Companies
In pubs and homes, Bira’s beers were the toast of one & all. Then this happened
Summary
- Beer maker Bira wants to beat its bigger rivals—United Breweries, AB InBev and Carlsberg—in innovation. Ever had its ‘Mango Lassi’ beer or a ‘Kokum Sour’ variant? The problem: Bira is beginning to stutter. What can founder Ankur Jain do?
New Delhi: Earlier this month, Komorebi Music, a company run by Tarana Marwah, an independent music artist, put out a post on Instagram lampooning Bira 91 Taproom, a bar business run by B9 Beverages Ltd, the company behind the popular beer brand Bira 91.
The post alleged that Bira 91 Taproom had been “unprofessional and disrespectful" while cancelling an event in New Delhi it had agreed to host weeks before and reneged on the payment of advance and cancellations fees.
“Their reason for cancelling our show is that they are unsure if we as indie artists can pull in a crowd. The assumption was based on pre-event ticket sales, a metric that doesn’t ever match the final number of people that show up," the post, which tagged other independent musicians, further alleged. “In a half baked attempt to try and make things work, they asked us to reduce our fee to half of the original quote, so as to make sure they don’t incur any losses."
Bira 91 Taproom responded to the post, saying the artist’s statement has led to confusion.
“Contrary to their claims, our teams did not cancel the performance. We endeavoured to reschedule the event and offered several alternative dates when the artist management failed to fulfil its obligation to co-promote the event," the beer bar wrote on Instagram. “Regrettably, the artists’ manager withdrew at the eleventh hour and declined any discussions of re-scheduling."
The artist’s manager, according to Bira 91 Taproom, had agreed to co-promote the performance and attract a specific number of attendees. “Fair compensation" was agreed upon, through additional revenue sharing and gate fee.
But, by the time Bira 91 Taproom posted its response, the damage was done. Komorebi Music’s post had garnered nearly 3,000 likes and 250 comments. Several other musicians and businesses chimed in, claiming unpaid dues.
One of them was Shuchir Suri. He runs a business that curates luxury-focused events and offers marketing solutions. Suri posted that his company had not received dues of ₹1 crore from Bira, pending for a year.
Both Suri and Marwah did not respond to Mint’s requests for further clarifications. An email sent to Bira requesting clarification on Suri’s claims remained unanswered.
Late payment of dues is a recurring theme with B9 Beverages, which over the last few years has diversified into many businesses. Under the Bira 91 brand, the company sells beer, cider ale and seltzers. It once sold hot sauce. Apart from Bira Taproom, its bar business also includes The Beer Cafe.
Three vendors Mint spoke to said payments have increasingly been erratic over the last two years. One person who supplies advertising material to Bira said a payment of ₹25 lakh has been pending for nine months. He didn’t want to be identified. He approached many executives in the company, including the company’s vice president of supply chain, Nawlendu Ranjan, requesting payment. But nothing worked, he added.
“After Bira’s funding round last time, they paid us immediately and cleared all the dues. More recently, they simply say ‘we don't have any money to pay you’. Rula diya hai (we are in tears)," the person said.
The funding round he refers to came in 2023 when B9 Beverages raised about $21 million in total, led by Japanese beer company Kirin Holdings. In June this year, the company raised another round—$50 million—from Kirin Holdings, Peak V and Tiger Pacific among others.
Despite the funding, the company may still be tight on funds. Four distributors Mint spoke to said the shortage of funds is taking a toll on the availability of its beers. Anecdotal evidence suggests that its premium wheat beer is now perennially in short supply in Delhi national capital region (NCR) and other regions in north India. Meanwhile, the company’s losses have widened. Company filings sourced by Tofler, a business intelligence platform, show that in 2022-23, B9 Beverages incurred a consolidated loss of ₹445 crore compared to ₹396 crore in 2021-22.
