Beer consumption in India

Executive summary

2009 was highly dynamic in terms of new brand launches, with United Breweries Ltd and
Carlsberg India Pvt Ltd expanding their domestic premium lager portfolios by launching
Kingfisher Ultra and Tuborg, respectively. Brands such as Tennent’s, Kingfisher Blue and Indus
Pride, which were launched in late 2008, became available in outlets nationwide in early 2009.
Moreover, brands such as Tiger, Carlsberg and Budweiser saw lower prices and greater
availability in India, as their new domestically-produced stock replaced imported SKUs in 2009.
Niche products, such as dark beer, also saw greater availability, with the launch of ales from the
Little Devil’s and Coopers portfolios in 2009.

2009 total volume growth was two percentage points lower than the total volume CAGR
recorded over the review period. Although 2009 volume growth was higher than that in 2008,
growth rates did not bounce back to the highs seen in 2006 and 2007. While the long summer in
2009 buoyed the beer market in North and West India, sales growth in the key southern states,
such as Karnataka, Andhra Pradesh and Tamil Nadu, was adversely affected due to taxation-
related price rises in Karnataka and the withdrawal of United Breweries Ltd’s and SABMiller
India Ltd’s brands from Andhra Pradesh in first half of 2009.

Domestic premium lager witnessed the fastest volume growth in 2009. Both domestic and
multinational players were very aggressive with brand launches and promotional activities in
2009, and the category benefited from consumers trading down from imported premium lagers to
domestic premium lagers. Moreover, brands such as Tiger, Carlsberg and Budweiser, which
were available as imports in several cities in 2008, saw a sharp rise in availability and
accessibility as domestically produced SKUs of these brands were rolled out nationwide in 2009.
These international brands created additional buzz for this category in that year.

The average unit price of beer rose only marginally in 2009, by about 1%. Overall prices
remained stable in most of the states in India. Nonetheless, fluctuations in taxation policy did
drive up prices in some states, including Karnataka and Delhi-NCR.
Imported premium lager grew by 12% in 2009, which was significantly lower growth than the
review period CAGR of 18%. Imported premium lager growth was adversely affected by the
dual effect of a rise in import taxes in key markets, such as Maharashtra and Karnataka, and the
economic uncertainty in the first half of 2009, which resulted in depressed on-trade sales. With
major international brands, such as Carlsberg and Budweiser, being priced on a par with
domestic brands, such as Kingfisher, consumers had access to several aspirational international
brands within domestic premium lager, thus growth in imported premium lager sales slowed
down.

Domestic standard lager showed the slowest total volume growth in 2009, of 10%, as consumers
shifted from regional standard brands, such as Thunderbolt, towards more high profile and
aspirational brands, such as Kingfisher.

81% of volume sales of beer are derived from off-trade sales, as beer consumption is most
common during social and family gatherings at home. Moreover, beer is priced on a par with
spirits in on-trade outlets, and many consumers prefer consuming spirits with mixers, which
provides a quicker “high”. Imported premium lager is dominated by on-trade sales, as these
premium brands are not stocked by the majority of off-trade outlets. Draught beer is also
restricted to niche premium outlets, due to the low awareness of this format and higher costs
involved in setting up draught facilities in outlets. With Haryana legalising the setting up of
microbreweries in 2008, at least two such outlets were operational by mid-2009. The expansion
of the microbrewery format in the affluent towns is expected to raise the profile of draught beer
in India.

Glass bottles of 330ml and 650ml are the dominant type of beer packaging available in India.
However, canned beer continued to see strong volume growth in 2009. Canned beer volume
sales grew by more than 20% in India in 2009. 500ml beer cans are more popular than 330ml
cans. In February 2009, Rexam HTW, a joint venture between Rexam Plc and Hindustan Tin
Works Ltd, signed an agreement with United Breweries Ltd to supply 500ml cans. In May 2009,
Can-Pack India Pvt Ltd started its operations in India, with the aim of supplying 65% of its one
billion can annual output to the beer industry, and gained contracts with most of the major beer
players.

Production, Imports and Exports

The domestic production of beer is on the rise, with official statistics reporting an 11% increase
in domestic beer production in 2008, which is in line with the 12% growth in volume sales of
domestic lager in 2008. In October 2009, Carlsberg India Pvt Ltd started work on its new
greenfield brewery in Medak (Andhra Pradesh), which is expected to have a production capacity
of 4 million litres per month and start operations in late 2010.

Exports of beer out of India declined marginally in 2007, while imports rose by 39% in volume
terms. This reflected the robust growth in sales of imported premium lager in India. Major
imported brands in the latter part of the review period included Heineken and Corona in
imported premium lager, and Hoegaarden in dark beer. Domestically produced beer is mainly
produced for local consumption and only a negligible amount is exported to neighbouring
markets. In 2008 and 2009, imports are expected to show strong growth, as players have
increased their push behind imported brands, such as Stella Artois and Peroni Nastro Azzuro.

Imported beer accounted for less than 1% of beer volume sales in 2009. Imported beer is only
available in niche premium on-trade outlets, where it is sold at significantly higher prices than
domestically-produced beer, due to high import duties. In addition to more widespread
distribution and lower price points, domestic brands also have the benefit of higher brand recall,
due to high-profile marketing activities.

Apparent consumption levels grew by 24% in 2007 over the previous year, to reach 390 million
litres. This is less than one third of the reported market size of 1,193 million litres in the year.
This discrepancy between the calculated apparent consumption and total market size is chiefly
due to problems associated with data collection by government bodies. Companies often
underreport actual production figures. In addition, many units will be sold via both official and
unofficial channels, such as with the illegal imports of beer into prohibition states.
Beer Demand: Past & Future

Year Kls
1990-91 201
1991-92 208
1992-93 224
1993-94 305
1994-95 272
1995-96 362
1996-97 391
1997-98 422
1998-99 456
1999-00 493
2000-01 528
2001-02 565
2002-03 632
2003-04 676
2004-05 723
2005-06 770
2006-07 820
2007-08 875
2008-09 930
2009-10 985
2014-15 1320
 
Market Structure
Market Segmentation
Segment Share (%)
North 12
East 2
West 37
South 49
Standard Beer 45
Strong Beer 54
Premium, Diet 1
 

Leading Brands

Kingfisher, Heywards 2000, Heywards 5000, Kalyani Black Label, Kalyani Strong, Golden Eagle, Black
Knight, Pelican, London Diet, Thunderbolt, Kaiser, Pilsner, Haake Beek, Lal Toofan, Castle Beer, Hi-Five.

Market Growth Rates

 
1990-91 - 1996-97 11.70%
1996-97 - 2001-02 7.60%
2001-02 - 2006-07 7.70%
2004-05 - 2009-10 6.40%
2009-10 - 2014-15 6.00%
 

BEER  MARKET : FEATURES

 
Market Characteristics Trade

 Beer packed in  650,750 & 1000 ml
glass  bottles; usage of (330 ml) cans
minimal
  Preference in the Indian market for
strong beer
  Promotions and sponsorships
(sports,     musical events) to promote
brands
 States’ prohibition policies govern
trade sales for beer
 Multi layer trade channel structure 
 Beer sold through the same outlets
as IMFL
 Institutional sales of beer to star
hotels, large restaurants, bars/
pubs

 
Regulations

 Subject to licensing under Industrial  (Development

and Regulation) Act, 1956
 Cap on licensed capacity; special license  for
expansion
 Beer policy; announced in 1994 to augment industry
growth
 Plethora of duties and taxes from bottling to sales
stage; varying from state to state.