RISE OF KINGFISHER BEER IN INDIA

The presentation tells in detail about the biggest bottled alcohol in India - Kingfisher Beer.

1. HISTORY OF BOTTLED ALCOHOL IN INDIA

2. Colonial era in I nd ia saw a number of British and French Breweries. Alcohol was locally produced by the Indian brewers and it was called as ‘ Taadi ’. It was not manufactured for selling purpose globally or in whole India. Local alcohol was developed for specific villages or group of villages and it used to be consumed there itself. Manufacturing of glass bottles was a popular factory set up idea In that era but it was not produced for alcohol till late 1820s.

3. In 1830, Edward Abraham Dyer, father of Colonel Reginald Edward Harry Dyer of Jallianwala Bagh massacre, travelled to  India  and set up  India's first  brewery in Kasauli . It produced the  beer  brand Lion . United Spirit was founded in the year 1826 by Angus McDowell. It is Indian alcoholic beverage company and started as a winery thus making it the first winery of India in colonial era. Mohan Meakin Ltd was another company founded in the year 1855. It had headquartered in Ghaziabad, United Province. It was offering a wide range of products including alcoholic beverages, vinegar, malt extract, cereals, glass bottles, non-alcoholic beverages etc .

4. UNITED BREWERIES AND ITS BEGINNING

5. United Breweries is the unrivalled market leader of the Indian beer market with market share of 52% which is almost 3 times the nearest competitor. It has an extensive production footprint with 21 own breweries and 10 contract units providing Pan-India coverage. International beer brands Heineken and Amstel and import portfolio complement United Breweries' Kingfisher franchise. The UB Group was founded by a Scotsman, Thomas Leishman, in 1915, when he brought together Castle Brewery and Nilgiris Breweries (1857), Bangalore Brewing Co. (1885), British Brewing Corp. (1903) and BBB Brewery Co. Ltd. (1913).

6. United Breweries made its initial impact by manufacturing bulk beer for the British troops before independence, which was transported in huge barrels or "Hogsheads". The Group took its initial lessons in manufacturing beer from South India based British Breweries. At the age of 22, Vittal Malya  was elected as the company's first Indian director in 1947. After a year, he replaced R. G. N. Price as the chairman of the company. During the 1950s and 60s, the company expanded greatly by acquiring other breweries. First was the addition of McDowell as one of the Group subsidiaries, a move which helped United Breweries to extend its portfolio to wines and spirits business.

7. THE BIRTH OF “KINGFISHER”

8. United Breweries (the original name of the group) have a history dating back to 1857. The company came into existence as UB in 1915 with the merger of five small breweries . The Kingfisher brand was launched in the year 1980 ( the exact year of the birth of Kingfisher is not known,80's marked the real life of this brand). The brand was the brain child of the Ex Chairman of UB group Mr. Vijay Mallya . Reports says that Mr . Mallya went to work in Calcutta as a part of mentoring program under Mr. HP Bhagat. At that time the brands that were popular from UB stable was Kalyani Black label, Doctor's Brandy etc.

9. Mr. Mallya wanted to create an exciting brand and none of the existing brands did not impress him. He went back to Bangalore, searched archives and stumbled upon an old label with a Kingfisher in it. That marked the birth of the Iconic Kingfisher brand . And now, Kingfisher is a classic case of branding success. This brand can even be termed as an iconic brand. The brand is synonym with Beer in India. It is the largest selling beer brand in India commanding a market share of over 28% in the Rs 5000 crore Indian Beer market.

10. STEP BY STEP KINGFISHER ENTERING THE MARKET

11. After the grand launching of Kingfisher Premium, kingfisher Lager and the canned beer, Vijay Mallya decided to create an amalgamation of the breweries namely Punjab Breweries, Kalyani Breweries, Kesarval Beverages and High Range Breweries to integrate them into United Breweries.  After acquiring Premier Breweries in 1994, Bombay Breweries was acquired in 1996. The all-time sensational Kingfisher Strong was launched in 1999 and supposedly this was the foundation of rave success of Kingfisher. 

