LANDSCAPE ASSESSMENT OF BEER MARKET IN INDIA

Executive Summary

Beer accounts for only 13%1 of the total alcoholic beverages market in India, however is
expected to grow at the rate of ~14.5% to reach total market volume of 4.4 billion liters 2
by 2018

Indian beer segment is divided into mass market, premium and super premium
segments. While the premium beer segment comprises mostly of strong beers (5 8%
alcohol), super premium segment is dominated by mild beers (~5% alcohol)

South India accounts for approximately 46% of the beer consumption, followed by
Western regions and Northern regions with 30% and 12% of share, respectively.

United Breweries is the largest seller with a market share of ~54%. Sab Miller and
Carlsberg are other prominent players

Super premium beer category comprises of mostly imported beers with total market size
of half a million cases. The target segment for this category from upper and middle class
backgrounds, mostly in metro cities and urban centers

Market entry is mostly through a JV/distribution arrangement with an Indian importer and
distributor of alcoholic beverages. Major point of sales include premium pubs and
restaurants, five star hotels, high-end malls and beer-centric cafes

Super premium category is expected to grow at a faster rate compared to the other two
categories (premium and mass market). This has led to launch of multiple brands like
Indus Pride, Kronenbourg and Miller Ice in this category over the past couple of years

Taxation (central and state taxes) remain prohibitive and key barrier to entry for imported
beers. Customs (central) and excise (state-level) duties for beer are amongst the highest
in the world

Regulatory challenges, such as changing/evolving regulatory norms are a major

challenge for domestic and foreign manufacturers. For instance, recent change in
labeling norms required companies to label all the ingredients used in the product in the
form of imprints and not stickers. As a result of the new guideline, many imported foods
items, including beers such as Corona, Hoegaarden, Stella Artois, and Victoria Bitter
were impacted and led to reduced availability

Anand Rathi

Technavio

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LANDSCAPE ASSESSMENT OF BEER MARKET IN INDIA

Current Indian Market:
The Beer market in India was valued at ~USD 4.13 billion in 2013 and is expected to grow at a
CAGR of 17%, to reach ~USD 9 billion by 2018. Total beer sales by volume were ~2.3 billion
liters, which is expected to grow at a CAGR of ~14.5% to reach ~4.4 billion liters by 2018.
The Indian market is dominated by hard spirits, with beer accounting for only 5% of the total
alcohol consumed in India. Beer drinking in India is predominantly an all-male activity with the
major driver/intent to get buzzed, as evident from the high market share (~85% of market) of
strong beer (~5-8% alcohol) in India. The beer market in India is divided into three categories:

mass market (650 ml bottle priced less than INR100),

premium (650 ml bottle priced in the INR100-200 range)
super premium (330 ml pint priced more than INR180).

Among these categories, super premium beers are expected to exhibit the fastest growth due to
rise in the target segment of young middle class in metro cities.

Super
premi
um
beers
Premium beers

Mass market beers

Imported mild beers (~5% alcohol)

Available in metro cities

Includes Corona, Hoegaarden, Stella Artois,

Miller High Life

Domestically manufactured strong beers

Available in metros and tier-2 cities

Includes Tuborg Strong, Fosters, Carlsberg

Domestically manufactured strong beers

Available in all cities and suburbs

Includes Kingfisher Strong, Thunderbolt,

Zingaroo

Be er cons um ption by region

South

30%
East

North

West

49%
12%

9%
Geo

graphic Trends
Region wise, southern states account for roughly
half of the beer consumption in India. The top beer
consuming states in India are erstwhile Andhra
Pradesh, Maharashtra, Tamil Nadu, Karnataka and
Rajasthan.

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LANDSCAPE ASSESSMENT OF BEER MARKET IN INDIA

M ark e t s hare breakup

United Breweries

SABMiller

Carlsberg

4% 7%

Mohan Meakins

Mount Shivalik

4%
8%
Others

54%

23%

Competitive Landscape
The Indian beer market is dominated by
United Breweries with a market share of
~54%. The company operates Kingfisher
(umbrella brand with offerings in both
premium and mass category), Bullet, Zingaro
(both in mass category) and Heineken
(premium) brands in India. SABMiller is the
second largest player with ~23% market share
and operates Miller High Life, Indus Pride and
Peroni Nastro Azzurro brands (all in
premium). Other major players include
Carlsberg, which operates Tuborg (mass) and
Carlsberg (premium), Mohan Meakins and
Mount Shivalik (both selling mass brands).
Landscape Assessment for Premium/Super Premium Beer Category
Over the recent years, beer market has seen an advent of niche super premium category,
primarily imported, beers. These beers cost upwards of INR180 for a 330 ml pint and the size of
the market is nearly half a million cases. Corona is the market leader (40% share) in the segment
followed by Hoegaarden (10-20% share). Super premium beer category targets the young
consumers from upper and middle class backgrounds in metro cities who drink beer to socialize
and refresh and not to get high. This target segment is well travelled around the world, has good
exposure to global brands and high on aspirations. The expectations of higher growth in the
premium beer category have led to a slew of global premium beers being launched in India and
capacity/distribution expansion for the existing premium beer brands.
Beer brand

