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Beer is the world's oldest and most widely consumed alcoholic beverage and the
third most popular drink overall after water and tea.] It is produced by the brewing
and fermentation of starches, mainly derived from cereal grains²most commonly
malted barley, although wheat, maize (corn), and rice are widely used. Most beer is
flavoured with hops, which add bitterness and act as a natural preservative, though
other flavourings such as herbs or fruit may occasionally be included.

The brewing industry is a global business, consisting of several dominant

multinational companies and many thousands of smaller producers ranging from
brewpubs to regional breweries. More than 133 billion liters (35 billion gall ons) are
sold per year²producing total global revenues of $294.5 billion (£147.7 billion) in
2006.

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The Indian beer market was estimated to be 6.7 million hectoliters (hl) in 2002 -03. As
seen in figure 1, beer consumption has been growing rapidly at a CAGR (Compound
Annual Growth Rate) of 7 per cent over the last 9 years, while growth in 2002 -03
was 11 per cent.

Indian growth rates compare favorably with the global beer industry, which grew by
about 2.6 per cent in 2001 -02 Apart from providing strong growth, India also provides
attractive profit margins due to the consolidated nature of the industry ± a
comparison between China and India, for example, reveals that the Chinese beer
market is marked by intense competition, with severa l players being marginalized. In
China there are about 400 brewers, of which the top 10 account for only 45 per cent
of the market. This has resulted in low profit margins for the Chinese beer players. In
contrast, the top two beer players in India account for about 75 per cent of beer sales
in India and the industry stands a chance to see more consolidation in the near
future. The effect of this consolidation can be seen in the fact that beer prices in
India rarely go down with the competitive pressures of new product or brand
launches. In the past, whenever beer prices have gone down, it has been due to
either the lowering of duties by the government or the deregulation of distribution

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(leading to lower margins for the distribution channel partners). In ne ither scenario
have the margins or revenues of beer manufacturers been affected.

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d The global beer market was valued at approximately $507bn in 2008, an increase
of 1.8% over 2007. Business Insights anticipates that the value of global beer
market will grow at a CAGR of 1.6% during 2007 ±12 to reach a total value of
$540bn in 2012.
d Shift in preference for premium beer in emerging market arising from rising
purchasing power, and product differentiation and marketing and promotional
activities in mature markets will help drive increase in beer market value through
2012.
d Asia-Pacific and Middle East and Africa are expected to be the frontrunners in
beer consumption by value through 2012

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VB (Vnited Breweries Ltd.) is the market leader in the Indian beer market with a 40%
market share. Its flagship Kingfisher brand alone commands 25% market share. The
company has however been focussing on strong beer, which has driven growth. The
company introduced its strong beer, Kingfisher Strong during the year 2000 in the
selected market of Maharashtra and Karnataka. The move came as a reactive move
following increasing shift of consumers towards strong beer, a trend started by Shaw
Wallace. While the overall market grew marginally by 2%, the strong beer market
grew at 8-10% during the year at the expense of lager beer. The market is now
skewed towards strong beer with more than 60% of the market being strong beer
market

In India the future of beer industry is very much optimistic because:

1. India has predominantly a warm/hot climate

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Apart from Kingfisher , and Foster's Beer, the other brands in the Indian market are
Carling Black Label, Carlsberg, Dansberg, Golden Eagle, Guru, Maharaja Premium
Lager, Haake Beck, Haywards 2000 Beer, Haywards 5000, Haywards skol, Flying
Horse Royal Lager, Taj Mahal, Heineki n, Hi-Five, Ice, Kingfisher Diet, Kingfisher
Strong, Kirin, KnockOut, Legend, London Diet, London Draft, London Pilsner, Royal
Challenge, San Miguel Lager, Sand Piper, Strohs and Zingaro.

2. The beer-drinkers in the country are much younger than the average beer -drinker
elsewhere in the world. This makes them more likely to carry the brand with them for
a lifetime.

3. Increasing exposure to be er and wine drinking, mainly due to media and

consumer mobility.

All these factors combined make the scenario very promising for beer industry and
are 'in sync' with their strategy for India.



The major brands which belong to large groups in the industry (apar t from VB) are ±
Shaw Wallace - Royal Challenge Premium Lager, Haywards 2000 Premium Lager,
Haywards 5000 Super Strong, Hi-Five and Lal Toofan .Apart from Kingfisher , and
Foster's Beer, the other brands in the Indian market are Carling Black Label,
Carlsberg, Dansberg, Golden Eagle, Guru, Maharaja Premium Lager, Haake Beck,
Haywards 2000 Beer, Haywards 5000, Haywards skol, Flying Horse Royal Lager,
Taj Mahal, Heinekin, Hi-Five, Ice, Kingfisher Diet, Kingfisher Strong, Kirin, KnockOut,
Legend, London Diet, London Draft, London Pilsner, Royal Challenge, San Miguel
Lager, Sand Piper, Strohs and Zingaro.

 


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It is used to identify the external forces affecting an organisation.



d Market Libarelization

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 d Legal Policies

Change in world wide supply and demand which will open for the firms crossing the
national boarders.
Government campaigning against drinking and drivingHard -hitting campaigns and
stiffer penalties have helped to reduce the number of roads accidents, deaths,
injuries and damage . Campaigns have aimed to raise awareness of the legal
situation and the dangers of driving while intoxicated. In most international
jurisdictions, anyone who is convicted of injuring or killing someone while under the
influence of alcohol or drugs can be heavily fined, as in France, in addition to being
given a lengthy prison sentence. Sometimes those campaigns make the brewery
industry looking very bad since usually the blame is laid exclusively on them for
making alcohol so easily available. Threat, with the government heavily expending
money in such campaigns the consumption of alcohol tends to decrease with people
scare

Economical
d Change in exchange rate
d Slow down of the developed economies and evolution of emerging economies.

