It was a winter’s day in Delhi. The conversation hadn’t gone well and the two men finally agreed to disagree.

Ankur Jain, founder of B9 Beverages Pvt Ltd, had spoken about his plans to sponsor the Tribeca Film Festival in New York in April 2016 as part of a plan to turn his flagship Bira 91, India’s first handcrafted beer, into a global brand.

His interlocutor Abhay Pandey, managing director of venture capital firm Sequoia Capital India Advisors, thought Jain’s plan was premature, recalled Pandey; after all, the brand was just a year old and had a presence only in a few Indian cities, among them New Delhi, Bengaluru, Mumbai and Pune.

A few weeks ago, Sequoia had agreed to make a small investment in B9 Beverages with a plan to “wait and watch” before pumping in more money. Pandey probably was more cautious than usual. B9 Beverages was the first alcohol maker in Sequoia’s global portfolio, and it still is.

Eventually, Pandey was persuaded by Jain’s reasoning and invested more money. “It was early. But he was very bullish about the market. It would have been preferable to establish the India business more before stepping out, but Sequoia had backed Ankur to run the business and therefore chose to go with his conviction,” said Pandey.

Jain sealed a deal with Tribeca Film Festival – which was started by Jane Rosenthal, Robert De Niro and Craig Hatkoff in 2002 in response to the 9/11 attacks on the World Trade Center – making Bira the event’s official beer partner. There were 70 after-parties with Bira as the centrepiece. Soon, Bira was available across 300 pubs, bars and restaurants in a small catchment area in New York City.

Before Jain took his flight back to India, B9 Beverages had office space in New York’s Fifth Avenue, one of the most expensive shopping areas in the world.

Jain was happy and Pandey didn’t have reason to complain.

Getting Things Right

New York City may have welcomed Bira warmly, but back home everything wasn’t quite right. During his three weeks in New York, the leadership team had become “dysfunctional” and decision-making came to a standstill. Jain realised that B9, which he built with people who had worked at other beer brands and retailers, had become a one-man show and he himself was to blame.

“I did not trust them. So they did not have the confidence to take independent decisions. They were great people. But culture was missing. It was a lala company back then,” Jain said in an interview at the B9 headquarters on the second floor of a vintage building in the outer circle of New Delhi’s Connaught Place.

After Jain came back, he started a massive restructuring exercise. He wanted to “set the culture right” to get it aligned with his ambition of tapping more international markets the next year, he said.

“To have a business that can scale beyond one geography, the culture needed to change, the quality of talent needed to change. So came the very aggressive rework for a culture correction,” said Jain, who works almost round-the-clock and keeps close tabs on how many Bira bottles are selling across different time zones.

Jain hired new people and some of his old hands decided to quit. B9 now has a team of around 300 people, up from around 25 at the start. To build a credible team, said Jain, one needs to trust the team members, be patient and empower them. “People do make errors. You have to allow them to make errors. Otherwise, things won’t work. We made mistakes. But we corrected fast. The team we have now has a high sense of ownership and there’s transparency. The entire team is very confident and we’re in a healthy situation right now,” he said.

Managing A Crisis

The team was not the only thing that Jain needed to fix. There was a bigger issue that he had to deal with – supply shortage. During the summer of 2016, the second year after it was launched, Bira went out of stock at most retail outlets. And there was huge consumer demand for the brand, which was selling around 40,000 bottles a day.

The reasons: Jain and his team had failed to gauge demand correctly, and the arrangement with its sole bottler in Haryana fell through; new bottling units were taking time to start.

Competitors said B9 engineered the supply crunch to keep alive the buzz around Bira. Anuj Kushwah, founder and managing director of Kaama Impex Pvt Ltd, which sells Witlinger, a rival craft beer, told Mint that Bira was not selling as much as its makers claimed. “The supply issue does not look normal,” he said.

Jain countered, “Why would I force a supply shortage? The more I sell, the more money I make. People like Bira and that’s how demand rises every day.”

There was more to it.

Soon after Sequoia invested in B9 Beverages towards the end of 2015, Bira dropped the price – from Rs 150 a pint to Rs 100 (retail price in New Delhi) to make it more competitive.

