium offerings are gaining popularity, but craft variants are not. In regular consumption, people tend to favour traditional styles of both beer and spirits. Flavoured drinks, like rose-flavoured spirits, aren’t something people want to drink every day.

Additionally, many flavoured drinks contain added sugar, and with growing health consciousness, consumers are increasingly mindful of their carb and sugar intake. Many don’t want to increase their carb load by consuming sugary alcoholic beverages.

One of the biggest barriers in the alcohol beverage industry is the state-wise policy. It feels like working in 27 different countries. Each state has its own set of rules. Other barriers include high taxation and capital requirements. Overall, the ease of doing business is simply not there in this industry.

If you’re looking for ease in business, the alcohol beverage industry is not for you. While it can be lucrative and consumption is growing, it requires a lot of competition and effort. There’s definitely a lot of fun in doing the business, but it’s not easy. You also need to be very street-smart to start in this business. It involves dealing with a maximum number of government departments compared to any other industry.

Yes, the younger generation in new India is increasingly accepting alcohol as a common beverage, but there’s still a lingering taboo. However, data from Gurugram shows a shift. Since wine shops were allowed to stay open until 4 am, the government has reported a decrease in road accidents, rapes, and road rage. Crime rates have actually dropped.

The key is that once alcohol is easily accessible, consumption doesn’t necessarily increase. People consume in moderation because they know it’s always available, eliminating the insecurity that often leads to binge drinking. When something is always available, people can approach it more calmly and responsibly.

Other state governments should take note of this approach. The more you make alcohol accessible, the lower the crime rates will be. Keeping it hidden or treating it as a taboo only fuels curiosity and encourages undesirable behaviour.

As an industry, alcohol is a significant cash generator for state governments, and opening it up can create a more regulated and responsible consumption environment.