Breweries will move towards the emerging market

Per capita consumption in India is hovering around a measly 0.5 litres per annum.
These figures pale into insignificance if one compares them with those of Czech
Republic that has the highest per capita consumption of 156.9 litr es per annum (see
box)

Per capita consumption is directly related to the taxation, according to an industry

observer. For instance, in Maharashtra there is a direct 100% excise duty on Beer.
An equivalent 650 ml bottle is available for approximately Rs 8 in China. Which is the
per capita consumption in China is a high 16 litres per annum.

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 !!"# The Indian consumer typically values an alcoholic
beverage on the basis of its 'kick' factor versus its price. The following two factors
therefore, affect the market for beer. Firstly, as most states do not have a differential
tax structure based on the alcohol content, strong beer...



d Change in consumption pattern

d Rise in middle class
d Increase trend of urbanization

Market sixe of beer consumers will increase

!$!%# India is home to nearly one -sixth of the global population and
is one of the most attractive consumer markets in the world today. Various research
studies have shown that a rise in the income levels has a direct positive effect on
beer consumption. The National Council for Applied Economic Research (NCAER)
projects India's 'very rich', 'consuming' and 'climbers' classes to grow at a CAGR of
15 per cent, 10 per cent and 2 per cent respectively. With this growth in income
levels, Indian beer consumption is expected to continue growing, at the very
minimum, at the growth rates witnessed in the last decade.

&!$!$$'# As a consequence of the high birth rates prevalent until the

1990s, a large proportion of the Indian population is in the age group of 20 -34 years.
This age group is the most appropriate target for beer marketers. This population
trend will give a further boost to the growth of beer consumption in India.

Many global players are planning to enter the Indian beer sector and they realise that
a partnership with a local player is important to establish a successful presence in
India in a short time frame.

&!$!$ '(# A deep-seated traditional social aversion to alcohol

consumption has been a traditional feature of the Indian society. However, as urban
consumers become more exposed to western lifestyles, through overseas travel and


the media, their attitude towards alcohol is relaxing. Social habits are undergoing a
transformation as mixed drinks are becoming more popular. The greatest evidence
of this trend is the increase in beer consumption among women. More and more
women are consuming beer ± the penetration in metropolitan areas is almost twice
as high as the penetration in other large cities ± implying that the greater tolerance
towards alcohol consumption in metropolitan areas facilitates the consumption of
beer. With increasing urbanisation, thi s acceptance is only going to rise.

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 d High
d The quantity of alcoholic beverages that a nation consumes tends to be
unaffected through recession and prosperity while the quality of the products
purchased is directly related to the disposable income.
d A decline in disposable income shifts the consumer preferences away from
premium priced brand name products in favou r of lower priced brands i.e.
switching cost is low

Threats of substitutes

d Low
d Customer loyalty through brand awareness
d The advertising restriction placed on alcoholic beverage industry in recent years
make it harder to achieve brand loyalty.

Bargaining power of suppliers

d Low
d Products used to brew beer are inexpensive and suppliers are numerous.

Intensity of rivalry among competitors

d Moderate
d Rise in legal and regulatory burdens, leads may manufacturers to merge in order to
lower competition
d acting as oligopolies, they ensure high profit margins, cash flow, and investment
returns.
d Though the competition is tuff, the King fisher brand is the one of the largest
supplier of beer and the third largest producer of distilled spirits

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d Population 1.1 billion
d Emerging middle class-India has a healthy urban workforce with 7.2%
unemployment. India¶s emerging middle class is relatively young. 63% of the country
population is between the ages of 15-64

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d India has an active domestic brewing industry that includes many local firms and a
growing increase in foreign investment
d Beer sale in India are forecast to grow at a compound annual growth rate of 17.2%
until 2011
d Despite the logistical challenges, India¶s young emerging middle class offers
tremendous upside growth potential in urban areas.
d India¶s climate is favoura ble for the harvesting of hops and barley, the primary
natural ingredients in beer.

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d There is not enough variety in the market. In good beer list there are 4 major
players: Kingfisher, Carlsberg, Tuborg, Corona .There is definitely a big market
there, but the variety that exists is nowhere close to other beer drinking
nations.

d Difference in pricing of foreign and domestic beer is very large. Hence the
better beer brands from the world find the market competitions extremely
difficult.
eg: Kingfisher costs Rs.100/-but Corona costs Rs.250/- . They need to make
the market more competitive in terms of pricing for foreign brands as well.
This will enable the whole industry in general to improve and hence give a
better offering to the consumer.

d In terms of advertising, since India has restrictions on Tobacco and Alcohol

advertising, beer companies need to come up with other innovative ways to
market. They can tow the same line as some of the other spirit companies
(Bagpiper, Bacardi etc) have done by launching CD¶s, drinking soda, bottled
water, events etc. The idea here is VISIBILITY. Just because Kingfisher is the

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 most visible product there, does not mean it is the BEST beer. Any beer
company needs to be able to market itself so that it is noticeable as a
new/different brand.

d Setting up of breweries (eg: Corrinthian Club) is also a gre at way to go. But
restricting the place to only beer manufactured there is a complete turn down.
The idea is that if you are developing a place for beer drinkers, you should be
able to give him/her the best of what he/she likes from around the world.

d The most important thing from the costumer point of view for beer is the
TEMPERATVRE that it is served. The manufacturing company needs to
somehow manage to have the distributors (shops, hotels, bars etc) have the
right equipment to maintain temperature of beer.

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