Bira was selling at 10 per cent loss towards the end of 2015. So it was burning cash. Until then, Jain had been importing beer from Belgium and bottling it in India. It needed to cut costs. It needed to brew in India, and it was taking more time than Jain and his investors imagined.

It did not end there. Rivals played a role. Bottlers of top brands were forced to say no to Bira, said a bottler who declined to be identified. They could not have sustained as capacity utilisation at bottling units would have been much lower with Bira’s sales volumes at that time.

Jain needed to remedy the situation, but there was no quick fix. “We never expected that much demand. And expansion into seven cities was based on the arrangements with the Haryana bottler, which did not work out. At that point, we did not have any other option but to import from Belgium. Simply put, our supply could not keep up with the demand in the market, primarily for Bira White,” said Jain.

Some of Bira’s competitors question the beer’s quality. “What they sell is not how wheat beer tastes in reality. They are just running after volume, and the quality is suffering,” said a microbrewery owner in Gurugram who didn’t want to be named.

Ishaan Puri, founder of White Rhino Brewing Company, which sells White Rhino beer, did not specifically comment on Bira, but said the market should have more quality brewers. “We need to educate the consumers. More quality-conscious beer makers can only do that,” added Puri.

Samar Singh Sheikhawat, senior vice-president (marketing) of India’s largest beer maker United Breweries Ltd, declined to comment on Bira.

Raising Funds

During the summer of 2016, Bira was selling around 50,000 cases a month, five times what it sold the previous summer. About 60 per cent of the company’s sales were coming from pubs such as Beer Cafe, Monkey Bar, Raasta, Pint Room and Barsoom.

Jain needed funds to keep his business running. In January 2016, he managed to raise $7.5 million in a Series A round led by Sequoia, which invested $6 million, according to B9’s filings with Registrar of Companies. But it was not enough. Jain needed more funds to build an efficient back end and logistics system to ensure the fiasco was not repeated.

“That time, fundraising was also very difficult. The investors have to invest in a company not because of a particular individual. The kind of confidence Sequoia now has in me took two years to build,” said Jain.

Expansion was stalled for a while. Jain focused on setting the back end right.

Investors were not unhappy. “It (own brewing and bottling) took more time, but we knew it was happening and was only a process delay. We should have anticipated higher ‘friction’ and planned accordingly, but I guess there are worse problems than such crazy demand,” said Pandey of Sequoia Capital.

Soon, Bira was being brewed in Indore, followed by a second facility in Nagpur. Together, the two breweries have the capacity to produce 4.2 million cases of beer a year. “We’re right now producing about 300,000 cases a month. This year, we’ll end probably at three million,” said Jain.

Next summer, Jain hopes to reach around six-seven million cases a year. The third brewery will be operational in Rajasthan by the end of this year to take annual capacity up to 12 million cases. The company has also finalised plans to put up its fourth brewery in southern India soon.

“Things have changed drastically at Bira. And will change even more drastically over the next 12 months,” added Jain.

After the restructuring, Jain managed to attract more external investors. Term-sheets were signed with TPG, said two people involved in the discussion at that time. But Sequoia did not let the opportunity go. It pumped in another $8 million in July 2017 to become the single largest investor in B9 Beverages.

With the latest round of funding, Jain has so far raised around $30 million in exchange for about 55 per cent of equity in B9 Beverages to investors. The remaining equity is with the company’s founder and its management. Sequoia and Jain are the two largest shareholders of B9 Beverages.

Others who have invested in B9 Beverages include General Atlantic managing director Shantanu Rastogi and its senior vice-president Alok Misra, and Naik Family Trust 2013. During its initial rounds of fundraising, the company also received investments from Kunal Bahl and Rohit Bansal, co-founders of e-commerce firm Snapdeal; Ashish Dhawan, co-founder of private equity firm ChrysCapital; Mayank Singhal, venture investor with RNT Capital Advisors; and Deepinder Goyal, founder of restaurant discovery platform Zomato.

When Jain launched Bira 91, he had raised about $1.5 million from a bunch of friends.

Sequoia’s Bet

There are reasons why Pandey is so bullish about Bira. He has known Jain for a long time. The first time Jain reached out to Sequoia was when he was planning to start Cerana Beverages Pvt Ltd for importing exotic brews and sell them in India, sometime in 2007-08.

