India: Owner of Indian craft beer Bira 91 goes back to its roots to beat inflation

B9 Beverages Pvt., the owner of Indian craft beer Bira 91, is pushing its premium bottles more to protect its margin as costs of ingredients, energy and transport escalate.

The current operating environment is “extremely tough” as costs have risen 30-70%, forcing the company to sell more of its premium portfolio compared to the mass-market products, Chief Executive Officer Ankur Jain, who founded the brewer in 2015, told BloombergQuint in an interview.

The company began by selling premium beer and expanded into the mass-market category just before the pandemic. Still, it has a “double-digit” market share in the premium segment, Jain said without disclosing the number. Having a stronger portfolio of beers targeting consumers in larger cities than towns gives it an advantage: wealthier drinkers are less sensitive to price increases.

The brewer's strategy underscores how consumer firms are trying ease the pinch of higher costs. Covid-19 disrupted supply chains, sending commodity prices soaring. Barley has surged 62.5% over a year earlier and 5% sequentially in the quarter ended March, according to Motilal Oswal report, with the latest spike driven by Russia's war in Ukraine. Ukraine, with 18% of exports in 2022, is among the top five producers of barley, it said.

“Whether it’s glass, aluminum, wheat or barely, all commodities that are essential for us are either facing price escalation or shortage,” Jain said. “We are securing them [raw materials] in adequate quantities to ensure uninterrupted production. We, however, don’t have any option but to pass on the cost to our consumers.”

The Delhi-based company, with a cartoon punk monkey mascot, is also focusing on innovation, where it’s able to command premium pricing, he said. It rolled out limited edition batches earlier this month to capitalise on the trend of young, urban consumers experimenting with new flavours. It launched four variants—Bollywood IPA, Kokum Sour, Brown Ale, and Mango Lassi.

The idea is to “bring together the many flavours of India”, Jain said. These will retail in metros such as Delhi, Mumbai, Bengaluru and Pune.

India’s beer industry, according to Expert Market Research estimates, was worth nearly Rs 37,100 crore in 2020, and is likely to reach Rs 66,200 crore by 2026 at an estimated annualised growth rate of about 9.2%.

But it was hit hard by Covid-related lockdowns.

Sales of beer, largely a summer beverage, fell more than 40% in 2020, according to Jain. Demand recovered in 2021 but failed to reach the pre-pandemic levels. “This year, March sales crossed pre-Covid levels," Jain said, hoping volumes to scale new highs after two lost summers.

According to the company, more than seven pints of Bira 91 are consumed every second —indicating the popularity of its craft beer offerings in a country where the market is dominated by brands like Kingfisher and Budweiser. B9 Beverages has also ramped up its capacity to 22 lakh cases a month (a case has 12 bottles), up from 6 lakh pre-covid, with consumers returning to bars and liquor shops remaining functional.

Backed by Sequoia Capital, Sofina of Belgium and Japanese beverage firm Kirin Holdings Co., B9 Beverages is also preparing for an initial public offering. With foreign investors more keen to invest in ESG (environmental, social, and governance)-compliant firms, B9 Beverages is doubling down on its sustainability efforts. It has set a target to become a carbon-neutral beer company in the next three years.

“Climate change is the most important challenge facing our generation and we are investing in our manufacturing and supply chain to ensure that our breweries reach zero carbon emissions by 2025—five years ahead of other global beer makers,” Jain said.

Among the global brewers, Carlsberg and Heineken aim for all of its production sites to become carbon neutral by 2030. Belgium’s Anheuser-Busch InBev, that houses Corona and Budweiser brands, is also looking to achieve net-zero emissions across the value chain by 2040.

In January last year, Kirin Holdings invested $30 million in B9 Beverages for a minority stake. Jain said both the companies partnered to form B9-Kirin Centre for Sustainable Growth, focused on environment sustainability and other business synergies.

Bira 91 has laid out four key areas to accomplish ‘Mission To Zero’.
• Shift to 100% clean energy.
• Consume 60% less energy.
• Use 50% less water.
• Zero waste to landfill.

“We have achieved zero coal this year in January and all our breweries are fuelled by renewables,” Jain said. “Our flagship Mysuru brewery is set to become our first carbon-neutral brewery by the end of this year and 50% of our brewing capacity will be zero carbon emissions by 2023,” he said, detailing the plan that would make it the first net-zero carbon emission Indian beer company.

Currently, B9 Beverages has five breweries. Two each in Maksi and Gwalior in Madhya Pradesh and one each in Maharashtra, Karnataka and Andhra Pradesh.

Jain expects the company’s decision to go carbon negative will prompt peers to follow suit. “We are hopeful that our ‘Mission to Zero’ will spark a revolution—one in which every beer made in the country is carbon neutral.”

21 April, 2022