How soon can Ankur Jain take Bira to the promised land of profits?

“There has been no supply of Bira for nearly six months now.”Jibin PV, CEO of a Bengaluru-based premium alco-bev retail chain, says matter-of-factly when asked about the missing stock of the popular beer brand.A little bit of prodding and more details flow in.“We don’t know what the issue is. At the beginning of last year, the company promised, say, 500 cases approximately for the year for one outlet, but fulfilled only about 30% of their commitment,” adds Jibin.Not only stores, Bira91 is also not available at bars and restaurants during this sultry summer.“I was at this bar during the Women’s IPL for a match. And they didn’t have Bira91 for some reason. They had all other brands, but not Bira91,” says Drishya Mohan, a Bengaluru-based lawyer and a Bira91 loyalist. medium111226840One man’s loss is another man’s gain. Store owners like Rajesh have now started pushing similarly positioned brands. “Consumers love Bira91. The demand continues to be very high. The brand is well loved. But since we don’t have supply, we direct them to Geist, Goa Brewing Company and Hoegaarden wheat beer,” says Rajesh.So, what’s behind Bira’s mysterious absence on the shelves of liquor stores and bars? Is the company facing any constraints on the production side? Or is it getting elbowed out by well-oiled competitors in the retail space?The company’s story started with a lot of promise. However, the narrative for Bira91, almost a decade after its foray, seems to be changing. Ankur Jain, founder of B9 Beverages, launched the brand in 2015, and introduced Indians to wheat beer for the first time, with Bira91 White. Apart from that, the portfolio also had Bira91 Blonde, which was a classic lager.It looked like Bira91 was set to disrupt the entire market with its innovation. Known for its premium positioning, the possibility that Bira91 will be the next beer market disruptor looked even more real when the company launched Boom, its mass-priced strong beer brand, in 2019.B9 Beverages was growing at nearly 230% CAGR (compound annual growth rate) in terms of revenue till 2020. While its revenue is still growing, it has slowed down considerably. And, the biggest problem is its losses, which continue to be heavy. medium111226519The company has still not filed its FY24 annual returns and declined to respond to ET Prime’s queries. In an earlier conversation with ET Prime in July 2023, Jain was optimistic about becoming Ebitda (earnings before interest, taxes, depreciation and amortisation) positive in FY24, and expected to break even with a gross sales revenue of ₹2,000 crore and net sales revenue of ₹1,000 crore.Can Jain’s dream become a reality this fiscal?High on fundingWhile we will have to wait a bit more for the answer, investors have shown firm belief in the Bira opportunity. medium111226562The company raised $25mn in a Series D round in March from Tiger Pacific Capital for a 4% stake. This came just a few weeks after Japan-based Kirin Holdings invested $25mn to raise its current stake in the company to 20%. medium111226616B9 Beverages acquired Beer Café, one of the largest beer pub chains in the country in October 2022 in an all-cash deal. It also raised nearly five rounds of Series D and a conventional debt fund since May 2022.The valuation of the company after the latest round of fundraising, as per Tracxn, is $523mn. This has been flat for nearly two years. medium111226645The company currently has five different revenue streams — beers, ciders, seltzers, Beer Café and Taproom. Its new offerings such as ciders, under the brand name Hill Station, and seltzers, under the brand name Grizly, are categories that are barely sizeable in India.Leading retailers across Mumbai and New Delhi confirmed to ET Prime that Bira91 brands have been unavailable due to supply issues for nearly two-three months now. Bengaluru retailers are claiming the supply issues have existed for nearly six months now.In addition, the company relaunched its original beers as well. Bira91 White is now called Bira91 Superfresh White and is available in citrus, mango and berry flavours, all with 4.7% alcohol by volume (ABV).A leaky bottom“There is no denying that B9 Beverages carved a niche for themselves. They launched wheat beer in India, and honestly did a great job in category expansion,” says Vinod Giri, director general of Brewers Association of India (BAI), a newly formed industry body put together by the three market leaders.Is B9 Beverages trying to do the same thing with the launch of seltzers and ciders? It would appear so. However, one year since launch, the product is not easy to find in stores.ET Prime research revealed that Grizly and Hill Station seemed completely unavailable in Bengaluru. A few retailers in Mumbai have some stock of the cider, and Delhi and Haryana seem to have intermittent stock every now and then.Bira91’s challenge is that the opportunity gate it once opened for itself could be exploited by competitors.At present, United Breweries (Kingfisher), AB InBev (Budweiser, Corona, Hoegaarden) and the Carlsberg Group together hold nearly 85-90% of the Indian beer market of 400mn cases annually.In comparison, Bira91’s share is almost negligible in the overall market. The company claims it has 11% of the premium market.The premium market is defined based on price points, and most of B9 Beverages’ portfolio is premium.Also, United Breweries, India’s largest brewer, now has more financial and distribution heft after Heineken, the world’s second-largest beer maker, took control of it. In fact, international premium brands like Corona, Hoegaarden and Heineken have started manufacturing in India and have slashed their prices.These factors may have accentuated Bira’s problems.“B9 Beverages spends nearly three times on marketing when compared to a lot of its competitors, whose revenues are nearly two-three times, if not more, of that of B9 Beverages,” says a senior industry official on the condition of anonymity.“If you look at their marketing strategies, they are great, but they are expensive. They were discounting their prices for retailers to push their brands; they gave free products at prestigious bars and clubs to have a retail presence there. They sponsored ICC events, which would have cost them a lot. These things add up. It’s great to have a solid marketing presence, but is your revenue growing at the rate of the expenses?” the person quoted above adds.B9 Beverages signed a five-year contract with cricket’s governing body ICC, which would have cost the company nearly $6-8mn per year. medium111226705Is Bira suffering from overcapacity?Is high capex the reason why the company is not Ebitda positive?Let’s first look at how much Bira91 sold.“In a market of nearly 400mn cases, Bira91 is estimated to contribute around 3mn cases. Obviously, it still has some way to go,” says Giri of BAI. This number is much lower than the production capacity the company has.B9 Beverages has six production facilities — one each in Mysore, Kovur (Andhra Pradesh), Nagpur, Odisha, Maksi (Madhya Pradesh) and Gwalior. The company had plans to increase its production capacity from 32mn cases (250mn litres) to 51mn cases (400mn litres) by the end of FY24.Industry sources claim that the company currently operates production facilities to make products nearly three times more than what it is selling.“The production facilities that the company has leased are way more than what they need. Just one of their leased plants has a production capacity of nearly 800,000 cases a month, which is nearly 9.6mn cases a year. The capex needed to set up a brewery of that size, even at conservative estimates, is ₹300 crore and upwards. Someone must pay for the cost of capital. You do the math. And that’s just one of the four leased facilities. Why have such large production facilities when they are selling only 3mn cases a year?” asks the industry official quoted earlier.The final cutIn a country of strong-beer drinkers, B9 Beverages steadfastly has chosen to specialise in products that are low on ABV. Jain’s beer is also priced at a slight premium, which in turn allows the company to make a nearly 60% margin on each unit sold, as compared to 45-50% by competitors, as mentioned by the founder. But that has still not resolved the problem of profitability.In case you are wondering, the last beer manufacturer that became profitable in India was Carlsberg Group, which entered the country in 2006, and became profitable in 2017, as per Tofler.According to media reports, B9 Beverages is going to go down the IPO (initial public offering) path as well. If the company has been dealing with supply issues for the past six months, despite having the production capacity, a lot needs to be done before it gets its fizz back.