Thursday, January 21, 2016

Indian Craft Beer ‘Bira 91’ Gets Venture Backing After Viral Success

International Business Times (January 2016)

NEW DELHI —Just a decade ago, practically the only bars in India were dark, male-only dens where red-eyed drinkers glowered over glasses of so-called Indian-made foreign liquor, aka IMFL. But rising incomes and a new generation of hip, young drinkers have changed all that. These days, the key Indian demographic for a host of alcohol brands and bars is the under-30 set, and craft beer is fast becoming the cutting-edge offering in the premium segment. Just ask Ankur Jain, who’s pioneering the adoption of bottled craft beers in bars and liquor shops, including his own Bira 91.

“We did not spend a dollar on traditional marketing,” Jain said, noting that sales of the locally branded, and soon to be locally made, Bira 91 have rocketed past 35,000 cases a month in less than a year. “People started recommending our product to their friends. It’s amazing how quickly we were able to dislodge some of the other beers in the premium segment.”

Launched in February 2015, Bira 91’s rapid viral success caught the eye of Sequoia Capital, the Silicon Valley firm best known for backing Apple, Google, LinkedIn and Whatsapp. This month, in its first alcoholic beverages play in India, the firm bet $6 million on Bira 91. Jain’s B9 Beveragesplans to use the cash to put some marketing muscle behind the brand and set up a local brewing facility in the central Indian state of Madhya Pradesh.

Does that mean that craft beer is about to take off?

Market leader Kingfisher and other local mass-market brands needn’t worry yet, according to a recent “Beer Market in India” report from London-based Technavio Research. But mushrooming microbreweries, together with increasing sales of imports like Stella Artois and Guinness, prompt the research firm to forecast 10 percent growth in craft beer sales through 2020, compared with 8 percent growth for the Indian beer market as a whole.

“Although craft beer forms a very small chunk of the overall beer industry, it started very modestly at just two microbreweries in 2008 [and grew] to approximately 45 by 2015,” according to Technavio’s lead food and beverages analyst, Vijay Sarathi. “We believe it is the right time for craft- [and] microbreweries to enter the Indian market.”

Compared with the volume of a giant like Kingfisher — the flagship beer brand of the Bangalore-based United Breweries Group — Bira 91’s million-odd cases a year is a drop in the barrel. But Jain, and presumably Sequoia, expect sales to grow much faster in India than they did in the U.S.

“It’s a generational project. The American craft beer industry took about 30 years to evolve,” Jain said, noting the time it took Boston-based Sam Adams to reach sales volumes of around 50,000 barrels a year. “I think it’s a 5-to-10-year story where India is concerned.”

The growth of microbreweries will help open up the category and introduce consumers to different beer styles, Technavio Research suggests. And new “beers-of-the-world” bars like the New Delhi-based Beer CafĂ© offer ready access to the target demographic.

“Our brewery started about 16 months ago, and over the last seven to eight months we’ve seen a lot of growth,” said Shailendra Bist, Pune-based Independence Brewing Company’s co-founder and head brewer. Over the next year or so, the microbrewery plans to open at least two taprooms, locally known as “beer bars,” in Mumbai, he said.

The main beneficiary of India’s nascent wine-making industry, Maharashtra, where Pune and Mumbai are located, was one of the first Indian states to permit such microbreweries, which are (for now) only allowed to sell beer on tap or by the keg. According to Technavio, midsized Pune alone has at least six microbreweries. Many more have mushroomed in Gurgaon, Haryana, and Bangalore, Karnataka.

“We as microbrewers in Maharashtra keep lobbying the government to be more progressive with their beer brewing policy,” said Bist, who boasts California-based Stone Brewing’s co-founder Greg Koch as one of his partners. Take-away jugs known in the industry as “growlers” may be on the horizon, and maybe more.

“Hopefully, the government may soon allow us to do a small bottling run,” Bist said.

