This is an audio transcript of The Morning Brief podcast episode: The Hot Business of Chilled Beer: From Pint to Pub.​

BG Sound 0:01
This is the morning brief from the economic times.

Ratna Bhushan 0:14
Sounds of a bustling bar. As you know it's Friday. As we close out this week and agreeably it's not been a hectic one given the festive break, I decided to pour into the hottest business in town, chilled beer. candid and cold two beer buddies who have converted their love for beer into a booming business Ankur Jain of Bira 91 and Rahul Singh of beer cafe, the two made headlines when they sealed an all stock deal with Bira 91 buying out the beer cafe. But as they tell me in the interview ahead, even though it's been fun, it's not all party Here is a sneak peek.

Rahul Singh 1:03
It was almost like going back to B School and by B School I mean beer school, you need about 20 different licenses in Delhi to actually serve a beer. Whereas if you want an arms license, you only need 12 different documents.

Ankur Jain 1:16
It's very difficult to dislodge established beer businesses. I think it's actually a business where time horizons needs to be much longer than what traditional investors are able to offer.

Rahul Singh 1:27
You don't get private equity in this business. When you start off mortgage my house, you know that I was living in to Cologne, and then that's how it has happened.

Ankur Jain 1:35
I think hopefully both Rahul and I and now together are at the cusp of something really, really massive.

Ratna Bhushan 1:40
It's Friday, October 28. I'm your host Ratna Bhushan from the economic times and you're listening to the hot business of chilled beer from pint to pub. It's happy hour here on the morning brief. And I have with me Ankur Jain, the founder of beer 91, a brand that clearly needs no introduction. Welcome, Ankur.

Ankur Jain 2:06
Thank you Ratna.

Ratna Bhushan 2:07
Also joining us, Rahul Singh, Chief Executive of the beer cafe to complete our pint to pop conversation. Good to have you with us here, Rahul.

Rahul Singh 2:17
Thank you Ratna. Good morning.

Ratna Bhushan 2:19
Ankur. Let's start with you. An out to out beer lover.

Ankur Jain 2:21
That's the only way I could have sustained this business. I love beers,

Ratna Bhushan 2:25
of course. But Ankur You returned to India in 2007 and started a beer import business launch of Beer 91 came only eight years later in 2015. Was the delay by design or was getting funding an issue back then?

Ankur Jain 2:41
It was both in a way right. I think at least for me, I do not come from a background of beer. I'm a technology guy by training. My first venture was in the healthcare space. And it was only because of my love of beer that I decided to start a venture in the beer space in the first five years of my life prior to Bira 91 were actually at import and distribution company which I had founded focused on craft beers. It was almost like going back to B School and by B School I mean beer school for five years before I launched Bira 91.

Ratna Bhushan 3:16
You began with a bang. They was catchy branding, there were cold flavors, great taste. But you were going against a monolith called kingfisher. What made you dare to dream?

Ankur Jain 3:27
I think again, it was my love for beer. And the fact that there is so much opportunity to really change what the Indian consumers are experiencing when they order that pint of beer. And that's when we started first with a wheat beer lager. And now we have an unprecedented portfolio. We make about eight different flavors of beer that are available countrywide. We release a new beer every week in our tap rooms. And that innovation sort of juggernaut continues.

Ratna Bhushan 3:59
Rahul bringing you in here. What about the challenges you dealt with to get beer Cafe up and running? There are stories that you know, investors were hard to come by. The concept of selling beer in a cafe itself was unheard of.

