Dec 3, 2008

Business - Q&A: Raja Mukherji, CEO, InBev India

Suvi Dogra

Q&A: Raja Mukherji, CEO, InBev India

Belgian beer major InBev entered India with 49 per cent stake in a joint venture with Ravi Jaipuria-promoted RJ Corp in 2007. But it was only by July this year that the company introduced its brands in the 158 million-case a year market. InBev India CEO Raja Mukherji spoke to Suvi Dogra about the company’s India strategy.

What is the business model you have adopted for India?
We have two business verticals in India. One imports our brands and the second is for brewing brands locally. India has a big market for imported brands. We started operations in May this year and by the time we got the Customs clearances, it was July. Yet, we are now present in over 200 outlets in four markets — the National Capital Region of Delhi, Mumbai, Bangalore and Goa. We have already introduced four brands — Beck’s, Stella Artois, Leffe and Hoegaarden — from our global portfolio in the country. This vertical has done well in terms of volumes as the acceptability of foreign brands is increasing and so is the willingness to experiment beyond mild or strong. Through our second vertical, we have introduced our locally produced brand, Tennents Super. The brand operates in the same category as Kingfisher Strong and Haywards 5000.

Is InBev looking at introducing new categories of beer?
The market for flavoured and different varieties of beer, ale etc is still in a nascent stage in the country. The positive response to our Hoegaarden brand, which is a wheat beer and has a unique coriander and orange flavour, has proved that there is potential for growth. By introducing new categories and flavours, we can create a distinct identity for our brands. InBev will roll out more variants for Beck’s and also bring our cherry and lime flavour offerings to India.

Will this strategy translate into volumes?
This strategy will help us build brand recognition. For volumes, however, the focus will have to be on the traditional categories. The Indian beer market is dominated by the strong beer (alcohol content more than 5 per cent) segment. The category already has some established names fighting for marketshare. To be relevant, we need to dominate the category we are operating in. In most states, strong beer dominates. It is only the urban centres that are opening up to mild beer and other varieties. To make a dent in this category, we have to fight outlet to outlet and bottle to bottle.

Since you have dedicated one vertical for developing local brands, will you brew international brands here as well?
InBev India has entered into long-term bottling agreements with Bangalore-based Dasappa & Sons and Madhya Pradesh-based Regent Breweries. Considerable investment has been made to upgrade the breweries to InBev’s global standards. Our Scottish beer brand, Tennents Super, is already being brewed here. We will start the trials for brewing Beck’s in the Bangalore brewery, where we have spent around Rs 17 crore to upgrade and change the process line. For Stella Artois, we may look at pursuing greenfield breweries. Hoegaarden and Leffe brands will not be brewed here.

In a cricket crazy nation, doesn’t it make sense to associate with the sport or any other similar opportunity?
Twenty-twenty cricket is the flavour of the season. There is a T20 craze we would like to enact upon. We will roll out some local initiatives in Karnataka in February and March. The entire concept of Tennents is built on the platform of friendship and a good time with friends. We already have an online presence with www. and even a Tennents jingle.

Do you think there is an opportunity in the canned beer segment?
Maharashtra, Delhi and Karnataka are outgrowing bottles. Here, more than 12 per cent of the total beer volumes come from cans. Other markets like Haryana and Uttar Pradesh are following the trend. Hence, we have put a canning line in the Bangalore brewery to feed the demand.

What is your growth expectation from the first year of operations?
We have sold 2,000-odd hectoliters of beer and we see sales of 3-4 times the number by next year. Even though the industry has grown by 8 per cent against 20 per cent last year, the potential for strengthening our business is great. We are expanding into markets like Chandigarh, parts of Punjab, West Bengal, Andhra Pradesh and the North-East.

How will operations in India change after the global agreement for InBev and Anheuser-Busch to combine, creating the world’s largest beer operations?
It is still early days. We must wait for the entire deal to conclude. Hopefully, the picture will be clearer before the year ends.

What brand building initiatives will you undertake, especially as liquor advertising is not allowed?
We need to propagate trials and provide the right brand experience that will lead to a purchase and repeat purchase thereafter. Despite charging a considerable premium over other brands, we have raked considerable market share in markets like Madhya Pradesh. We have also tied-up with the Taj group of Hotels for our beer. We are the first company in India to import tap beer. Both Stella Artois and Hoegaarden are now available in this format in select locations and are in huge demand. If you expect a marketing exercise, wherein we rope in a Shahrukh Khan, that won’t happen, because our line of business functions very differently.