12. In the following year, Kingfisher acquired Mangalore Breweries and Associated Breweries. After acquiring Inertia Industries in 2001, Kingfisher changed its name to Millennium Beer.  By this time, Kingfisher had schemed to separate its brewery business into a new entity completely and hence, it started a partnership with McDowell Alcobev Ltd and Scottish & Newcastle UK and changed the name to MAPL –Millennium Alcobev Pvt. Ltd. Empee Breweries and GMR Breweries after being acquired by Kingfisher, became MAPL’s subsidiaries. 

13. A strategic alliance was set up with Scottish & Newcastle where it acquired equity shares and became equal promoter of UB. In 2005, Mangalore Breweries was partnered with UB and once Karnataka Breweries was acquired and amalgamated along with London Draft Pubs and London Pilsner Breweries. Full-fledged brewing under Greenfield Breweries helped in experimentation with new products like Kingfisher Blue (2008), Kingfisher Ultra (2009), Kingfisher Ultra Max (2015), Kingfisher Buzz (2016) and Kingfisher Storm (2017). Since 2007, the Greenfield Breweries had been in fully operational state in Khurda (Odisha), Chopanki (Rajasthan), Nanjungud in Karnataka, Naubatpur in Bihar and Sangareddy District in Andhra Pradesh. 

14. Heineken as promoter of the United Breweries since 2009, started operation in India under UB management. By 2011, MAPL along with its 4 breweries, Nizam Breweries, Associated Breweries, Ajanta Breweries, Chennai Breweries were amalgamated into United Breweries and Heineken Beer was also manufactured under its management. 

15. KINGFISHER’S BASIC MARKETING STRATEGIES

16. Kingfisher brand is a unique marketing success story because it thrived in an environment where liquor/ beer advertising was banned in India.  The brand directly talks to people who are easy going, chilled out person who's always willing to take a break and party with the friend but they are very professional and successful. During 1997 , the brand roped in Ajay Jadeja and Sourav to feature in the campaigns. In 1996 the brand become the worldwide sponsors of the West Indies cricket team. But the brand was conscious to keep Kingfisher the star . The West Indies team personified the brand values of fun loving but successful team.

17. The brand also have a 360 degree approach to promotions taping all possible ways to communicate with its target audience. The brand sponsors lifestyle events and the Kingfisher calendar has attained a cult status with in 4 years of launch. During early 2000s the brand logo got a make over and the Kingfisher started flying rather than sitting. The new logo signals the brand's vision to get to new heights. The new logo designed by Claassen was backed with lot of noise in the media. There were a few more changes to the logo which always was introduced with lot of market promotion. Logos itself became a marketing strategy for Kingfisher.

18. Changes in KINGFISHER’s LOGO since its launch

19. To circumvent the regulatory ban on surrogate advertising, the brand has launched into different categories like Mineral water and even into ready made taking a lesson from Wills. 2005 saw the UB group getting into the Airline business with its Kingfisher Airlines. The airlines became a brand to reckon with in a year because the brand lived to its expectation and promise. Positioned as a fun liner, the brand equity of the mother brand has been enhanced by this extension.

20. KINGFISHER’s MARKETING CAMPAIGNS

21. In Internationa l market, u nder the manufacturer United Breweries, Kingfisher also has its European branch named as Kingfisher Beer Europe Ltd or KBE which has its headquarters in Maidstone in Kent. Under the tagline of “The Real Taste Of India” this company pays tribute to its rich heritage and highlights the Indian signature recipe of brewing. Initially KBE sold only Kingfisher Premium but in 2016-17, its campaign led it to launch products like Peacock Cider (apple cider with Asian flavors), Pearl River Beer and Bintang Beer.

22. The campaigning for each product by Kingfisher have made it listed among the top brewing companies in India and the products thus campaigned over the years are – Kingfisher Strong brewed with authentic malted hops  Kingfisher Ultra campaigned for Indian Derby 2015-2016 Kingfisher Ultra Max in golden and black hues made from authentic Pilsen, campaigned for Dart Championship Kingfisher Storm with tagline of Live The Swag Life Kingfisher Buzz, malt-based beverage Kingfisher Blue campaigned in 2008 for adventures like Rishikesh- Chopta rafting, Delhi- Leh bike trip, Mt Everest Basecamp trekking and Watersports in Andaman-Nicobar Islands. 