Rahul Singh 4:12
Yes, very challenging, for sure. There's no doubt about it. But just to you know, just go back in time, first 15 years of my career life was in the clothing industry. I'm a textile engineer. When I decided to become an entrepreneur, I took a call into the golf industry, which was for the five years that I was in. And at that time in 2009 in that golf business, I met with Ankur, and the kind of beers that he put together and the varieties were just mind blowing. And that's where I actually realized that, you know, beer can be such a fun and a product that, you know, this country definitely needs. That's where the beer Cafe kind of happened to me, but extremely challenging. But then my golf business had folded up and you don't get private equity in this business. When you start off. You don't get bank loans, especially for a concept which is evergreen beer and cafe both are Very evergreen, but as a business, nobody would ever do that. So you usually borrow from friends and family. I come from a service background, my grandfather justice in the Rajasthab High Court, my father is an IIT engineer work in the same industry. Nobody's ever done business in our lives. I'm the first set of people who actually gotten into this. But yes, mortgaged my house, you know, that I was living in took a loan, which is called loan against property. And then that's how it happened just open four or five outlets without even thinking, you know, what's gonna happen and and then the venture capitalist came knocking and then, you know, it's been 10 years. And here we stand.

Ratna Bhushan 5:34
I want to pick on that the difficulty to raise funds. Ankur, I was reading one of your previous interviews when you said it was tough to raise funds in the beginning. There was also a supply demand mismatch and a fallout with one of the bottlers. Of course this was all, you know, some five to six years back. So what are the lessons you carry from there?

Ankur Jain 5:54
I think this will always remain a sector that in which capital is difficult to raise. And this is not just true of India, I think it's true. Globally, there are very few beer businesses that have been funded by what one would call traditional private equity or, or venture players. Paradoxically, there are a ton of billionaires who own beer companies. So I think it's actually a business where time horizons needs to be much longer than what traditional investors are able to offer. But once you get there, these are also businesses which almost have an annuity that is perpetual, it's very difficult to dislodge established beer businesses. And I think hopefully, both Rahul and I, and now together are in a cusp of something really, really massive,

Ratna Bhushan 6:41
something massive is brewing for sure, the funding scenario has changed dramatically Ankur for you, and it's frothing over if the grapevine is to be believed, Japanese beverage firm kiRin, already an investor with you is now looking at a bigger investment, a $70 million cheque is the word on the street. That's a whole lot of investment. So what would it mean for Bira.

Ankur Jain 7:03
I cannot comment on specific fundraising events. But needless to say, we are a fast growing company, we have a large ambition, and we're targeting a very, very large space that's dominated by incumbents. And so fundraising is a natural outcome of the type of growth that we anticipate and are delivering in our business. Our ambition is to really redefine what Indians consider to be premium beer. And in that endeavor, I think we're putting together all of the resources that are required, starting with brilliant team capacity, capital, and everything else that's involved.

Ratna Bhushan 7:42
Ankur is an IPO brewing anytime soon.

Ankur Jain 7:45
I've always maintained Rata, that an IPO is a logical outcome for a business with our scale or potential scale and our ambition. As I mentioned, the true ambition for us is to really redefine what Indians define as premium beer or considered to be premium beer. And in that process, and if you're successful in that endeavor, we believe that we'll be able to successfully challenge much larger players in the industry. And as we sort of go about doing that, in my view, that outcome is not three or four years of age, maybe five or 10 years away. And therefore, it naturally means that Bira 91 and the entire B9 family now would need to remain independent for that thesis to play out,

Ratna Bhushan 8:34
even as hopeful investors await for more on that. Rahul, let me come to you. Many are very excited about the current deal of Bira's buy out of Beer cafe. The deal comes at a time when dining out and socializing is back to double digit growth after two years of pandemic stress. What's your scale up plan for beer cafe? Now,

Rahul Singh 8:54
this match was meant to be and what's meant to be will always find a way, the way we look at this is that India has almost 30 states, you know, where allow alcohol beverage is allowed as a retail or service. So our ambitions are to be a national chain, which we already are. So we will continue to grow in each and every state one step at a time. So there's no numbers to disclose at this point in time, because we've just come together. And I think over the next two to three months, that's where our strategy will play out. But it's going to be a complete national rollout for sure.

Ratna Bhushan 9:22
So Ankur what changes for Bira 91 I remember a recent chat when you said that with the deal in place you want to foster beer culture in India. What does that mean?

