The Changing Beer Market Dynamics
From premium and international beer brands to locally brewed Nepali strong beer brands Nepal's beer market has seen a tremendous shift in the last couple of years. Industry insiders opine that varied tastes, numerous choices and price factor are among the overriding reasons for this shift. Consumers are spoilt for choices in today's market scenario and hence, they have started to prefer indigenous beer brands, asserts K P Rizal, Deputy General Manager at Sungold Brewery (Nepal) Pvt Ltd.
This change in consumption trend has ensured that Gorkha Brewery Pvt Ltd, the market leader, has turned out to be the biggest loser in the bargain. It enjoyed an absolute monopoly in the market with over 80 per cent market share not too long ago with established and popular brands namely Carlsberg, Tuborg and San Miguel ruling the marketplace. Over the last couple of years, however, the brewery has seen a turnaround in fortunes primarily due to the change in consumers tastes and sense of pride attached with local brands. A market estimate suggests that Gorkha Brewery has seen its market share plummet sharply during this period.
"The market has shifted to lesser priced brands and it has led to the leading brewery losing market share considerably," confirms Kishor Bhattarai Chief of Sales & Marketing at Himalayan Brewery Ltd. Experts allege that international brands took the market for granted and hence, created room for local brands to find a stronger foothold in the market. More consumers are increasingly opting for strong beer brands that cost less as well as promise faster intoxication.
The price of a beer is what is truly driving the market at this point of time. "The mindset of the consumers is to buy a beer with high alcohol content at cheap price," agrees Thomas Schlau Technical Director and Master Brewer at Sthapit & Schlau Pvt Ltd. He says people must enjoy beer and there is a need for a culture to develop around beer drinking. Sensing the shift from the premium and international beer brands to indigenous Nepali brands, market leader Gorkha Brewery has indulged in severe price slashing in a bid to regain lost territory, reiterate competitors. So much so that its flagship brand Gorkha is now the cheapest beer brand available in the market.
Though, of course, the brewery continues to be the market leader due to its strong show in the premium segment which it monopolises with no competition in sight by a long way. Sthapit & Schlau that began production in May 2010 by using the production facility at United Breweries Nepal Pvt Ltd in Hetauda Industrial district, started with a modest 2,500 cases a month. Within a year-and-a-half, it has registered a 100 per cent growth, claims Schlau, and produces 5,000 cases a month during the 'beer season' between March and October. We have been promoting both our brands Coblenzer Pilsener and Coblenzer Marzen as natural beer and it took us some convincing to sell initially but our hard work is beginning to pay off, he says.
It started off with distributing in cities such as Kathmandu, Dharan and Biratnagar and has moved on to cover Pokhara, Narayanghat and Gorkha under its distribution network this year. The brewery, buoyed by overwhelming response from several sections of the market, plans to aggressively expand its network in the coming years. Sungold Brewery that uses up, on an average, 60-70 per cent of its 140,000 cases-a-month-capacity brewery at Damkauli in Nawalparasi is currently growing at 25 per cent per annum. About two years ago, we were growing at 100 per cent annually but due to the declining growth of the industry, our growth too has been affected to an extent,â€ admits Rizal.
The brewery currently enjoys 20 per cent market share, he claims. It is now focusing mainly on two brands Nepal Ice (started in 2007) and Real Gold (started in 2008). While Rizal concedes that a brand name is something to reckon when it comes to international brands, he is confident that his brands will hold their own in the market as time progresses. The brewery has a strong distribution mechanism in place with 200 distributors across Nepal. He elaborates, "Distribution and market expansion is a continuous process and market growth and access dictate our distribution strategy." Not content with its impressive domestic show, it is also in the process of developing Nepal Ice as an international brand by exporting it to destinations far and wide such as Japan, USA, UK, Hong Kong, Korea and Dubai. Himalayan Brewery, which is going through a transition phase currently with a new management having taken over operations about a year ago, is already doing decently with about 9 percent of the market share, claims Bhattarai.
"It was immensely satisfying for us to discover that our flagship brand Iceberg enjoys incredible brand recall in the market and it makes our job that much easier," Bhattarai states excitedly. With its brewery at Godavari in Lalitpur, it has around 100 distributors across Nepal and counting. Iceberg also awaits a brand line extension few months down the line. "We are looking at extending the brand to premium segment.
There is every reason for a domestic beer to provide quality at par with international brands and compete on equal terms," reveals Bhattarai. Brewers rue the fact that advertising wise, they don't have the option of gaining mileage through the electronic media as promotion of alcoholic beverages is banned on this medium in Nepal as per a government directive. "From a marketer's perspective, it is sad indeed that we cannot avail the benefit of advertising through the electronic media," says Rizal. He is, therefore, limited to mainly use BTL (below the line) activities which includes branding of glasses, openers and signage etc, consumer sampling, sponsoring sporting events and musical concerts and, of course, print advertising. Schlau, while choosing 'Coblenzer' (the name is based on Schlau's hometown Coblenz in Germany) as a brand name, hoped that it will go down well with the consumers.
However, as he says, "My calculation was wrong that a foreign (read German) name will get us immense mileage, it took me a little time to realise that people here have an affinity towards Nepali-ism." He too primarily depends on print advertising to promote his beers and occasionally supports events. At Moksh Bar last month, he celebrated 'Oktoberfest', modeled after the famous German beer festival in Munich. On the other hand, Himalayan Brewery, after beginning to function under a new management, started its branding exercise from scratch including developing POP (point of purchase) displays like posters and danglers, says Dhiraj Tuladhar, Brand & Business Development Officer at the Brewery.
It has made an attempt to relate Kathmandu beer with cultural heritage by promoting occasions such as Nhu Dan (Newari New Year). "We are trying to cash in on the culture aspect and hope it works for us," adds Tuladhar. While it may appear that Nepali breweries make huge profit margins, they have a different story to tell altogether. Brewers allege that heavily levied taxes including excise duties and VAT are so high that beer drinking in Nepal has become a very expensive proposition for the end consumer. A case (12 bottles of 650 ml each) of Coblenzer Beer invites an excise duty of Rs 624 which translates to Rs 52 per bottle. It is extremely high. Can you imagine that a bottle of beer actually costs more than a full meal at a reasonable eatery? asks Schlau.
He elaborates, While a plate of daal-bhaat may cost you Rs 150 at a regular food joint, you will have to pay Rs 162 and Rs 167 respectively for a bottle of Coblenzer Pilsener and Coblenzer Marzen. Even though the beer industry in Nepal hasn't suffered as much as some of the other sectors in the economy, there has been a considerable decline in its annual growth rate. Enjoying a 40 per cent growth per annum about two years ago, it is now growing at a modest 12-13 per cent annually. Brewers blame this on the economic downturn the country has been facing over the last few years. Rizal blames it on poor financial activity, a result of the economy being on the slow side.
He says, "The real estate business was booming a couple of years ago. Today, restaurant visits have minimised and people are gradually shifting towards strong beer brands due to economic reasons." The slowdown in the economy has taken its toll and impacted the industry to a certain extent with restaurants and pubs registering less than expected footfall in recent times.
A lot of people for whom spending lavishly weren't a problem at all; income disposal has begun to matter a great deal. A 500,000 cases a month market, the annual revenue of the beer industry hovers around Rs 10 billion mark presently. Beer professionals believe that the industry holds great potential and in the future, with signs of recovery in the economy, it can look forward to better days ahead.