India is the toughest beer market in the world. The regulatory web is complex and stifling, mass-media advertising is not allowed and over three-fourths of the market is with two companies, United Breweries and SABMiller. Several smaller players who entered the market have either had to shut shop or sell out to one of these two. Into this tough-as-hide market has stepped Carlsberg. It has put out three brands: Carlsberg and Tuborg in the mild segment, Palone in the strong segment. All the three brands have begun to sell over a million cases each. But there is still a long way to go. How has Carlsberg planned its India innings? Carlsberg India Managing Director Pradeep Gidwani tells Bhupesh Bhandari.
Distribution is vital in the beer market. How many production units do you have in India?
We have got four units operational. We started with the basic premise that one of the key drivers for us will be quality. We looked around quite extensively and found that there are very few who can deliver quality in this side of the world. We found one unit which was built by the Germans (Himneel Breweries) at Ponta Sahib in Himachal Pradesh. We acquired it in June 2007. We then constructed two new projects — one at Alwar in Rajasthan and the other at Aurangabad in Maharashtra. And then we found two entrepreneurs who were setting up a brewery just off Kolkata. We then acquired 60 per cent of it. We have just about started work on our fifth project in Andhra Pradesh.
When we looked at all the research on the Indian beer market, we found that one of the key challenges was quality. We looked at different sectors and found that one which has changed significantly is the car market. About 20 years ago, you had just the Ambassador and Fiat. And then along came the Maruti 800 with some fine features like a side-view mirror and indicator. Everybody thought there was nothing better than this. In the last few years, the standards have gone even higher. The beer market is where the car market was five or six years ago. Suddenly, the consumer has got choice. He can decide what he wants rather than take what the thekedar (retailer) gives him. In making that decision, one of the key drivers is quality. And that made us think of taking quality as the key differentiator. That’s why we set up these new units.
The car market has one dominant player with over 50 per cent share. The rest is distributed amongst all others. So, is this the way the beer market will evolve?
Between United Breweries and SABMiller, they have 85 per cent of the market. Then you have a few regional players. What will happen is that the overall share of the large players will shrink and people who deliver quality will start picking up shares. They could account for up to 30 per cent of the market in the immediate future. In any part of the world, most of the big players do not have more than 10 or 15 per cent share. Nowhere do you have a situation like you have in India.
What market share will make you happy?
Carlsberg has a strong first, second or close third position in all the markets we are in. That would be the vision for the Indian market as well. In each of the markets we are in (in India), we have got to the third position in the mild beer segment in a span of under two years. We haven’t gone national, because the rules are such. In Tamil Nadu, you cannot sell unless you have a brewery in the state. Largely, we are in the North-east and West. There the share of Carlsberg and Tuborg ranges from 10 per cent to 11 per cent in the mild segment. In the strong segment, our shares are between 5 per cent and 7 per cent. In terms of value, we would be probably the third largest brewer in these regions. The vision is to be a pan-India player, though it will be one step at a time.
Where all is beer consumed in the country?
Off-premise (home) accounts for about 85 per cent of the beer consumption and the remaining 15 per cent is on-premise — restaurants, thekas, ahatas and permit rooms.
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How do you create a brand pull at the retail shop? Most buyers ask for beer and not a particular brand. The shopkeeper hands out whatever is stocked next to him.
Ho Chi Minh City with a population of about 6 million has 23,000 licensed outlets for beer. Shanghai with 15 million has 83,000. Mumbai with 15 million has only 2,300 and Delhi with a similar population has 700-odd outlets. That is why you get more people in each outlet. Therefore, the only way is to create a consumer perception of your brand, make it top of the mind so that he asks for your brand. And that’s a lot of hard work.
There are two types of buyers. One is the consumer who is aware and asks for a brand. Those are the middle and upper income groups as well as some of the lower income groups. And there may be a few consumers who go and say give me a beer. I think that number is reducing. When you didn’t have a choice then you said give me a beer. Five years ago, you didn’t have more than three or four brands. Today, there are over ten. At that time, there was more demand than supply and therefore the retailer sold whatever he had. Today, the situation is completely different. The consumer is the king today as supply is more than demand.
So, how do you ensure that the buyer asks for a Carlsberg and not just beer?
Our job as marketers is to go out and talk to the various consumer groups about our products and get them to taste our product. The reason why some of our brands have succeeded is that we have been able to draw consumer demand. Otherwise, this market is extremely complex.
Does point-of-sale display play any role?
Not really. A lot of middle and upper income homes don’t go to the shops themselves. They could, for instance, send the driver. Some shops in Mumbai even deliver at home. So you have a situation where the consumer pretty much knows what he wants. So the scope for point-of-sale promotion is limited. You have to get into the consumer’s mind somewhere else. The next level of consumer buys the beer himself. They can be influenced at the shop. Or you can influence then at the ahatas or the shops.
Then how do you promote your brand?
While retail margins are controlled (by the state government), you still have the opportunity to offer the trade some discounts linked to purchases. But we prefer not to go down that route. The second way is to create a consumer experience and then consumer demand. We have positioned our brands very clearly. Carlsberg is an all-malt beer — the first in the country — and we have positioned it as the Mercedes Benz of beers. It targets customers at the high end of the market — businessmen, senior executives and others. The second is Tuborg which is an entry point, easy-drinking innovation with a pull-off cap. It targets young adults and is about fun. Then we have got Palone which is a strong brand. It is the Nirma of beers.
Our next job is to reach out to these consumers. For Carlsberg, if there is a CEOs’ conference happening, we will be happy at the end to get consumers to sample our beer and build an association. We believe our beer is superior in quality and once the consumer tastes it, he is likely to stick to it.
How do you get people to sample Tuborg?
Here, we do a lot of stuff around fun. So, we are doing Tuborg Fun Nights at night clubs, trendy bars and discos. We are also doing a lot around offices. We can support parties. The more I get people to taste my product, the more I can convince them of our quality. Most of our advertising dollar goes into that.
Since Carlsberg had good brand recall, didn’t it make sense to go to the market with one brand and not three, of which two were totally unknown?
India is a different market. It is like the car market — you can’t go with just one offering. You have to have a portfolio. We know there are different drivers and different opportunities. We know there is space for a value brand here. If you can give them a good quality product at a good price, you can get some traction. And that’s what we have done with Palone. We also know that as more and more Indians travel abroad, they want an international brand and are willing to pay a price for the super-premium product. Our strategy is about having a portfolio, within that the underlying principle is quality.
Have you looked at the option of acquiring a local brand? That would have cut go-to-market time.
There are different approaches to entry. I go back to the car market. How strong are these local brands? Can they exist when you have true competition? We were not sure of those answers. And to pay a price for those brands was not a viable proposition. At hindsight, it appears to have been the right decision.
Growth trough sampling can be a long and tedious process.
Out of the one billion people in India, 20 to 25 million drink beer. For mild beer, the number of people in the market will not be more than five million. For Carlsberg, my job is to target 1 to 1.5 million people. Out of that, up to 400,000 are likely to be in Delhi. Mumbai will have a similar number. So, there is a clear opportunity to go with a targeted approach. My approach with my team is that I am not going to give you a bazooka with which to shoot at 200 people; I am going to give you a rifle with 100 bullets, of which you should get 90 correct. Follow a targeted approach. If you look at the data, there are about 4 or 4.5 million cars in India, and that’s roughly the numbers are for credit cards. So there is some bit of correlation. That’s roughly our market too.