23. Since 2003, with the support from ace model-photographer Atul Kasbekar , Kingfisher has been publishing its annual calendar featuring newcomer and renowned models in swimsuits and that too in exotic locations from Mauritius to French Riviera, Thailand to Australia, Andamans to Maldives and so on . The 2018 calendar shoot was done in Croatia and it features models like Ishika Sharma, Priyanka Moodley, Mitali Rannorey and Priyanka Kasrunakaran . The Kingfisher Supermodels, annual model hunt had started in 2010 and the calendar campaigning has been significant force in advancing modeling and acting careers of artists like Deepika Padukone, Katrina Kaif, Yana Gupta, Nargis Fakhri, Lisa Haydon, Bruna Abdullah and Karishma Kotak. 

24. PROBLEMS FACED BY KINGFISHER

25. 1). BOTTLE PROBLEM Apart from all the other things that go into making beer, there is one other element without which selling beer becomes virtually impossible and it’s the all important ‘Glass Bottle’. The glass bottle is an essential feature of most beer brands. Unfortunately though, they don’t come cheap. Bottles could form as much as 40% of the total raw material cost and companies spend considerable time and effort in trying to bring down this expense. Now, unlike most things, glass bottles can be reused.

26. Its much cheaper to reuse bottles than to make new ones. On average it costs about Rs. 10 to buy a new bottle whereas you could get a used one for as little as Rs. 3. The only catch — you need to convince the retailers to sell used bottles back to you. For United Breweries (UB) however, this turned out to be quite a challenge. Most retailers sold back used bottles to the highest bidder, not to the original manufacturer and competitors often bought UB’s used bottles by paying a premium (it was still cheaper to pay a premium for a used Kingfisher bottle than spend money making new ones).

27. This meant that the company lost significant sums trying to outbid competition in an attempt to buy back their own bottles, a rather frustrating endeavor. And that’s when they started patenting their bottles with embossments, which effectively meant competitors could no longer use them.  This helped the company bring down manufacturing costs considerably. On top of it, UB has also taken initiatives to introduce rain water harvesting and the likes to decrease consumption of water, in a bid to boost profit margins.

28. 2). NO POWER ON RAISING PRICES Multiple states have laws that prohibit beer manufacturers from raising prices unilaterally, which means any time there is an increase in input cost, the beer manufacturer has to bear the full brunt, until the state government finally decides to proactively negotiate or allow for price hikes. This isn't limited to input costs alone, instead it extends to excise duties as well. Excise is a duty charged on every case of beer the moment it leaves the brewery. On average, the company’s excise duty amounts to about 50% of its sales and this number has been constantly on the rise. But despite rising excise duties, state governments have been reluctant to let beer manufacturers increase prices

29. Take for example the case in Maharashtra. Despite increasing excise duty on beer last year, the state government did not allow for a commensurate increase in price. And then there are states that allow for price increases but charge excise duties so high that even the most hardened alcoholics move away from beer for a short while . In West Bengal this year, the company increased its price from Rs. 110 to Rs. 145 per bottle on the back of rising duties and the consumers promptly moved away, in some cases to country liquor. Each of the 29 states of India is a unique market with its own set of rules and regulations that keep changing with time. 

30. 3). ALCOHOL PROHIBITION IN INDIAN STATES Prohibition is the act of banning the manufacture, sale, and transportation of alcoholic drinks within a particular location. Gujarat is a state that has had prohibition in place for a good number of years. In Bihar, the chief minister enforced a state wide ban on alcohol. United breweries had little choice but to abandon production of alcohol and instead switch to non alcoholic beverages. W hen prohibition (outside of 5 star hotels) hit Kerala, the move sent shock-waves. Before the ban, the state had India’s highest per-capita alcohol consumption, at more than eight liters per person per year.

