Tech is the Best Way

Too many Beer Bars bringing own (craft) beer

“I studied in Shimla,” he says. “I had a lot of friends from the North-East. There is something Western about that area, the hip-hop culture. I knew some people in Assam, so we took a chance and it worked. We did it very differently. We took a little more than one-third of the hoardings in Guwahati [the largest city in Assam] for about 20 days and advertised our brand. Being a non-metro, the promotion cost me just Rs 10 lakh.”

But you can’t promote alcohol in India…

“We didn’t say craft beer on the billboards. Just the name Simba (and its logo) started the conversation in town and made people curious. Those billboards opened the doors of distributors for us and that’s how we arrived.”

The word arrive doesn’t quite cut it.


In 2017, Simba, the craft beer brand sold by Sona Beverages, entered Assam. As of July, it sold 70,000 cases in the state, up from just 800 in July 2017. A case has 12 bottles of 650 ml each. That’s sales of 8,40,000 bottles of Simba every month. That’s 28,000 bottles every day. About 1,166 bottles every hour. Not bad for a craft beer brand that’s just two years old. Better still, not bad for a beer company you may not have even heard of, whose most distinguishing feature is its mascot—a lion with Aviators.

The company has a long road ahead of it though. In June this year, it ventured into the metro cities for the first time, launching in Delhi and Gurugram—and the competition is fierce. Bottled craft beer is an increasingly crowded segment, and Simba is just one in a slew of brands that launched in the past three to four years.

At the same time, the overall beer market in India is on the decline. And on top of that, liquor regulations in India are notoriously difficult to navigate, varying wildly from state to state. As the (supposed) Chinese proverb goes, interesting times.

A drunken dream (and other stories)

Every bar in every city stands witness to countless drunken tales.



There’s one story which is incredulously famous. Friends meet. Drink a hell lot of craft beers, only to be inspired by the thought, what if this could be us. After all, how difficult could it be? It is just beer. We’ll make it, sell it, drink it, and once we strike it big, we will tell the world our rags to riches story. The morning after, things become a little more real. And what was once a great drunken tale fades into legend. Legend into myth. Myth into, we are too old for this shit.

Not with Bhatia though.

His family’s association with alcohol spans 60 years. His grandfather entered the alcohol retail business in 1947; later, the family acquired a company called Sona Traders (a liquor distributor) in the 1980s, the company which lends its name to Simba’s parent.

Not a drop to drink

Bhatia had never tasted alcohol before he started his research on craft beer in 2009.

In 2009, Bhatia was studying economics and finance at the University of Exeter, but he had other things on his mind—the craft beer revolution had just begun in the UK. He came up with the idea for his own brand and, during a trip home that year, he applied for a licence to open a brewery in Raipur.

Three years later, in 2012, he had finally got all the permissions. By 2014, he had set up the brewery, at a cost of Rs 60 crore ($8.4 million), of which Rs 40 crore ($5.6 million) came from a bank loan. Time to make some beer. Only, not Simba. Not yet.

Brew up

“A new brand wouldn’t have been able to use the entire capacity of Sona’s brewery, which was 150,000 cases (1.8 million bottles) a month and we didn’t have the money to burn,” says Bhatia The capacity has since been doubled to 300,000 cases (3.6 million bottles) a month.

"SABMiller made us efficient and eventually, taught us what optimal production is. It gave us a head start in business"

PRABHTEJ BHATIA, FOUNDER AND CEO AT SONA BEVERAGES

And so, Sona Beverages started out by contract manufacturing for the Indian subsidiary of SABMiller, the UK-based beer maker that was acquired by rival AB InBev in a $103 billion deal in 2016, creating the world’s largest beer company. For two years, Sona stuck to making Fosters, Haywards and Budweiser for SABMiller and learnt everything there is about manufacturing beer.

In 2016, the family exited the retail and distribution businesses, and Bhatia launched Simba in their home state of Chhattisgarh. He claims to have captured 50% of the entire beer market in the state within a year. In its second year, the brand moved to Goa. Immediately after that, Assam. In January this year, Simba expanded to Jharkhand, followed by Delhi and Gurugram in June and, as of two weeks ago, Bengaluru.

Simba, Bhatia says, currently sells 200,000 cases (2.4 million bottles) every month—80,000 in Chhattisgarh, 70,000 in Assam, 10,000 in Goa, 30,000 in Delhi and Gurugram, and the rest in Jharkhand.

In the year ended March 2017, Sona Beverages recorded a revenue of Rs 33.7 crore ($4.7 million) and a net loss of Rs 59 lakh ($82,523), according to the company’s regulatory filings, sourced from Paper.vc. The company hasn’t filed its financial reports for 2017-18 yet; Bhatia, though, says the firm has turned a profit, and revenue rose to Rs 76 crore, with Simba accounting for Rs 66 crore ($9.2 million), more than 10 times what it was the previous year. Sona exited the contract manufacturing business in March 2018.

