During the beery explorations that resulted in The World Atlas of Beer, Tim Webb and I hit upon the two markets we consider most important to the future of brewing world-wide. Not craft brewing, mind, but brewing in general. They are China and India.
Neither has high per capita consumption levels – China drinks about 34 litres per person per year, while India languishes around one, yes, one litre per head annually – but both are growing markets and one, China, already produces more than twice as much beer as the second largest brewing nation in the world. India’s production sits at a very modest 26th place globally.
But beer consumption is growing, slowly, in both markets, partly because increased affluence allows for greater purchasing power among the middle class.
India, however, is primarily a spirits market, as evidenced by the fact that United Spirits, the country’s top distiller, is also the number two spirits company in the world when measured by volume of product sold. And now Diageo is poised to take control of it.
With an offer of $1.8 billion on the table, Diageo is expected to assume majority control of United Spirits and thus gain ownership of a vast portfolio of brands and, perhaps more importantly, access to an expansive distribution network for its own global brands. This will place the world’s largest drinks company in a steel cage match for market presence with its chief rival, Pernod Ricard.
It will also likely put on hold for possibly several years any significant growth in the Indian beer market. Why? Because with two spirits behemoths going head-to-head in what is primarily a spirits marketplace, there is likely to be little room left over for beer growth, especially when the inevitable marketing and price wars heat up.
The good news in all this is that I’m told reliably that a small but enthusiastic craft beer market is just beginning to develop in India, the existence of which will probably not even be noticed by the two Goliaths hammering each other for market share. Bad news for A-B InBev, SABMiller, Heineken and the rest, but good news for the small minority of Indians thirsting for good beer.
6 Replies to “Global Craft Beer Future – India”
I would be pretty shocked if Indian beer ever becomes more than a very niche product there. When you have 1.3 billion residents, the gross market potential is attractive, but India not only doesn’t have a beer culture, it has sort of the opposite. As you mention, liquor is the potent potable of choice, but it is almost entirely a middle-class and upper-middle-class phenomenon. These are less traditional urbanites who tend to sidestep tradition. In rural areas and among the middle-class and poor, drinking is a shameful practice.
Beyond that, it’s really expensive. Keep in mind that the majority of Indians are poor enough that food and shelter are at risk. A single beer costs more than a day’s wage for many people–and that’s mass-market lager. (I think it’s one reason liquor is popular; it’s a far cheaper way to relax.)
It’s possible to nudge per-capita consumption up a notch, but there’s an absolute ceiling, and one I would put pretty low. If India’s economy transforms such that they have a broad middle-class with incomes in the $15,000 a year range, you might start to see the number tick up, but those days are sadly well in the future.
If you look at the various projected economic models for India, Jeff, the middle class is uniformly expected to boom over the next decade-plus, by some estimates expanding to as much as 40% of the population as a whole. That’s why Diageo (by most analyses) grossly overpaid for control of United Spirits and why, when cities like Bangalore legalized small-scale brewing, license offices were overrun with applicants the very first day.
You make some interesting points so far as culture and mores go, but as Mr. Dylan once sang, the times, they are a-changin’. And in India’s case, fairly rapidly.
I agree with Jeff. I would be quite surprised if small-scale brewers in either country ever amounted to much.
Also, I’m not quite clear why you wrote “Bad news for A-B InBev, SABMiller, Heineken and the rest…”
Heineken already has a fairly significant business in Asia. For example, they are majority holders in Asia Pacific Breweries (http://en.wikipedia.org/wiki/Asia_Pacific_Breweries).
AB-INBEV has no less than 12 breweries in China, but none in India.
I suspect that if, as you believe, the times are a-changin’, that the industrial breweries are either already in place to take advantage of any change in the market or are rich enough to buy up whichever company they feel would give them the clout in that country.
BTW, is there any history of beer brewing in either of these countries?
What part of “Global Craft Beer Future – India” do you not understand, Mike? China is referenced as part of the intro, but is a whole different can of worms, to be addressed separately. The story specifically focuses on the coming spirits competition in India, which I postulate will leave little room for growth in Big Beer in the near future, hence the bad news for A-B InBev, SABMiller, etc.
And since you ask, there is no significant recent history of brewing in either country, although recent archeological digs have provided some evidence that brewing may have started in China rather than what is now the Middle East.
Stephen, I would really love to believe those rosy estimates of India’s growth. I just don’t see it happening. I’ve been traveling to India every few years since 1988 and lived there off and on in the 90s for a couple years. We could get into long back-and-forths on this, but I don’t actually want to argue against India’s economic growth. There are so many structural barriers (infrastructure and corruption being the most intractable) that I can’t see how this would happen.
But I’m prepared to sign on with the rosy estimates! Because the other side is that it’s never wise to bet against India. It’s in many ways the most diverse country in the world (16 languages, three major religions, etc) and despite being a huge, unwieldy place with huge poverty and illiteracy, it has nevertheless maintained one of the most robust democracies and has, unlike so many developing nations, a real, functioning judiciary. In terms of structural supports, these are profound. I love India and feel a bit like it’s my home away from home, so it’s hard not to root for it. (Still, if I were a wealthy man, I’d put my money into liquor, not beer.)
Your last line is key to my view, Jeff. I don’t expect craft beer to boom in India, especially in the face of the Pernod-Diageo battle looming, but I think the liquor giants will make it so tough for the big brewers that the new small craft brewing segment will left to itself.
And as you note, it’s never wise to bet against India. Stranger things…