But Sequoia did not invest at that time. When Jain launched Bira, Pandey saw an opportunity. In January 2016, Pandey said in a statement that the venture capital fund had invested in the company as it wanted to back “the challenger in a large category with nice customer cohorts on basket size, retention and frequency”.

Soon after Pandey received the investment proposal, his team conducted a quick internal survey. Out of 200 people, 175 had said they “loved Bira”. Pandey had to take Jain seriously.

“Consumers loved the product. The distribution strategy was thoughtful. These, along with Ankur’s passion and a large market opportunity, made Bira a compelling proposition for investment. The initial investment was small and was to watch their execution. But, soon it was clear that the go-to-market strategy needed to change and that would require more capital,” Pandey said in a phone interview.

When Sequoia first invested in the company in 2015, it estimated Bira’s valuation to be above $100 million by 2022. Sequoia’s initial plan was to make an exit in 2022.

Since then, Sequoia has invested two more times as the lead investor and may put in more money in the future. “Sequoia will continue to support the company,” said Pandey, who now believes that Sequoia may stay invested in B9 Beverages beyond 2022.

According to Jain, Sequoia does not interfere much. “There can’t be a better partner than Sequoia. Investors’ trust is what made all the difference,” said Jain.

According to Pandey, Jain is left to run the business maintaining the key metrics that the board has set.

Besides the set level of 45 per cent gross operating margin, budgets for marketing expenses and global expansion are decided by the investors.

The decision to maintain the operating margin ensured that every Bira bottle makes money. And if Bira does not raise funds before the next summer, the company is likely to break even by this month, according to one of its investors, who did not want to be named.

Jain, however, is a little conservative. “We are breaking even by early next year,” he said.

Fund-wise, said two of Bira’s investors, the company is covered till next January or February. After that, he’ll need funds to manage the summer.

Overseas Expansion

The year 2016 went in getting things right in India and ensuring sustenance in New York City.

There was one more thing Jain has been working on silently. That’s his ambition of making Bira a preferred beer brand across top global cities.

A month after he got fresh funds from Sequoia in July 2017, Jain announced entry into five new markets – the UK, Singapore, Hong Kong, Thailand and the United Arab Emirates – by next summer through distribution partnerships.

In India, it currently sells across 12 cities and plans to add three more cities, with a retail presence across 6,000 outlets, by the end of this year. Its presence in the US is limited to the small catchment area in New York.

“We received a good response in the US. Now, we want to enter London, Singapore, Hong Kong, Thailand and Dubai. We aspire to drive that shift in beer towards more flavours globally,” said Jain, adding that the company will initially look at catching the attention of the millennials in these markets.

New York, admits Jain, was a risk that he had taken. “But Bira has the potential to make it in New York. True, it is a hyper-competitive market and it’s obviously not easy to make the cut. We are unapologetic about being ‘imagined in India’ and so far it is well-accepted,” he added.

New York state, noted a report by wine consultancy firm Stonebridge Research Group, had 207 craft brewers generating about $2.9 billion in revenue.

Market research firm Mintel estimated about 10.2 per cent of the $102 billion beer market in the US was craft beer in 2015, almost double the 5.2 per cent share it had in 2010.

Entering New York was an aspiration for Jain and his plan worked.

“We are still in the beginning phase. Bira has the opportunity to become the first global brand for flavourful beer,” said Jain. So far, he is importing Bira from a Belgian brewery to sell in New York. But by next summer, Jain is looking at running his own brewery in the US.

Jain believes that the beer market in South-East Asia is very similar to that in India. “We want to be the first to get the consumer shift from mainstream beer,” he said.

Feet On The Street

Jain will initially export Bira to these countries and replicate the model he developed in India – beer on tap in restaurants at accessible price points, much lower than other imported ones, and later making Bira available in retail stores.

“Unlike other brands, we’ll have our feet on the streets. We’ll have our own people to build the business and will not be solely dependent on the distributors,” said Jain.

Like he is planning to have own brewing unit for the US market, Jain will look at having facilities, through partnerships, in each of the new countries once the volume reaches 10,000-20,000 barrels per annum.