Ankur Jain 9:32
Before there was beer cafe or before there was even Bira 91 Rahul and I had met and we bonded over great beer. And perhaps through some of those interactions. Both of us decided to change beer culture in India he chose to execute we have the beer cafe. I started Bira 91 And I think it's sort of a homecoming for the both of us in that joining forces to ensure that we can serve Indian consumers better bring more innovation for consumers.

Ratna Bhushan 10:02
Okay, Rahul, at the time of the deal announcement, you also said you're looking at making private label beers. You already sell about 50 brands at your stores if I'm correct. So going forward, the logical question is that will you have more private brands at beer cafe, overseer Kingfisher, or a Carlsberg?

Rahul Singh 10:21
Look, the beer Cafe is known for its democracy of beers, which basically means that we are here to deliver a promise to consumers to have the largest variety of beers under one roof. And this is to suit every pocket and occasion.

Ratna Bhushan 10:35
Rahul Bira 91 And your old brand the beer Cafe will they not have an edge at beer Cafe outlets.

Rahul Singh 10:42
In our case its a menu which drives in so the way we write the menus are always alphabetically and price. Bira starts with B. So they will have an alphabetic order for that there'll be a beer with a which will our alphabetic elixir priority on on the on the little bit.

Ankur Jain 10:58
And Ratna, if I can just add here, it's really important for us to reiterate the point that the beer Cafe will always remain extremely neutral, especially when it comes to product selection. As Rahul said, the consumer decides what they want to drink. And there are great beers that are being made by our peers in the industry. And we for one would not would never want to deprive consumers of those great beers.

Ratna Bhushan 11:25
That brings me to my next question. And I'd like you, Rahul, to address this. The acquisition gives Bira 91 retail presence to beer cafe's 33 stores for beer cafe, you get access to Bira's innovation pipeline and supply chain network across 15 countries. That's a lot of scale. But how far can you go in a sector that's so highly regulated and heavily taxed?

Rahul Singh 11:46
So there are paradoxes that play out here, you know, to start with, obviously, the Constitution seeks for a complete prohibition of alcohol across the nation, which you know, and that's why it's a state policy each states takes their own. Having said that, each state also understands that, you know, the alcohol beverage sector provides a huge amount to the exchequer's. And obviously, there is no way that they will let that go. There are certain states which will have total prohibition, like for example, Gujarat, and Bihar, and there will be different kinds of regulations when it comes to each and every state. But the way it works is we for us, each state is a step. And every time we enter a state, we understand the law, we understand the you know, the supply to what we call the route to market supply chain. And once you've addressed that state, we go deep into that state. And that is how we would do this, India is definitely you know, a lot of countries within a country when it comes to alcohol beverage. Having said that, there are other challenges too, you know, it's just not the challenges which come from the regulations. It's also that the real estate has a paradox in the restaurant business, we do have a third world sales with first world rentals, you know, and our business definitely dependent on location. And, and that is where it is. So there's a lot that goes on in creating a beer cafe, in terms of not just the physical infrastructure, but the entire, you know, right from getting the licenses to making sure that we have the right location, and then obviously, the skill set of all our team and then the route to market for all the beers that we try and aggregate. So it's a lot of work. And it continues to do that. And, you know, with Bira 91, I think this will become you know, what I call a more powerful route to market than ever.

Ratna Bhushan 13:16
Rahul in one of your previous interviews I was reading you also called regulation, like as a pet peeve. So, would you like to elaborate a bit on that?

Rahul Singh 13:26
Look, regulations in alchohol beverage across the world are pet peeves. You know, if you're running a business, like for example, let's say ive to open a coffee shop in India, I just need an online tax ID I get an F sign number and boom, I open the doors. But when it comes to running an alcohol beverage, it's you know, many times we have shown that that you need about 20 different licenses in Delhi to actually serve a beer. Whereas if you want an arm license to actually process a gun, you only need 12 different documents. So yes, it is a heavily regulated industry. And it will continue to do so. But you know, we've taken this choice that we want to be in this industry. This also becomes a mode for us. You know, not everybody will just wake up in the morning says let me open a alcohol beverage bar or a cafe. It's not that easy.