Company

Type of action

Comments

Indus Pride
Kronenbourg
Miller High Life

SABMiller
Carlsberg
SABMiller

Peroni
Kaltenberg
Miller Ace

SABMiller
CMJ Breweries
SABMiller

Launched in 2013
Launched in 2013
Capacity expansion
in 2014
Expansion in 2014
Launched in 2014
Launched in 2014

India's first specialty beer brewed with Indian spices

Carlsbergs signature French premium beer
Company plans to add 10 thousand liters of
incremental capacity
Distribution capacity expanded in 2014
Company has also set up manufacturing in India
Premium beer from pale and caramel malt

Given below is a price comparison of beer brands available in the super premium category.
Beer brand
Asahi No. 1
Corona Extra

Country

Volume

Price (in INR)

Japan
Mexico

330 ml
355 ml

245
240

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LANDSCAPE ASSESSMENT OF BEER MARKET IN INDIA

Corona Light
Geist Dark
Kapittel Watou Pater
Leffe Beer
Peroni Nastro Azzurro
St. Bernardus Tripel
Stella Artois Premium
Hoegaarden
Guiness
Murphy Stout
Erdinger

Mexico
Belgium
Belgium
Belgium
Italy
Belgium
Belgium
Belgium
Ireland
Ireland
Germany

355 ml
330 ml
330 ml
330 ml
330 ml
330 ml
330 ml
Details not available
Details not available
Details not available
Details not available

240
250
186
225
160
200
202

Source: Online websites (Madhuloka.com, Boozzr.com)

Market Entry/Route to Market

Majority of players in the super premium category prefer a JV/distribution agreement with
India-based importers of alcoholic spirits. The arrangement is more cost effective, allows the
manufacturers to explore the market, and reduces regulatory requirements. Example of such
companies includes Indospirit (distributor of Asahi, Hoegaarden, Leffe Blonde and Stella Artois),
Jorini Hospitality (distributor of Erdinger) and Brindco (distributor of Corona).
Route to Consumer:
The major sales channels for the super premium beers are premium bars and restaurants, five
star hotels and high end malls in metros. Off late there has been a rise in popularity of beer
centric pubs and microbreweries in metros, these are also a prime sales channel for the super
premium category of beers. The roadmap below highlights some potential channels and point of
sales for the target consumer.
Route to end consumer for super premium beers
Super premium beer brands (including Corona, Hoegaarden)
JV/distribution agreement

Niche beer brands are imported directly

Local importers (Example: Brindco, Indospirit)

Five Star hotelsHigh-end

(Oberoi, malls
ITC, Leela)
(Ambience,
Premium
Phoenix
pubs
Beer
mall)
and
centric
restaurants
cafes/pubs (Beer Cafe, Pint Room)

End consumer
Regulatory challenges
Taxation and regulations on beer are the major challenges for the industry players. Taxation on
imported beer is done by both central (customs duty and education cess) and state governments

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LANDSCAPE ASSESSMENT OF BEER MARKET IN INDIA

(excise duty and other state specific taxes). Customs duty on imported beer in India is set at
prohibiting levels of 100% (no difference between countries). State level taxes (mainly excise
duty) vary across states and are raised every year. The average rate of excise duty in India in FY
2014 was 46% which is among the highest in the world.
Cons tant surge in average e xcis e duty rate s in India

45%

42%

40%

40%
39%
Excise duty

35%

30%31%

25%
FY2009

36%
32%

FY2010

FY2011

FY2012

FY2013

FY2014

Source: United Breweries

Also unlike most other countries, taxation of high alcohol content and lower alcohol content drinks
is not done differently in India. Thus, there are lower taxes per unit of alcohol on hard spirits,
making it more attractive for the Indian consumer.
Other regulatory hurdle for imported beer in India is the heavily regulated movement of beer
across the states. Movement of beer from one state to another in India attracts taxation from both
origin and destination states and is permitted to a certain quota of quantity. Therefore, it is
advisable to import beer in the state of consumption. Other challenges for the imported beer (and
domestic beer) industry is the differences in alcohol distribution structure across India which
dissuades a uniform distribution strategy on a pan-India level.
Distribution structure in India
Distributor -- Government;
Retail -- Government