Now, the company is targeting Rs 150 crore ($21 million) in revenue in 2018-19. By expanding its reach in the metros—growing its Delhi, Gurugram and Bengaluru business and entering Mumbai, Kolkata and Hyderabad.

Bring your own (craft) beer


Unlike in most countries, where beer accounts for the lion’s share of alcohol sales, spirits (excluding imports) lead the market in India with a 65% share by volume, followed by beer which stands at 34%, says Rajat Wahi, a partner at consulting firm Deloitte India. Of that 34%, craft beer accounts for only about 1-2%.

45 million hectolitres

The size of the Indian alcohol industry, of which beer accounts for 15 million hectolitres, according to data from Deloitte.

And the past two years have not been kind to the Indian alcohol industry. Growth slowed in the wake of demonetisation, a Supreme Court-ordered ban on liquor sales near highways and all-out prohibition in Bihar and growing calls for the same in states such as Tamil Nadu, as well as a hike in excise duties in Maharashtra.

Beer, in particular, was hit hard, as consumption fell 0.4% in 2016—the first decline ever—and about 10% in 2017, according to Deloitte.

The silver lining that industry executives are betting on is that the fall in consumption is mainly in the lower end of the market. “The consumption is impacted in the mass beer segment, not in the premium ones,” says Bhatia.

Craft beer, which primarily falls in the premium segment, is growing at a good pace, says Deloitte’s Wahi. Little surprise then that it has become a gold rush.

Launched in 2015, B9 Beverages-owned craft beer brand Bira dominates the bottled craft beer segment, and since then, many new craft beer brands have been emerging in the metro and tier-I cities, including Delhi-based White Rhino and Witlinger, and Mumbai-based White Owl.



The latest to jump on the bandwagon is none other than United Breweries, India’s largest beer maker, accounting for almost half of the overall beer market. In February, the company announced it would launch its own craft beer by the end of the year.

“In past few months, 21 home-grown brands have approached us to retail their beer. The consumer is evolving and there is certainly a demand, but we hope it does not become overkill,” says Rahul Singh, the founder and chief executive officer of beer chain The Beer Cafe, which has 35 outlets across 12 cities.

Hurdle, hurdle, hurdle


Everyone wants a piece of the pie but, as Singh puts it, not everyone understands the complexity of the Indian liquor market. For one thing, liquor is one of the most regulated sectors in retail, ruled by state laws—29 states, 29 different liquor policies.

Also, liquor distribution has its own challenges. “The game of alcohol is in distribution which needs political relationships. A good chunk of Indian markets are where the government is the sole liquor distributor. In the majority of cases, one needs connections,” says Arvind Singhal, chairman at retail consulting firm Technopak Advisors.

For Simba’s Bhatia, his family’s long history in liquor distribution gave him a leg-up, particularly in their home ground of Chhattisgarh. The tougher part came after. New states, new policies and new connections.

“Assam is working out well for us, but you need time and patience to build these markets, specifically because of government policies,” he says. It took more than six months for Simba to get a licence for Delhi and Gurugram. And a similar time frame for Bengaluru.

A further challenge for brands is that most restaurants and bars in metro cities charge them to place products at their outlets. “Discounting your product and losing money on it is inevitable in Delhi,” says Bhatia, adding that beer makers also have to pay an upfront amount of Rs 15 lakh ($21,024) a year for each variant to the Delhi government, plus import and excise duties. In Chhattisgarh, it comes to Rs 1 lakh ($1401) a year for each variant, plus duties, he says.

For Simba, its success in smaller towns and cities gives it a revenue stream it can use to bankroll its ambitious expansion plans. And Bhatia’s grounding in liquor distribution may help the firm weave its way through the jungle that is the alcobev business.

But it’s not alone, and it’s an uphill climb to profitability in the metros.

Take the case of Bira maker, and market leader, B9 Beverages, which is backed by venture capital firm Sequoia Capital. In the year ended March 2017, Bira’s revenue grew more than sevenfold to Rs 31.9 crore ($ 4.4 million) from Rs 4.1 crore ($573,466) in the previous year. At the same time, its losses mounted, rising from Rs 12.3 crore ($ 1.7 million) to Rs 55 crore ($7.7 million). Evidently, you need deep pockets to run in the big cities.

“I will build the brand my way, with a bottom line as strong as the top line. Yes, we will have an external investor because we will need one to grow. But on our terms,” he says confidently. “We will survive (and thrive) in metro cities and in a few years, we will have an IPO too.”
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