A little over five years ago, the senior management at United Breweries (UB), was finding it hard to conceal their excitement. The latest offering, Heineken beer, was now officially in India and a presence in the growing premium mild beer segment beckoned. With its Kingfisher range, the country’s largest beer company was all set. After all, Heineken, with its iconic green bottle and red star was among the largest brands globally.
Today, the brand has come a cropper with a market share of less than 1% in the ₹12,000 crore beer market. Heineken is not easily available and its equity, questionable. That is ironic considering UB’s strong distribution network has hugely helped its flagship brand Kingfisher to retain a position of dominance. Today, the company accounts for close to 50% of the beer market (Kingfisher and its variants bring in over 41%) by volume, according to Euromonitor, and Heineken’s accompanying indifferent performance is a serious cause for concern. And by the looks of it, it may just be the beginning of an uphill battle for the iconic brand in India.
For UB, the first big challenge came from Carlsberg, which was launched in India in 2007. UB responded with Kingfisher Ultra in 2009. Ultra encountered some level of success. This was soon followed up by the launch of Kingfisher Ultra Max in 2015 — all these are mild beers. Kingfisher Buzz, a brand to take on Bacardi, was launched early this year. Therefore, the plan has been to extend the Kingfisher brand only and do nothing with Heineken. Therefore, at every stage when competition came in or a new brand had to be launched, it was done through Kingfisher only and not Heineken
Though Heineken owns 43% in United Breweries, the key functions in the organisation starting from sales and marketing all the way to the MD are basically old timers and have worked with Vijay Mallya. They are tuned to thinking like UB employees and do not look at Heineken as their own brand. Heineken is at best a high-end premium brand that reaches out to a small segment of the market and nothing more. A different approach with Heineken will take place only when — this strategy/mindset changes or maybe a new management altogether takes charge.
So far, Heineken, that was launched in India in 2011 has done nothing to correct that. The buzz is that a changing market dynamic will get them to correct that mindset and now push Heineken aggressively and simultaneously bring in more brands from its international portfolio.
Heineken’s entry into India was courtesy its global buyout of Scottish & Newcastle in 2008, that held a substantial stake in UB. For a few years now, there has been a clear shift in beer-drinking habits with consumers more than willing to experiment with premium mild beers. There were few options in mild beer since 90% of the volumes came from strong beer, those with an alcohol content of more than 5%. Pradeep Gidwani, the former MD of Foster’s and Carlsberg’s Indian operations, speaks of imported beers accounting for just 2% in volume terms today but 6-7% by value. “It can very easily increase to 10-15% driven completely by mild beer.”
It is this segment that Heineken should logically have dominated. By contrast, Budweiser, a brand that Anheuser-BuschInBev (AB InBev) owns, after a slow start in India has a market share of 2.3%, while Carlsberg accounts for 4.5%. Both these brands set up operations from scratch and did not have the distribution might of UB. In that scenario, it is hard to comprehend why Heineken has failed to impress.
Randip Singh Munjral, owner of Shah & Co, one of Mumbai’s largest liquor outlets says, “UB has just chosen to ignore the Heineken brand.” He points out that Heineken had a 330 ml can when it was launched, which was phased out quickly. “That was a big mistake since that variant alone brings in at least 25% of volume. It was barely 15% three years ago,” he explains. Today, Heineken is sold only in a 500 ml can and the more traditional 650 ml bottle. Besides, UB has slashed retail margins from 12.5 % earlier to 8.5%, which is equal to what rivals offer. The buzz is that UB is not pushing volumes with the trade, focusing all its attention on Kingfisher instead.
Now, with the acquisition of SABMiller by AB InBev, existing brands in India like Haywards, Knock Out, Miller High Life and Budweiser will come under a single ownership. AB InBev’s brands like Corona, Stella and Beck’s are already imported and sold in large stores and restaurants. With this deal in the bag, UB will need more than just Kingfisher to stem its fortune from turning for the worse. “The premiumisation of beer in India is a reality and Heineken will really need to get its act together,” says Gidwani. So far, Kingfisher’s foray in the premium segment has met with very limited success and that is only leaving the door wide open for rivals. With a brand like Heineken, UB can scarcely afford to do that, especially when other options like microbreweries are more than just a fad. This could just be the time for it to finally wake up and take note of the crisis on hand.