“It would make sense to localise production. If the brand starts resonating this summer, we should hit the mark by subsequent summer,” he added. So, in two years’ time, Jain is likely to start producing in each of these countries.

In five years, said Jain, Bira should be the leader in each of these markets. What he wants is simple: Bira should be the first beer for the starters – at least the first colourful beer for a consumer in each of the country the brand would be present in.

Jain might have got a confidence booster from his success in New York. But his investors are still sceptical. “The whole global expansion was launched early in the life of the company,” said Pandey of Sequoia Capital.

To execute these, Jain will require more funds – this time, a much larger amount. “Over the next few years, we’ll need to raise fresh funds in the range of $150 million through debt and equity,” he added.

The Accidental Beerpreneur

Brewing beer wasn’t the original calling of Jain. His first venture as an entrepreneur was a healthcare information start-up – Reliant MD, in New York in 2002 which he sold in 2007. His interest in healthcare grew during his short stint at the healthcare division of Motorola in Chicago.

As a child, Jain wanted to be an architect, as he always wanted to follow in the footsteps of his father, who was part of the Delhi Master Plan as an architect with the Central Public Works Department for about 35 years.

“I always wanted to be an architect and copy my dad. But he discouraged me. I picked up computer science and went to the same college where my father studied in the US. While computer science was my major, I had architecture as a minor,” he said.

Jain was picked up by Motorola at the Illinois Institute of Technology, Chicago, in 2002. But soon, he realised he could not work for others. The entrepreneur was born with a healthcare start-up.

When the venture was being incubated in New York, he frequented Brooklyn Brewery, run by a former Associated Press correspondent who opened the outlet after he had had enough of covering the West Asian conflict. Those visits made a big impression on Jain.

In 2007, he decided to return to India, having made up his mind that his entrepreneurial future lay in brewing beer.

Returning to India, Jain joined Reliance Fresh, then a core start-up within Reliance Industries Ltd, as a retail director. In between, he went on a three-month road trip across Europe to identify beer brands that could potentially suit the Indian palate.

The trip included countless pub crawls and visits to breweries, and even expensive restaurants that served exotic beers. He came back signing with half a dozen breweries to import beer and sell in India.

This time again, Jain’s father was not in favour of his son selling beer. “My father did not speak to me properly for almost five years,” said Jain, adding that probably helped him to do his own thing to become a disruptor and not a techie.

In 2008, he started Cerana Beverages to import exotic beer for selling in India. In May 2014, Jain soft-launched Bira 91. The hard launch followed in February 2015.

Initially, he started selling Bira 91 White (a low-bitterness wheat beer, as the company website describes it) and Bira 91 Blonde (an extra hoppy craft lager), and later introduced other variants – Bira 91 Light, Bira 91 Strong, low calorie versions and soon in cans.

According to Jain, the aim was to fill the gap in the market for a trendy, unorthodox, fun and smart brand of beer that could be positioned between Indian brands and the expensive imported beers. “The focus was on taste and experience in a market that is dominated by strong beers,” he said.

Tough Task

Selling alcohol has never been easy. Even global brands have struggled in the Indian market. Beer again is a different ball game.

In India, around 85 per cent of the beer market is dominated by strong beers (more than 8 per cent alcohol content) such as Kingfisher, Kalyani Black Label, Carlsberg Elephant, Budweiser Magnum and Miller ACE, according to the All India Brewers’ Association (AIBA). Kingfisher, owned by United Breweries, leads the market with a 37.2 per cent share in 2016 in terms of total volume, down from 41.5 per cent in 2011, according to market research firm Euromonitor International. Technavio, a research firm, estimated India’s beer market to reach $9.03 billion in 2018 from around $4 billion in 2014.

Then how did Jain manage to make Bira fly off the shelves so fast?

The answer: There was a void in the market. Consumers were changing. Bira came as a breather.

“Bira is India’s first credible speciality beer brand which has balanced global craft beer heritage with Indian origin. They have certainly created the ‘craft’ category for India and now dominate the premium segment of the market,” said Rahul Singh, founder and CEO of the Beer Cafe. “This does disrupt the share of voice for the mass-produced behemoths and I see them challenging Bira’s position by introducing a flurry of brands from their global portfolio. This is a win-win for the Indian beer consumers as it provides a larger variety and trade-up opportunity for service business like ours.”