But that’s where the big challenges will begin, he added. India’s distribution chain is both cutthroat and chaotic, with the big players offering serious kickbacks to drive sales. That could prove a tough nut to crack, he said. But he believes those same conditions give local craft beers a better-than-even shot at more famous-imports.

“Competing with imports is not a problem,” he said. “There’s no cold chain [i.e., refrigerated transport], so imports are 100 percent oxidized by the time you get them. And import duties are so high you pay 900 rupees [$14] for a can of Guinness.”

In comparison, Bira 91 retails at 100 rupees ($1.50) for a 330 ml bottle, while its nearest competitor, Carlsberg, is 85 rupees ($1.30) per 330 ml bottle.

A second-time entrepreneur (he co-founded a healthcare revenue cycle management firm called ReliantMD in 2002), Jain started Cerana Beverages and began importing famous craft beers from around the world in 2008. He believes the market savvy and distributor relationships he's earned will help Bira 91 leap the same hurdles.

“We’ve had relationships with these distributors for four or five years now from our import business,” said Jain, whose company has exclusive import and marketing rights from seven breweries and a retail presence in all of India’s major urban centers. “It’s a slow-burn process.”

In terms of product selection and branding, Jain zeroed in on two distinct-but-familiar styles, a wheat-based Belgian white and an aromatic craft lager. By design, neither style is as radically different from India’s mass-market lager as a stout or a pale ale. Theorizing that other “premium” beers, such as Budweiser and Carlsberg, were essentially asking consumers to “ drink me because I’m extremely respected abroad,” he also made sure that Bira 91 was “unapologetically Indian” yet appealed to upwardly mobile youth, he said.

The name Bira has an Indian sound, and 91 is a reference to the international country code used to dial India. Meanwhile, the punk rock monkey chosen for the brand’s logo is Indian enough, yet not too Indian.

“We tried to stay away from elephants and spices and so forth” because young Indians are resistant to hackneyed images of “exotic” India, he said.

Exotic beer, on the other hand, they drink right up.

Sunday, January 10, 2016

India embraces clutch-free driving, thanks to Suzuki

AMTs, using a decades-old technology, are taking the Indian market by storm. 

By Jason Overdorf
International Business Times (January 2016)
NEW DELHI — When 39-year-old Raj and his partner were shopping for a second car last year, it wasn’t a hybrid or an ultra-clean vehicle running diesel that caught their eye. It was a decades-old innovation that never really took off anywhere else in the world: the automated manual transmission, or AMT.

“My partner had just learned to drive, and she still faced the problem of stalling with a manual,” said Raj, who works as a web developer in the western Indian city of Surat, in Gujarat. “When we test drove the [Maruti Suzuki] Celerio and there was no clutch involved she just fell in love with it.”

It didn’t take long for Raj to fall in love, too. Although Surat is less congested than larger cities like Delhi and Mumbai, it’s routine for him to spend an hour in bumper-to-bumper traffic during his daily commute. And even outside of rush hour, there’s always a traffic jam someplace.

“I still drive it at least once a day,” Raj said. “The driving experience is amazing.”

A cheaper and less sophisticated alternative to the hydraulic system used in developed markets, AMTs are taking the Indian market by storm, says Ashwin Kumar, South Asia and Middle East head of Frost & Sullivan’s automotive and transportation practice.

“Automatic transmission, which includes a host of technologies, should account for about 15-20 percent of the Indian market by 2020,” Kumar said. That’s a compound annual growth rate of more than 60 percent, most of which will come from AMT, he added.

The upshot: “One in 10 cars sold in India will have an AMT transmission.”

Unlike hydraulics, the AMT system uses a friction clutch. There’s no clutch pedal, and in “drive” mode a computer does the clutch work. Critics say that makes the driving experience a little jerkier, but with Italy’s Magneti Marelli manufactured kits, which are easily added to factory assembly lines, the old technology allows first-mover Maruti Suzuki to bring the add-on cost of shift-free driving down to as little as $500 on models like its $6,400 Alto K10 AMT and $6,900 Celerio AMT.