Ankur Jain 14:09
Yeah. And just to add to that Ratna, the beer business in general, whether it is at the supplier level, or the brand level, such as with Bira 91, or at the wholesale level, or at the retail level, like with our hole at the beer Cafe is a business that is difficult to scale. But it is also a business off scale. The kind of margins that are there in this business are far ahead of any other category. And part of the reason is that there are so few businesses that are actually able to scale and deliver their goods to consumers. So I think both Bira 91 and beer Cafe seemed to have figured out how to scale businesses across geographies. And I think that's a very very important competitive advantage for for both

Ratna Bhushan 14:59
Rahul tell me In terms of easing out of policies and regulation over the last 10 years has it eased out and I mean, what is your expectation on that front from the government and various state governments,

Rahul Singh 15:10
July 2017 is when the GST got rolled out and you know that GST was unbelievable reformative concept that came into India. And one of the things that is not part of GST is the alcohol beverage. So the state depends on alcohol beverage to add on to the revenues. And it is an important sector for them. And each state is actually going out of their way now to I'm not saying to promote alcohol, beverage, but create revenues for the state in a way that it becomes an ease of doing business, the whole ease of doing business starts with the center, but states definitely incorporate that. And what we've seen now is that each state is getting far more digital in nature. Some states will also allow e commerce of meaning delivery of liquor, but it's all becoming an pretty digital way. Having said that, the challenges remain because you still have to run pillar to post, you know, to get your licenses. But once you've gone through that compliance group, you reach a place where it's then business as usual. And that's what it is. But yes, if I would go back 10 years and now remarkable changes happen.

Ratna Bhushan 16:11
Talking about remarkable change Ankur, you set a very high standard for Bira since the time you launch the brand. How sustainable is it in the long run? I know they're like big investors, which have you know, putting money and more fundraises is expected soon. But sustaining in the long run at a time when there are many newer players. There's a simba, there's gateway and many others. So, you know, how do you continue this run?

Ankur Jain 16:37
I think when you look at the size of the beer industry today, it's about $8 billion, growing at a 10 - 12% value CAGR expected to grow to about $20 billion by 2030. And Ratna just to put these numbers into context, this is almost 1.5 times the size of all soft beverages put together. So whether that's ready to drink branded juices ready to drink carbonated soft drinks, ready to drink tea, or coffee based beverages, all of them are smaller than beer, and are not growing as quickly. So this space is massive. And we've always been an ambitious company, I think we can afford a little bit of delusion because we believe the DNA of the company is that you have to have your moonshots right you rather aim for the stars and fall short than aim for something that's more manageable and meet those targets.

Ratna Bhushan 17:33
Very, very interesting Ankur the comparisons with other beverage sectors as well tell me how many breweries do you have now? And what kind of CapEx are you looking at going forward?

Ankur Jain 17:44
We today have five breweries that are operational. We will add a couple more in the next 24 months. And our intent is to double our capacity from where we are today from about two and a half million hectoliters to about 5 million hectoliters.

Ratna Bhushan 17:59
Okay, so the sector seems to be brimming with potential, the challenges stay, and so does much of the red tape. But then the consumption data and the outlook seems very robust Beer 91 and beer Cafe have narrowed their losses according to you know, latest regulatory filings, which I was just skimming through before this interview Rahul, what's your consumption outlook for beer as a sector,

Rahul Singh 18:24
like Ankur had put the numbers together from a retail price point of view, it's already an $8 billion industry, which will gallop up to 20 billion by 2030. We will be if not the second at least the third largest country in Asia for beer consumption. And the beer consumption happens at retail level as well as the service level, the hospitality sector which is the hotels, restaurants and catering, which is what the beer Cafe is part of I just you know if you've seen the proliferation of the products, meaning the service brands in the chai and the coffee industry beer Cafe is definitely much smaller than them at this point in time. But as people drink better beers as we get access to more markets, I just see this score at least 5x From where we are today.

Ratna Bhushan 19:11
chilled beer is surely hot business. Rahul, what's your assessment?

