Malted
mullings
Neeta
Ramnath believes that the Indian beer industry offers tremendous opportunities
for new and existing players and is poised to see attractive growth
in the future
The
Indian beer sector has seen a hectic merger and acquisition activity
recently with 12 breweries changing hands in the last 3 years. However,
this is not the end of the consolidation wave in the Indian industry.
Rather, some of the largest beer players across the world are still
eyeing India with a view to gaining a share of the country’s rapidly
growing beer consumption.
An
attractive beer market
The
Indian beer market was estimated to be 6.7 million hectolitres (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 favourably 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 several players being marginalised. 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 (leading
to lower margins for the distribution channel partners). In neither
scenario have the margins or revenues of beer manufacturers been affected.
Growth
prospects for the beer industry in India
The
Indian beer market has been growing rapidly over the last 10 years,
due to the positive impact of demographic trends and expected changes,
like:
Rising
income levels: 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.
Changing
age profile:
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
|
Changing
lifestyles: 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, this acceptance is only going to rise.
Reduction
in beer prices: 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...
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