Foodindustryindia.com interviewed Mr. Sundeep Kumar, director corporate affairs, SABMiller on the reasons behind the stupendous growth in the Indian beer market, future prospects and roadblocks.

      Foodindustryindia.com: The Indian beer industry has recorded double digit growth in the last couple of years. What could be the reasons.

      Sundeep Kumar: Chandigarh, Punjab and Haryana have been largely responsible for this as a single regulatory change freed pent-up demand for beer. The governments there changed the beer distribution system from auction to licencing which brought the retail price of beer down making it profitable to stock beer. Punjab grew by 500% and Chandigarh, 300% in a single year. That kind of growth has not happened in any other state.

       Foodindustryindia.com: What is the real growth then.

      Sundeep Kumar: The real growth is around 15%-17% per year. It falls down if there are negative interventions and rises if there are positive ones. There was an interesting study by NCAER (National Council for Applied Economics Research) which said that the income elasticity of beer is 1.7 and price elasticity is -3. This means that if GDP grows by 10%, beer consumption will rise 17% and if price of beer goes down 10% then demand will rise 30%. Also, availability of beer has a direct correlation to growth. If the retail outlets double, demand in turn will grow in equal proportion.

      Foodindustryindia.com: What is your market share in the Indian market and what is your production volume.

      Sundeep Kumar: At the moment we are capacity stressed. In fact, all beer producers are. Focus now is on increasing capacity. Our capacity is 42 million cases from 10 breweries and 3 contract breweries. Our market share is 37% and we are the second biggest beer manufacturer in the country after U.B.

      Foodindustryindia.com: What are your popular brands and are you introducing new ones.

      Sundeep Kumar: Our brands include Castle, Haywards, Fosters, Royal Challenge and Knockout. We have several local brands which are popular in certain states.

      We have recently brought in two beers in the premium segment- Peroni, which was introduced in Mumbai and Haywards Black, a stout beer similar to Guinnes as we believe the Indian market is open to premium beers. We are quite confident of Haywards Black doing well as this is the first real innovation in the Indian beer market in a long time.

      Foodindustryindia.com: Other beer manufacturers are betting big on diet beer. What are your plans in this direction.

      Sundeep Kumar: Quite the opposite, our focus is on strong beers (those with relatively higher alcoholic content) as this represents 70% of the Indian beer market. Our best sellers are Haywards 5000 and Knockout which are strong beers. Consumers in India are not really making a brand decision. They go to a liquor store and ask for “strong” or “regular” beer or specify the price as stronger beers are priced higher than regular ones. Also, unlike in many other parts of the world, beer is not the most consumed alcoholic drink. In India, the honor goes to Whisky. So beer is not yet a high volume purchase.

      Foodindustryindia.com: How difficult or easy is it to introduce a new beer brand in India considering that you cannot advertise alcoholic beverages in the Indian media.

      Sundeep Kumar: It is a major challenge as in the absence of access to advertising, we have to rely on promotions and events and even surrogate advertising as mineral water having the same name as the liquor brand. This is the reason we acquired the Fosters brand for $300 million and also beer brands owned by Shaw Wallace such as Royal Challenge and Haywards. It is easy in India to set up a brewery but to market the beer it produces is the difficult part as each state has its own set of constraints.

      Foodindustryindia.com: One has heard of a number of laws that hinder the liquor trade in India. Can you elaborate some that particularly affect the beer industry.

      Sundeep Kumar: There are a number of them. For instance, you cannot sell any alcoholic beverage in Delhi unless it has achieved sales of certain volumes elsewhere. Now how can a new brand achieve such figures. So it takes years before a brand can be sold in Delhi. Some states have taken over the liquor distribution trade. I as a manufacturer cannot set the price. The state government’s liquor distribution arm decides at what price it will buy. Some states have separate bottling tax. There is a rule that a brewery cannot run at night. At sundown, the excise tax official locks up the place and hands back the key in the morning.

      Foodindustryindia.com : There was a move to de-link beer and wine from spirits and make them available in supermarkets. What happened to that proposal.

      Sundeep Kumar: The Ministry of Food Processing Industry had proposed to make beer and wine more easily available and remove some hindrances in their manufacture and distribution. But this is yet to take effect. Regarding beer sales in supermarkets, it is possible in Delhi and Mumbai. But the licence fee is so high, supermarket owners don’t think it would be profitable for them to stock beer and wine.