Breweries & Distilleries Industry

 

Overview

The oldest brewery in India was set up in 1830 by Edward Dyer in Kasauli. Today, with over 30% of the Indian population consuming alcohol led mostly by the UTs and southern States, the industry boasts of being the third largest and fastest growing market for alcoholic beverages with a US$5 billion market valued in beer alone growing at a CAGR of 7% over the past 4 years.

The brewery and distillery industry is divided in to four major segments: 

 

Industry Structure :-

 

Buy Industry Analysis

 
Consumer Behaviour

With an increase in disposable incomes, increasing number of drinkers and adoption of a changing lifestyle, the per capita beer consumption has risen and premium beer comes out with the highest growth in sales with 49%. Over 50% of Europe consumes beer as against a meager 15% in India which means that there is huge potential as far as customer base is concerned. Although IMFL and CL bring in more income as compared to beers due to their lower cost of production, beer is the fastest growing segment among all four segments. The inflationary economy has hiked raw material prices for beer which was coupled by increase in cans and hop prices due to the depreciation of rupee against dollar but the major advantage enjoyed by Indian Brewers is that India is, by far a young country. It has a majority of population in its youth which serves as a comfortable platform to build markets for alcohol consumers between the ages 18 – 40 years. The Breweries and distilleries industry is extremely customer sensitive with a highly elastic market, which means they can use this parameter to their advantage.

 

Domestic Outlook

A growing resistance from the Federal and several State Governments on advertisement and sale of liquors despite alcohol being a huge revenue creator, heavy taxation and a poor distribution channel further deteriorated with certain cultural beliefs have set up a blockage on further turnover as well as pricing rigidity which hampers profits.  The dominant players of this industry are United Breweries Ltd. and Radico Khaitan. The Indian Brewery industry has reached its shakeout with United Breweries’ strong hold over 50% of the national market share making it the third largest manufacturer of spirits in the world with exports in over 52 countries. Not far behind, Radico Khaitan with its large manufacturing capacity within India and joint ventures in UK and Africa, makes a strong barrier against entry of potential domestic manufacturers as well as foreign imports. Although provision of quality, consistency and availability are the recognizable driving forces of these companies, they need to transcend the basic characteristics of this industry and look out for better customer reach.

 

Global Outlook 

In the beer segment, an average Indian drinker consumes about 1.7 liters of beer a year as against 22 liters in Hong Kong, 37 in China and 74 in USA. This can be attributed to lower capacity as well as unsuitable climatic conditions for beer consumption. The domestic participants see minimal but rising competition from imported beers but enjoy heavy exports of beer.  Indian exports of whisky and rum in 2015 have reduced in comparison to 2014 unlike vodka which has increased.  Government restrictions through heavy VAT, import tariffs have kept foreign liquor at bay. In the beer segment, foreign imports struggle to cross the 1% mark of sales in India.

 

Future Potential

Through a reduction in the duty and statutory dues of the industry, the industry is well placed for future growth and higher profits. Consolidation in terms of the markets participants will also take place by 2025. Innovative campaigns in the present like when United Breweries Ltd. Had organized “The Great Indian Octoberfest”, which runs on the lines of Oktoberfest and the International Berlin Beer Festival, will boost the usage and increase market depth.

Moreover, introduction of a good product mix and corresponding marketing like Beer Cafes and Pint Room with innovative concepts to encourage beer consumption for their target markets would be a fresh penetration in to an already saturated market in terms of marketing efforts. Additionally, companies must turn their attention to microbreweries providing craft beers and non-commercially produced beers that are future market threats. Although India is one of the fastest growing alcohol consumer markets, it needs well strategized policy based freedom which encourages responsible alcohol consumption and disintegrates black market trading of liquor and poor quality alcohol.

Production of fortified wine should be infused in India since it has a virgin market domestically and microbreweries are still in their embryo stages. Although there is substantial export of beer from India, these numbers can be increased through efforts made to maintain brand loyalty abroad.

 

What this report contains:

  • A detailed overview of the industry

  • Structure of the industry from both, domestic and international perspectives

  • Related industries that this industry has inter-dependencies with and their understanding

  • Detailed analysis of industry segments in terms of the value and depth of corresponding market

  • Analysis & insights about the elements and critical success factors of this industry using strategic models

  • A forecast on the state of this industry in 2020, predicting the growth and movement patterns for 2016 - 2020

  • Our professional analysis on the future of the industry based on strategic actions adopted by major industry participants

  • Quantitative estimates and forecasts of the growth prospects of the industry using revenue and financial forecasting models

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