The company that made urban Indians fall in love with craft beers—innovative beers that are made in small batches and with non-traditional ingredients—needs to pull itself out of this quagmire. The question is if it can brew yet another success from here on, amid growing competition, a changing industry landscape, and the complexities of India’s liquor policy landscape.
Why the delay?
We met Ankur Jain, the 43-year-old founder and chief executive officer of B9 Beverages, at his office in Delhi’s Connaught Place. His right arm was strapped—he suffered an elbow fracture from a biking accident in New York’s central park earlier this month.
When we probed him about delayed vendor payments, he accepted that there were problems. “In 2023-24, we did have pendencies across vendors which we are not very proud of. This has happened two or three times in the last nine years," he said.
“Working capital cycles are long, between 80-120 days. Whenever there is growth, capital infusion is required, which for a company like ours comes from capital raises. We have had situations where equity raises have not neatly overlapped with working capital requirements, which causes these delays," Jain explained.
He cited the example of the company’s planned capital raise in the third quarter of 2023-24. It spilled over to the fourth quarter.
Jain exudes confidence that things are getting better. “95% of that (pendencies) is solved and I would say that the remaining 5% will normalize this quarter. Our suppliers have been supportive," he said.
In 2022-23, the company touched $100 million in revenue, the founder said. Even then, the margins and the revenue it targeted, were not met. “We realized this early that year. But couldn’t disambiguate whether it was a challenge because of the industry or us," Jain said.
Indeed, a lot has changed since he started the company nine years ago, in 2015.
Pandemic’s curse
In its initial years, B9 Beverages imported craft beers from Belgium, focusing more on wheat beer. It found ready acceptance among India’s young, upwardly mobile population in cities. They were eager to experiment and had the disposable income to pay a slight premium over traditional beers. From 150,000 cases (24 bottles or about eight litres make one case) in 2015, the company’s sales rocketed to 2.6 million cases in 2019, a year before the covid-19 pandemic hit.
“Following the debut of Bira 91 in 2015, India’s craft beer industry saw significant expansion. There was a gap in the market for flavoured beers, targeting millennials and Gen Zs, with brands such as Simba, Witlinger, White Owl, Kati Patang, and White Rhino subsequently entering the arena," Amulya Pandit, senior consultant, Euromonitor International, a market research company, said. “However, these smaller companies suffered during the pandemic in light of the restrictions placed on outlets and shortages of capital," he added.
Many craft breweries have failed to recapture the same level of success that they achieved in 2019 and have downsized to specific states or ceased operations altogether.
Bira’s problems also date back to the pandemic even though it survived—by shedding its niche, low volume craft beer ambitions. It launched Boom, its first strong beer offering in 2019. Strong beers, which have alcohol content in excess of 7%, account for an overwhelming majority. According to data from IWSR, an international drinks consultancy, 98% of the 400 million cases of beer sold in India every year is lager, a category dominated by strong beers. This pivot meant Bira continued to grow at a time when the overall market stalled.
Nonetheless, with bars and restaurant businesses disrupted because of lockdowns, Bira was unable to sell several of its new product lines that had been launched between 2019 and 2021. The company had hired a large number of sales people but they had no channel to sell to. By this time, the brand had also scaled to many more states and its supply chain became more complicated.
The slowdown
In 2021, volumes grew to 6.2 million cases from 3.5 million cases in 2020. Thereafter, it scaled another peak at 8.5 million cases in 2022. But in 2023, sales slipped to 8.3 million cases, Jain said. This is the first time the company saw its volumes dip.
This data is at variance with that of IWSR. Bira’s volumes, according to the consultancy, were even lower at 3 million cases or 245,000 hectolitre (HL) in 2023. One hectolitre is 100 litres of beer.
“Research agencies rely on third party surveys which may not be accurate or reconcile with the actual data," Jain clarified.