31. 4). BLANKET BAN DURING ELECTIONS Election season means a blanket ban on selling alcohol for designated periods as mandated by the election commission. There could also be a limit on the amount of alcohol a person can buy during this time. Sales are almost always affected. But what is particularly disconcerting for beer manufacturers is that a total of 10 states are poised to head to elections next year with the additional caveat of the General Elections.

32. Outside of the blanket bans, elections are also periods of extreme uncertainty. An opposition party might make prohibition its prime agenda while contesting an election, negatively impacting sales, while another party might offer massive incentives to the working class through subsidies and loan waivers, both of which could aid beer consumption. Its extremely difficult to forecast the real effect of state elections on beer production in the country except make an observation that the immediate future harbors extreme uncertainties.

33. 5). TRIPPLE TROUBLE OF 2017 In 2017, the country saw something spectacular — a rather strange sequence of events, all combine together to render a death blow to beer manufacturers — Demonetization, GST and The Supreme court highway ban. Both sales and Profits immediately took a nose dive. First, it was demonetization. Most people bought alcohol with cash and when cash was hard to come by, they simply stopped visiting their favorite bars. Then, GST. We won’t take you through the whole dynamics of GST and how it impacts beer prices. But let it be known that as things stand, beer is more expensive than it used to be.

34. The supreme court highway ban while in force prevented the sale of liquor within​ 500 meters of a highway and suddenly hundreds of outlets closed overnight. Fortunately for United Breweries things changed rather quickly. The effects of demonetization waned. The supreme court highway ban was restricted to only some highways and sales rebounded. While effects of GST still linger, it wasn’t enough to prevent a spectacular rebound and in 2018, UB was back. But the uncertainty involved in all of this left a bad taste.

35. BENEFITS OF INDIAN SUMMERS

36. India is a hot country during the summers. The first quarter of the financial year begins in April and continues through to June and a chilled beer provides the perfect respite from the scorching summer heat. This is true for months January, February and March -3 months that form the 4th quarter as well. During these months, breweries across India run at capacities close to a 100%. But then monsoon sets in.  Monsoons and winters (Q2 and Q3) are particularly damaging to beer sales. Sales almost always declines and most breweries are left with excess capacity that they simply can’t put to any good use which is why most breweries show capacity utilization between 60–70% — because business is seasonal.

37. KINGFISHER V/S OTHER BRANDS

38. Despite being the dominant player in the market, United Breweries is up against some stiff competition from the likes of Carlsberg and the Joint Venture of SAB Miller (Makers of Haywards &Royal Challenge) and AB Inbev (Makers of Budweiser and Corona). By now, almost all beer manufacturers are talking about premiumization — A phenomenon where an ever increasing portion of beer enthusiasts are shifting to more expensive beer. While UB has traditionally owned the markets for cheaper variants, its ability to hold sway in the premium sector is still suspect. Then there is the whole phenomenon of Craft Beer i.e. Bira 91 and although the definition of what constitutes craft beer is still up for debate, growth in the craft beer industry is expected to reach double digits soon.

39. KINGFISHER – THE KING OF GOOD TIMES ONLY?

40. United Breweries holds 52 % of the market share and happens to be one of the few beer manufacturers to be profitable. It must also be noted that consumption of beer is perpetually on the rise and the hope is that this trend continues. India provides a market opportunity like no other. While in most countries the proportion of beer sales as a percentage of total alcohol sales stands at 87%, in India, it stands at a measly 20%. Indians are more inclined to consume spirits i.e. whisky, rum, which form 78% of total alcohol sales. 

41. Heineken who currently own ~44% of United Breweries. When Heineken was plotting to increase their stake in the company back in 2012, they had a rather interesting set of numbers to present whilst elaborating on the Indian Beer Market. The bottom line is that Beer is expensive and not enough outlets sell them. The hope is that if government policies and tax structures are favorable, India could prove to be a valuable market for future expansion and thus Kingfisher is still the ‘King of Indian Market’. The brand has maintained international quality but made sure that it is with in the reach of the Indian consumer.

42. SOURCES 1). MOTILAL OSWAL’s ANALYST REPORT FOR DATA 2). WIKIPEDIA FOR UB HISTORY 3). MULTIPLE WEBSITES FOR REST OF THE PART

43. THANK YOU!