Five years after making its way to Indian shelves, Heineken is now going beyond the metros and mini-metros it had started off with. It is now present in 15 cities, with plans to dig deeper for custom. Of the total beer market, the Tier-I cities (barring Chennai in which Heineken India is not present) account only for 15-20 per cent, making the brand's share negligible on a country-wide basis. Its Indian partner, United Breweries' (UB Group) beer franchise, Kingfisher, commands over 40 per cent of the overall market.
Despite growing at 100 per cent in the top urban markets, Heineken can not depend on these anymore. Urban markets are battling a sizeable cutdown in discretionary spending and more competition.
Consumers are cutting back on what they think is not essential and beer happens to be one such product. "People are cutting down on alcohol. They are not only drinking less frequently but also in less quantity. In some markets, they are also shifting to lower-priced beer," says Samar S Sheikhawat, senior vice-president, marketing, at United Breweries.
THE TRIGGER TO EXPAND
Heineken India is not present in Chennai, a large beer market. The remaining 10-11 Tier-I cities account for only 15-20 per cent
Metros and mini-metros are getting saturated
Highest growth from mid-lower towns and rural areas
Heineken retails at about Rs 170 a quart
Growth in demand for beer in India had advanced at 13.5 per cent since 2007, but slowed to 9.3 per cent for a market size of about 240 million cases in 2012, according to research firm IWSR. Analysts attribute more than half of this growth to smaller cities and towns, which along with villages make up for 80 per cent of the total beer volumes.
Ankur Bisen, vice-president (retail and consumer products), Technopak, says, "Heineken, the world over, is a mass brand. But as we have seen with other foreign brands, when they enter India, they end up occupying a premium positioning by default. But with metros saturating with competition and also consumers increasingly looking for fresh brews over bottled ones, it is important to grow beyond. And, how does one grow without changing one's positioning? By going to smaller cities and towns." Heineken will leverage the network of the UB Group
(in which its parent has 37.5 per cent stake) to sell in the new cities.
Priced at about Rs 170 for a quart (650 ml), in a market which sees maximum traction for beer priced at about and below Rs 100 for a quart, it is not going to lower prices as it enters smaller towns such as Kannur, Alappuzha, Thodupuzha and Pathanamthitta in Kerala. It has already set foot in Nashik, Nagpur and Kolhapur.
Priced higher than the widely-sold Kingfisher
range and the foreign brands of Carlsberg and Foster's, Heineken will keep its distribution restricted to outlets selling premium brands in the new markets. "Distribution will be limited, but more focused on the target market for the product," says Sheikhawat. Its marketing will be on similar lines as that in the metros, though scaled down. For example, its popular Foosball tournaments and other promotional activities will be held in select pubs or shops.
"A lot of effort goes into placing a brand in a new market. We have to ensure it is in the right shelf for our audience. Adequate signage needs to be placed and perhaps, a brand representative has to be there to talk to the consumer about the brand. We are not going to place it there and expect it to sell" says Sheikhawat.
He says the 100-per-cent growth rate of the brand is testimony to its relevance despite a steeper price tag. "The Indian market has matured in the last two to three years as people have gotten used to the price, packaging and the taste perception around the brand," he adds.
The only concession Heineken will make is to communicate in the vernacular language in the smaller markets for a better connect.
Beer is a relatively expensive purchase in India versus other countries on the basis of purchasing-power parity. Even the annual per capita consumption of beer is less, at about 2 litre, compared to 78 litre in the US. India, then, is ranked among the five fastest-growing markets for b eer. Industry experts estimate this growth could be higher if not for the restraining effects of the tax regime and regulations imposed on the alcohol sector, even as beer consumption stagnates or grows slower the world over.