Rahul Singh 19:15
Category wise we know beer is growing in value from 10 to 11%. CAGR volume wise six to 7%, which means, you know, people are drinking better and more premiumization is happening. So the value wise the beer industry is growing at when it comes to the sector that the beer Cafe belongs to that's called the PBCL sector, the pubs bar cafes and lounges we will be having a report which the NRI is bringing out by next year, we missed the Two years of COVID. So the numbers will play out but I can tell you looking at what our numbers today are compared to pre COVID. We've obviously already done a double digit growth. So the good part is that people have come back with a vengeance. People are going out and having a great time with their families and friends, which is what the sector that I belong to the way i look at the sector, we feel that the sector will contribute to at least 12 to 15% of the entire the restaurant sector, the food service sector in India.

Ratna Bhushan 20:09
My last question is for you Ankur. Do you see craft beers, like the category you play in as the future of beer in India, because there are new varieties. And there's a lot of blend of, you know, traditional flavoring also happening. So is that sector growing faster than the conventional? So to say, beers, which we knew 10 to 15 years back?

Ankur Jain 20:30
That's a great question Ratna. And I think it really goes back to the thesis that both Rahul and I believe in, which is that, for this generation of consumers beer means flavor. Beer, perhaps is the only large category that has been devoid of innovation and diversity for a large part of the last 70 or 80 years with an absolute dominance of mass market lagers. So you pick any global brand. And most likely, the beers taste very similar. They're in the same beer style. They have similar abv and so on. No other category in food or beverage has such a lack of diversity. And when we look into the future, we believe that there is just so much exploration that needs to be done that needs to be brought forward for consumers in India and globally. And people asked me to make comparisons and asked me, Hey, what's the size of the craft beer market would be in five or 10 years? I tell them, this is going to be the entire beer category. lagers are going to be an important style that consumers consume. But those days when laggers are 95% of beer that's consumed in the world. They're gone. I think, at best loggers may stabilize at 35 - 40 - 50% Over the next couple of decades and the balance 50% of beer that's consumed in the world is going to be non lager. So that's the way we look at the world of beer playing out over the next couple of decades. And hopefully we can play a small part in driving that change.

Ratna Bhushan 22:02
Okay, fabulous. And thank you so much, Ankur and Rahul for joining us.

Ankur Jain 22:08
Thank you Ratna.

Rahul Singh 22:10
Thank you Ratna.

Ratna Bhushan 22:11
The Name Bira 91 came from the Punjabi word Bira, which means elder brother. Bira also means Brave One in Bengali, and 91 represents India's country code to resonate with the brands in Jeunesse the reverse B in the logo represents irreverence. Bira surely started with that, importing the product from Europe at a huge cost to the company's balance sheet. The alcohol business is among the toughest to crack, very high entry barriers and yet, innovation by the craft beer brewers across the nation is giving a taste of success to the startups. Even Bira that gave others the courage to brew is now facing stiff competition from nimble footed rivals from Chhattisgarh, Goa and Maharashtra. In between Bira too went waywards splashing on brand building expensive sponsorship expansion to global markets that did not yield the desired results. Delays in scaling up manufacturing locally and challenges in maintaining the original taste with homegrown ingredients also added to the headwinds. Even small batch brewers created a niche while Bira lost much of its oil hutzpah or so it seemed but with the backing of a Japanese behemoth like Kieran. There is a heady concoction that is getting brewed for sure. From pint to pub, the business of beer is definitely one to watch out for. On that note, this is your host Ratna Bhushan signing off. Thank you for tuning in to the morning brief. And here's hoping you have a fabulous weekend.

Ratna Bhushan 23:56
This episode was produced by Sumit Pande sound design, Rajas Naik executive producers Anupriya Bahadur & Arijit Barman. The morning brief airs every Tuesday, Thursday and Friday. Do listen like and share this episode. The morning brief is now streaming on all your favorite podcast platforms. Credits and disclaimers are in the description.

BG Sound 24:20
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