“This is 50 percent cheaper than the other technologies,” Kumar said.

Whereas other carmakers previously bundled hydraulics and other more sophisticated automatic transmissions with costlier options in their top variants, the longtime market leader has scored by offering AMT as a mid-range option. Customers can now escape the clutch pedal in exchange for bells and whistles like a top-end stereo or anti-lock brakes — which are less important in stop-and-go city driving.

AMT also suits India’s penny-pinching drivers once they leave the dealership, says Gaurav Vangaal, a senior analyst with the research firm IHS Automotive.

Apart from the sticker price, one of the reasons Indian car buyers have been slow to embrace automatics is that they are very concerned about fuel economy and hydraulic transmissions reduce efficiency. With the same gearbox, but operated by a computer, an AMT typically performs the same as or a little better than a manual transmission.

“This technology fits best the Indian middle class,” Vangaal said. “That is the reason it is getting success in the Indian market. Price, efficiency, everything matters for Indian consumers.”

Since it unveiled its first AMT models at the 2014 Delhi Auto Expo, Maruti Suzuki has sold more than 50,000 AMT cars. In comparison, it sold only around a thousand or so hydraulic automatics the year before the AMT launch. Having already rolled out AMT variants in six models, the company now plans AMT variants across its full product range, according to a recent article in India’s Financial Express newspaper.

Other brands are rapidly following suit, says Vangaal.

An AMT model has helped rehabilitate moribund sales of the bargain-priced Nano for Tata Motors — accounting for a whopping 40 percent of sales. Mahindra Automotive, Renault, Ford India, and Hyundai have also introduced AMT variants.

As a result, Magneti Marelli expects its Indian revenue to more than double to $435 million over the next three years, from today’s $175 million, according to a report by India’s Economic Times. To meet the demand, it’s building a $25 million production facility in Haryana with a projected production capacity of 200,000 AMT units by the third quarter of 2016.

“Now everybody is jumping for this technology,” Vangaal said.

Because AMTs have a positive or neutral impact on fuel economy, there’s little risk of a clampdown due to environmental concerns like the one potentially poised to hit carmakers that have bet big on diesel. Instead, how long the boom lasts will depend on how swiftly the price difference between AMT and other automatic transmission technologies drops, and how quickly India lifts people from lower-middle to middle to upper-middle class.

A Chennai-based IT executive who purchased a Maruti Ritz hatchback with a more costly hydraulic transmission after test-driving several AMT models provides his viewpoint.

“There is a minor noticeable jerk in AMT-based vehicles, especially while changing into first and second gears,” he said, asking that his name not be published. “You are supposed to get used to it as you drive, but I wanted my first [shift-free car] to be a proper automatic and not a pseudo-automatic like AMT.”

Wednesday, January 06, 2016

Food for thought: In India regional brands gaining against bigger players in consumer goods

By Jason Overdorf
International Business Times (January 2016)

NEW DELHI — When India opened its market to international brands in the 1990s, many people expected that only the strongest national players would survive. After all, kids who had to settle for a local knockoff called Campa Cola were so thirsty for “the real thing” that they got jealous watching blurry TV commercials from Pakistan. But India’s regional brands have proven to be more resilient than expected, even as advertising spending has skyrocketed.

Regional brands have clawed back a 13 percent share of the $44 billion Indian packaged goods market, up from 12 percent two years ago, according to Nielsen India. And that trend is likely to continue despite or even because of the modernization of the retail business, say brand experts like P. Rajan Mathews, vice president of sales and marketing for the food division of Desai Brothers.

“Regional brands are here to stay,” he said. “This is something really unique to India. Every state is a different culture, [virtually] a different country, so there cannot be a single formula applied across the country.”