An investor deck for the second quarter of 2023-24 (July-September last year), reviewed by Mint, tells the story of the slowdown. Bira stated that its revenue slipped 3% to ₹109.5 crore during the second quarter of 2023-24 compared to the same year-ago quarter. Volumes dropped by 15% during the period even when the industry, overall, inched up 7%. Bira’s biggest drop was in north India (in Uttar Pradesh and Delhi) where it de-grew 43%. In contrast, south India saw 66% growth, driven by Kerala and Karnataka.
No Mango Magic?
For a company that was chugging along merrily till some time back, why is Bira suddenly finding the going tough?
“Markets like Delhi have had their own challenges with some brands being available while others are not (Delhi saw excise policy changes). Other issues last fiscal also reduced the availability of some variants," Jain explained.
The Indian alcoholic beverage market is notorious for being tough on startups. Alcohol is one of the few products outside the ambit of the goods and services tax (GST), which means that every state has its own liquor policy. And often, they change annually. Retail licensing rules and fees in India also do not differentiate between low-alcohol products like beer and high-alcohol content products. Beer is therefore taxed on the volume it is sold at instead of the volume of alcohol it contains. This incentivizes big established players with deep pockets who can set up distilleries and breweries in multiple states.
To circumvent these problems, Bira relied on contract manufacturing and leasing breweries rather than setting them up by itself. It has six breweries in four states so far—four on lease and the rest on contract. It is in the process of setting up a four million case per annum brewery in Uttar Pradesh.
For context, Heineken Group-owned United Breweries, India’s largest beer maker, has 21 breweries and 10 contract manufacturing partners. To be counted among India’s top beer makers—AB InBev and Carlsberg are No. 2 and 3 in the pecking order—Bira clearly has a long way to go.
Meanwhile, B9 Beverages became a limited company (it is planning an initial public offering by 2026) from being a private limited company. “This required us to re-register all of our products, labels and packaging. It is a very complex process. So, we had to ramp down inventory," Jain further said.
Some analysts say that Bira is experimenting a bit too much—the company has a ‘Mango Lassi’ and a ‘Kokum Sour’ variant, for instance. But the founder thinks the company is doing just fine when it comes to innovation.
“We are very glad if our competitors think we are experimenting too much. If we were doing the same thing as our competition, there would be no Bira. Nobody innovates like us," he said.
Nonetheless, the company’s strong beer portfolio—Jain said it accounts for 40-50% of its sales—makes it look more like any other beer company now. It can no longer call itself a ‘craft beer’ maker.
CFOs don’t stick
Company insiders also point to high attrition as a problem. “Attrition is higher than other companies in the industry but you cannot compare Bira to UBL or AB InBev as it’s a startup. The churn and pressure is higher but so are the rewards (in December 2022, the company expanded its employee stock options (Esop) pool," said an employee who didn’t want to be quoted.
The problem of attrition is not restricted to entry or mid-level positions—in the last six years, B9 Beverages has had four chief financial officers (CFOs). In 2019, it appointed the former CFO of General Motors India, Vinaya Jain, to the post. Jain’s stint ended in just over a year. He was succeeded by alcobev industry veteran Anil Arya in August 2020 who quit in less than two years. In August 2022, Meghna Agarwal, the former vice president of finance at Diageo, joined as CFO but she too quit earlier this year. Bira now has reappointed Vinaya Jain in the role.
“Yes, we had more (CFOs) than we should have had. There is a potential for us to have a more stable CFO. But I would argue that the management team has seen very little attrition," Jain clarified.
The founder clearly has his hands full but remains unruffled. He wants to achieve double digit operating margins by the time the company hits the public markets in about two years. “We are at the cusp of an Ebitda (earnings before interest, taxes, depreciation, and amortization) break even. We’ve made a ton of progress in profitability and will look to double our share in the market," he said.
While Jain confidently answers nearly every question you ask, he couldn’t really duck our last bouncer: where can one get Bira around Connaught Place?
“Wish I could say anywhere," he said.
