Low penetration and share of beer in the overall alcoholic beverages in India is lending a growth opportunity for Heineken, the Amsterdam-based developer and marketer of premium beer and cider brands, and majority owner of United Breweries (UB). Rajeev Sathyesh, Asia-Pacific director, brand – Heineken told Shubhra Tandon that India is not a market share game for the company as it targeting the growth of the total pie of its offerings, while premiumisation remains a key focus area. Excerpts:
How has beer as a segment evolved post-Covid and what are its prospects going forward? Globally, beer as a category has bounced back strongly post-Covid, and India is no exception. In the April-June quarter, our volumes in India as a company have doubled and we see a big recovery overall. There have been new habits, and new occasions that came up during Covid in a big way—in-home consumption being one of them, especially in a market like India where it was not very big. Those habits and behaviours are continuing now as well. Also, on-premises consumption is back with a bang, especially with the younger generation who feel they have missed two years of their life, and not socialised. We have benefitted from that as well and these habits are here to stay.
Are these growth numbers sustainable in India?
On a compounded annual growth basis, absolutely yes. If you look at the per capita consumption of beer in India, it’s two litres per person per year. The consumption in other countries in the Asia Pacific region, is 10 to 20 times higher than India. So we are not talking 10-20% but 10 to 20 times higher. Also, beer as a percentage of alcoholic beverages is less than 10% in India. In most countries of the world, beer is the most democratised of these things. So per capita consumption being low and beer as a percentage being extremely low on one side, and then fundamentals of demographic population in India—growing young population, huge urbanisation, growing GDP per capita, disposable income growing—all present a good opportunity. Also, with people willing to spend on premium products and experiences, in the mid-to-long term we remain extremely bullish on India.
How is the India market performing for Heineken versus the rest of Asia and globally, and how important is this market for the company?There are countries which are stable markets and flat categories, and there it is a market share game. In India, it is not a market share game for us — it is the growth of the total pie. There is so much more growth to be had, that as long as we stay focused on the consumer and do good job of meeting their needs, the growth will come. India’s prominence is also evident from the fact that we managed to increase our stake overall in the company last year. India is a huge priority for us and we are doing everything possible to accelerate growth of the category overall, and the premium segment.
What are the future ambitions for the Heineken brand and how would you want to influence the premium beer market?
With the sort of brand power that Heineken has globally, we would like to see India become one of our big markets, which it is not today. We feel we have the recipe to do that, and with the launch of Heineken Silver we believe that we also have a product that meets India’s young consumer’s needs. So our ambition continues to be to make Heineken in India as iconic as it is globally and Silver is the first step in that direction.
How big is the premium beer market in India at present and how is it growing?Like in other countries, premium as a percentage is small in India as well. Having said that, its outperforming rest of the category. At the global level, Heineken brand, which is our premium brand significantly outperforming our numbers and growing double-digit globally. In Asia-Pacific, it is higher than the global numbers as well. India will be no exception to that going forward and premium is outperforming mainstream in a big way for the category overall.
What does UB’s launch of Heineken Silver mean for the company?
Heineken Silver is a proposition specifically designed to connect with GenZ globally on both emotional and functional level. It comes from Heineken which stands for open mindedness and inclusion and diversity, and values that today’s young populations holds dearly. That is the emotional connect. Functionally, it is less bitter, doesn’t fill your stomach, and extremely smooth. It is a premium beer for the Indian GenZ, which is how we want to market it and want consumers to perceive, which will help grow the category and the premium segment.
Are you looking at more launches in the premium segment or any other gaps that you see filing in?The beauty of a country with 1.4 billion population is that there are varied tastes and gaps that exist across the board, and across states, and age groups and segments. We already have a wide portfolio in India. We focus on ensuring that we drive each one of them, and as and when the right opportunity presents itself compliment it with additional propositions.UB had highlighted in the June quarter that the focus remains on building further category penetration while driving the share of premium in the portfolio.
Could you elaborate on what all will this entail?
It is a twin strategy — we continue to grow category penetration and we have to drive premiumisation. What we expect and we want to make sure is that the premium part of the portfolio grows faster. This is why Heineken Silver is a huge bet for us and a big launch that we have done, because it is a premium proposition and a proposition that is designed to meet the needs of consumers in India, especially the young consumers. And if we can get that right and continue to grow at a much faster pace, then our overall premium portfolio will grow faster.
Also, what will the rise of premium portfolio mean for the margins of the company given that commodity prices have also escalated sharply?
Commodities going up is a reality, and the way we handle that is by ensuring that our premium portfolio goes up, where we can take pricing, we do that and keeping our costs within control to the extent possible. So, all levers of the P&L that we can play, we play.
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