Smaller and more focused than their national and multinational competitors, brands like Gold Drop vegetable oil, Jivraj tea and Balaji chips can react to the demands of their customers faster. Moreover, some of the changes first brought in by multinationals have begun to level the field, according to Santosh Desai, managing director of Futurebrands India.

“In earlier times, there were gross differences between regional brands and national or multinational brands in marketing and product development capability,” Desai said. “Now, the advantages of the big players are not as significant.”

While once the difference between a regional brand and its larger competitors was obvious from its packaging, the drive by multinationals to outsource that part of the business to local companies has made high-quality packaging available “off the shelf,” he says. The mushrooming of venture capital firms has made financing available for expansion, and the successful emergence of several regional companies as large national players has made it easier to attract top-level employees.

Regional brands are present across the country, but they’re increasingly competitive in Uttar Pradesh and Punjab in the north, Tamil Nadu in the south, and Gujarat and Rajasthan in the west, according to Nielsen. They’re usually strongest in packaged foods and home care products such as refined cooking oil, soap, detergent, tea, snacks, and condiments.

In packaged snacks, spices and condiments in particular, regional brands’ greater focus allows them to cater to the specific tastes of India’s many distinct cultures, says Mathews of the Desai Brothers conglomerate.

Reasonable Dates and Reasonable Rates

Micro-marketing initiatives like door-to-door sales help regional brands maintain close relationships with customers, he says. And the smaller firms have learned that offering better margins to distributors and shop owners can go a long way to compensate for the higher ad spends of national and multinational competitors.

“Every state or every region has a very focused regional player, which derives 80-90 percent of their revenues from that area,” Mathews said. “One result is they save on logistics and various other national costs, and as a result they’re able to give more credit, and they know the distributors in and out. It’s a personal touch they give to the business.”

There’s also an impact on the price paid by the consumer. Regional brands are about 40 percent cheaper than national and multinational brands, according to Nielsen’s data. Local shop owners like Sanjay Arora believe that’s the main secret to their continued success.

“There’s fresh stock daily and the prices are reasonable,” said Arora, who owns a mom-and-pop grocery called Pal Stores. “Reasonable dates and reasonable rates.”

With its clear plastic bag and only one flavor (salted), a regional brand like Kakaji potato chips, cannot compete with Lay’s for regular purchases, he says. But when people are buying in bulk for parties or seasonal festivals, the cheaper brand gets the nod.

It’s not clear whether regional brands are convincing customers to switch from national brands, or whether the gain in market share results from faster growth. Desai reckons it’s probably a mix of both, and Nielsen’s data does show that regional brands get as much as 50 percent of sales from urban markets — which suggests they’re competing well head to head.

Regional Brands Becoming National Players

A large number of regional brands such as MTR (spices), Vi-john (shaving gel/hair care), Wagh Bakri (tea), CavinKare (hair/skincare) and Kalyan Jewelers (jewelry) have already expanded to become major national players. Sometimes the transition can be lightning fast, as in the case of television yoga guru Baba Ramdev’s Patanjali products, which swept India almost overnight due to his personal popularity. But the road can also be bumpy, says Mathews.

“For every regional player that becomes successful in their region or state, the ambition comes to spread geographically. That’s when the first hurdle happens,” he said. “Certain brands lose their focus and start losing money.”

When that happens, national or international firms that can otherwise find it hard to crack certain regions snap them up. According to a recent report in India’s Mint newspaper, big ticket buyouts like the $260-million acquisition of the hair and scalp care business Kesh King by Emami Ltd helped spur a fivefold increase in mergers and acquisitions in India's fast-moving consumer goods sector to a healthy $318 million last year, compared with $61 million in 2014.

But there are some unexpected successes, too, Desai says.

“There are new product categories where regional brands are actually faster to tap the market,” he said. “For instance, look at pasta. You’ll find local brands of [instant] macaroni [mixes], simply because they’ve understood that in India [pasta] has nothing to do with Italy. It’s just another excuse to get spices into your food.”