India: Beer makers in expansion mode despite challenges

The beer market in India has been gaining momentum over the last few years. While the industry is concentrated among leading players, new and regional players brands have been actively expanding their retail presence as well as widening their product portfolio to capture a share of India’s lucrative beer market, the Economic Times reported on June 26.

Talking to ETRetail, Jammu-based Devans Modern Breweries, which is present in key cities across the country, said that it plans to extend its footprint shortly to Goa, Maharashtra, Punjab, and Tamil Nadu. The company plans to increase its beer production capacity to 2 lakh KL by the end of 2023. It opened a new distillery at Samba last year and is in discussions to enter into production tie-ups with multinational companies.

One of the earliest entrants in the craft beer category, Simba Beer is aiming to increase its market penetration in its current 16 markets as well as enter into new markets. “Our focus right now is creating mass availability at mainstream retail chains and outlets,” said Ishwari Bhatia, co-founder, Simba Beer.

Kimaya Himalayan Beverages owned craft beer brand, BeeYoung too aims to strengthen its foothold in North India by expanding into new regions. Another aggressively growing player in the market, Seven Rivers, an AB InBev brand, is focusing on expanding its microbrewery presence and retail distribution network, in an attempt to establish itself as a prominent craft beer brand, said Vineet Sharma, VP, marketing, AB InBev India.

Expanding in terms of product portfolio, beer makers are banking on the shift towards low-alcohol and premium beers in the country.

“The next big trend in the Indian beer market revolves around the exploration of unique flavours, the introduction of healthier option (low alcohol beers), and the emphasis on sustainability,” stated Simba Beer’s co-founder Bhatia.

Moonshine Meadery, which makes meads by fermenting honey, along with fruit and spices, says that it sees beer as a key competitior because consumers are increasingly switching away from flavourless, bitter beers to meads.

Khemani Group’s vice chairman, Amit Khemani too highlighted the ‘escalating demand’ for low or no-alcohol beers, driven by health-conscious consumers.

In addition to healthier beers, brands see the trend of premiumisation catching up in the industry.

Prem Dewan, MD, Devans Modern Breweries, commented that the entry of new discerning consumers with high disposable income would result in huge industry growth, especially I the premium low alcohol category. AB InBev’s Sharma said, “80% of India’s spirits market is in the value segment, and we see a huge opportunity for premium offerings in line with our overall premiumisation strategy.”

However, despite an attractive opportunity, industry players see high input costs and complexities in taxation as major challenges and entry barriers for new entrants. “In India, unlike the rest of the world, drinks are taxed based on volume rather than alcohol content. Furthermore, each state has its own set of rules and regulations governing the taxation, sale, and distribution of alcohol,” said Sharma from AB InBev, adding that the inequitable tax system, with a high excise duty on low alcoholic beverages like beer, has prevented the industry from reaching its full potential.

Devans Modern Breweries MD too shared similar thoughts. “…alcohol in beer is taxed much higher than the alcohol in IMFL across all States leading to much lower consumption,” he pointed out.

Abhinav Jindal, CEO and founder of Kimaya Himalayan Beverages, said that as a homegrown brand, the company faced challenges due to GST applied to all inputs, including raw materials and packaging materials. As the beer industry is ultimately subject to state government taxation as well, beer makers are unable to claim any input tax returns on the GST paid for inputs, resulting in additional manufacturing costs.

Additionally, Jindal believes that exorbitant licensing fees and duty structure, related to brand registration and permissions to sell, make it financially impractical for new entrants to establish their presence.

Highlighting another roadblock, Khemani Group’s vice chairman stated, “One notable challenge lies in the availability of breweries in pivotal states where we can meticulously craft and package our product.” This necessitates a strategic approach to ensure efficient production and seamless market access, he added.

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