Distributor -- Government;
Retail Free

Distributor -- Free; Retail

Free

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States that have banned

beer (and other spirits)

LANDSCAPE ASSESSMENT OF BEER MARKET IN INDIA

Kerala, Tamil Nadu, Delhi

Seemandhra,
Telengana,
Orissa, Uttar Pradesh, Bihar
Rajasthan,
Karnataka,
Chattisgarh, Uttaranchal and
Bihar

Assam, West Bengal

Daman, Pondicherry,
Goa, Tripura,
Jharkhand & Maharashtra

Gujarat, Manipur, Mizoram

and Nagaland

The advisable ports for import of super premium beer in India are Jawaharlal Nehru Port Terminal
(JNPT), Kochi, Mormugao, Vishakapatnam and Haldia ports for targeting major metros. These
ports have spare container capacity (beer is transported via container route) and are situated in
the target states resulting in avoidance/minimization of complicated state to state transfers.
Ports in close proximity to major markets
Port
Major market
Kochi
National capital region
JNPT
Mumbai and Pune
Mormugao
Goa and Bengalore
Vishakapatnam
Hyderabad
Haldia
Kolkata
Other recent regulation which has impacted the sale of imported beer in India is the recent food
labeling norms. According to the new food labeling norms, companies must list on the label all the
ingredients used in the product in the form of imprints and not stickers. As a result of the new
guideline, many imported foods items, including beers such as Corona, Hoegaarden, Stella
Artois, and Victoria Bitter went missing from the market.

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LANDSCAPE ASSESSMENT OF BEER MARKET IN INDIA

Options for entry for a beer (or any other alcoholic spirit) importer
As noted earlier alcohol is a heavily regulated market in India with both central and state
governments exercising their control over the market. For a foreign beer brand/trader willing to
start operations in India, the following is a list of compliances required:

Incorporating the
company

To be registered as a company under the Company

Act of India
Detailed procedure at Ministry of Corporate Affairs
website

Import
formalities

Exports under Open General Licence (OGL), no

specific licence is required to import beer
need to be a company registered in India with an
Import Export Code (IEC)

Storage

Beer so imported can be stored in custom bonded

warehouses
Can alo be sold to duty free outlets in airports

Retail sales,
clearance from
excise

Clearance and payment of customs duty required

Payment of excise duties for the state of operation

A beer brand/importer can thus look to enter Indian market via three routes:
Tie up with another established player for both import and distribution (Full tie-up)
Owned import operations but tie up for distribution (Distribution partnership)
Own both import and distribution functions (full ownership)
Pros and cons of each route of entry

Full tie-up
Pros: Hassle free option with the player piggybacking on existing infrastructure of
an already established player
Cons: Heavy profit dilution for the beer brand/importer

Distribution tie-up
Pros: Player bypasses dealing with different regulations of individual states, the
most painful regulatory step
Cons: First three steps still to be done by player

Full ownership
Pros: Full control over the brand and resultant profit
Cons: Lengthy regulatory process considerable management bandwidth required.
Fit only for players who are taking a multi-year view of the market

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LANDSCAPE ASSESSMENT OF BEER MARKET IN INDIA

Owing to regulatory challenges and multiple stakeholders involved foreign beer brands have
opted for the full tie-up route in India.
Estimated cost structure for imported beer
The table below highlights some of the major duties at central and state level. Other charges such
as freight and operational changes would impact the price, thus uptake, in the local market.
Cost head
FOB cost

Nature of cost
Input price for the importer

Corona, Mexico
EUR0.33

FOB cost (in INR)

Input price in Indian currency

INR22.90

Ocean freight

Transportation charges

USD0.30

Custom duty

Import tax (100%)

100%

Education cess

Addition central level tax (3%)

Landed price (LP)

Price at Indian port

INR65

Inland freight cost

Cost of moving in India

INR5

Excise duty (ED)

Average excise tax for all states

46%

Importer cost

Cost paid by importer before distribution

INR95

Importer profit

Profit for the importer

INR40

Importer margin

Margin of the importer

42%

Wholesale cost

Wholesaler cost

INR136

Wholesaler margin

Margin of the wholesaler

12%

Retail cost

Retailer cost price

INR152

Retailer margin

Margin of the retailer

15%

Retailer price

Price paid by consumer

INR175

The estimated cost table above illustrates that profit margin on import and distribution of foreign
beer in India is ~40-45%. This margin will be shared by the beer brand/importer and local
distributor in the Case 1 scenario (Please refer to the cost model for estimated price calculator and
similar profit estimations for Leffe and Hoegaarden)

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