Craft beer is a relatively new category in India and the market for it is growing at around 20 per cent a year, according to AIBA. There are more than 80 microbreweries operating in India, including White Rhino, Arbor Brewing Co, Irish Village, Doolally Brewing Co, Effingut Brewerkz, TJ’s Brew Works, Gateway Brewing Co, the Barking Deer, the White Owl Pvt Ltd and Brewbot.

In a report earlier this year, Euromonitor said, “B9 Beverages is a craft brewer which has been making immense progress in the country… A growing young population, which soon took to the taste of this craft beer, has resulted in its strong success. The further rise of craft beer is expected to be the main trend in the category over the forecast period. The huge success of B9 Beverages’ Bira 91 is expected to further encourage many global players to introduce their own craft beers. Additionally, with this category being largely underdeveloped, many new players are also expected to emerge”.

Getting The Marketing Right

Initially, Bira did not require much marketing. As Jain puts it, all it needed was right placements – a strategy that he plans to replicate in all new markets worldwide. When he started, Jain just made Bira available at pubs and restaurants. “People tasted it, liked it and it had gone viral,” he said.

There was one more thing. The packaging connected with young consumers. The logo of Bira 91 is a reverse B, coupled with a playful monkey, said Jain shows “a spirit of rebellion against the conventional”.

Bira 91 was “imagined in India” and made in Belgium with French and Belgian malts. Initially, it hired a brewmaster from Belgium as a consultant.

“That time, we had the luxury of not telling our story to consumers. The vacuum in Indian market was so big. But now, we need to communicate that. We need to tell the global consumers that Bira is a beer – at the point of sales, and digitally in each market,” said Jain.

Besides, there are corporate events. At present, corporate events for Bira are taken care of by Jain’s wife Ankeeta, whom he met on dating app Tinder in October 2015 (three months before Tinder officially launched in India) and got married last Christmas. Jain logged onto Tinder while he was about to close Bira’s first investment from Sequoia, looking for someone “liberal with a cosmopolitan mindset”.

Inspired By Coke Studio

To tell the story of Bira to its consumers, Jain has picked up a few passion points – millennial identity, spice, food, hip-hop music and technology, among others which will set the tone of its brand communications in future.

In each of the markets, the company will engage with local foods and spices that would go well with Bira, the beer.

B9 Beverages, which recently teamed up with music streaming app Saavn in India, is working on a plan to create a platform for local artists who are into hip-hop music – a model close to one adopted by American beverage maker Coca-Cola Co. to find folk music artists in India and Pakistan through Coke Studio.

“Something like the digital version of Coke Studio. But the difference here is we are for co-creation, and Coke Studio was for reviving folk music. The intent is to build a platform that discovers local music talent,” said Jain who himself is passionate about hip-hop music. The Bira founder, who has picked up cooking as a hobby lately, believes hip-hop as a genre is very tactical for Brand Bira.

At present, the company spends about 30-35 per cent of its revenue in marketing, which Jain said would eventually come down to around 25 per cent.

The Big Dream

Jain, who hopes to close the current fiscal year in March with Rs 150 crore in sales, has already set his eyes on a possible initial public offering (IPO). “Once we reach the level of Rs 1,000 crore revenue, it’ll make sense to look at a listing,” he said.

By when? Jain was little hesitant in specifying the timeline. “May be in five years,” he added.

But the IPO can’t be the finishing line for the man who calls his own plans “audacious”.

“I think about a 20-year picture. Over the next 20 years, this business will be extremely large and will require huge investments. In 20 years, if we execute on our ambition of changing the world of beer, we’ll be the global leader in the category. We want to redefine this category,” he added.

The big dream that Jain has been nurturing for years, however, is much larger. In his own words: “What has been missing from India is global leaders. Where’re the Apples, Googles, Nikes of India? Our ambition is to be that in the world of beer, at least.”

That’s clearly the reason why Pandey believes Sequoia will stay invested in Bira for a little longer than intended.

(Mint)

Abhay Pandey

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