India, beer contributes only 4% of revenue. The low penetration in beer consumption provides a substantialand sustainable growth in demand for beer in future.
(see Exhibit 1 for the average beer consumptionacross the world)
Rising income levelsIndia is one of the most attractive consumer markets in the world with about one-sixth of the globalpopulation. The rising income levels has a direct positive impact on beer sales in India. Also, urban consumerswho are more exposed to the western culture socialize with beer. The growing income levels particularly inthe urban earning class is a potential market for beer manufacturers in India.
Dynamism in Beer market Many foreign beer manufacturers have entered or plan to enter the Indian beer market with their product line. The market is set to flourish with 15 new breweries and 10 international brands in the next 3 years.With the global markets experiencing low or stagnating growth and focus shifting to India, the Indianindustry is expected to witness fast growth in the coming years.
(see Exhibit 02 for the major brandsavailable in India)
Bottling shortageWhat often happens is people have more bottles at home than they drink on a weekly basis because they tendto buy regularly and bring them back irregularly. SABMiller, which manages Shaw Wallace Breweries Ltd,has warned that the country could face a beer shortage in the approaching summer, the peak consumptionseason.Mr.Richard Rushton, Managing Director of SABMiller India Ltd, told Business Line in an interview that hefeared industry would not be able to adequately service the demand in the summer months on the back of "aninefficient bottle pool management" in a market that is heavily dependent on recycled bottles. MrRushtonsaid, "The route which the bottle takes to the trade and ultimately to the consumer should be the same it takes back to the brewer through the value chain. But in India, it gets fragmented and dispersed to spend a lot of time in the trade and results in high incidence of breakage," he added.The 650 ml beer bottle is common to all companies and only the 250-300 ml bottle has proprietary designsand logos on it. Thanks to breakages and diversion to other unorganized players, only around 60-65% of bottles are actually returned to the company, says liquor industry consultant, UB Bhat.Till about a year and half ago, bottles were being returned to companies at an average of Rs 3.00 to Rs 3.50per bottle. Taking advantage of the shortage, second hand bottle traders hiked prices from the normal Rs 3.00to Rs 3.50 to Rs 7.00, almost equal to the price of a new bottle! Not to be left out of the party, glassmanufacturers sharply increased prices too.The shortage in bottles took their toll on profitability of the companies. Richard Rushton, managing Director
of SWBL admitted that bottle prices had seriously affected the company’s profitability, especially considering
that regulations in a number of states prevent companies from passing on cost increases to. UB too talks of an
“unprecedented cost push” caused by the shortage in its annual report. In fact, UB disclosed that the spiraling
bottle costs shaved off Rs.30 crore - 40 crore in its operations during the last financial year, 2003-04.Indian brewers have injected about 250 million new returnable glass bottles into the beer market during thelast nine months to beat down prices of recycled bottles.
Many bars across the State of Kerela now display the sign ‘No beer' and several others tell their patrons:“Only one bottle per person, sir.” They apologetically tell the customers that they are not getting sufficient