The founders of Beerworks Restaurants and Microbrewery (that manufactures and distributes Geist beer) aim to setup local manufacturing units and microbreweries in India and record a turnover of Rs. 100 crore in the next five years
In early 2000, when residing in Portland, Narayan Manepally began brewing beer on a small scale, in his home garage. In his own words, when he and his friend made the first pint and nobody died drinking it, he decided to nurture the beer-brewing venture back in India. “I always have a crazy idea checklist (that needs approval from at least two people I know), so, when my wife and another friend thought I was crazy to start a beer-brewing business, I knew it was worth a shot,” he reminisces.
Eventually, when his family moved back to India in early 2003, Manepally met his childhood friend Paul Chowdhury at a school reunion, where the latter agreed to help Manepally in his business. Thus, the duo setup Beerworks Restaurants and Microbrewery Pvt. Ltd. in 2005.
As a first step, they approached the Goan authorities for securing licenses. “Even though the state is liberal towards alcohol availability and consumption, we were told that it is illegal to brew and serve in the same place. Same was the case in Karnataka,” shares Manepally. A third alternative of securing an industrial licence and selling bottled beer also fizzled out as it could only be bought off the few people who held it.
“After so many failed attempts, we came to crossroads where we thought we should call it quits. That’s when our mentors, Narayan Ramachandran, the former president and CEO of Morgan Stanley Asia and Manish Sabharwal, co-founder and chairman of TeamLease came along,” says Manepally. The mentors suggested exploring the reverse outsourcing model, an approach of manufacturing beer outside the country and importing it to India as per demand.
They identified a brewer in Belgium and in 2007, began manufacturing, importing and distributing what they now call Geist beer, in India. Today, Geist is available at 140 outlets across Bengaluru and Chennai. It has released three varieties in the market now, namely, Whistling Wheat, Dark and Blonde, each priced at Rs. 220 per 330 ml bottle. In FY 2012-2013 the company recorded a turnover of Rs. 80 lakh to a crore. In the next five years, it intends to reach the Rs. 100 crore mark. “It is now legal in many states to manufacture and sell locally, so we are planning to setup microbreweries and beer manufacturing units across states. Our expenses will also go down significantly because we don’t have to pay heavy import duty and taxes,” says Manepally. As a result, the founders hope to drive higher volumes at lower prices and achieve a steady growth in the coming years. “We’ve identified a sweet spot, a price that’s higher than that of industrial beer and lower than that of premium craft beer – Rs. 150 per 330 ml bottle. We aim to sell at this price,” he adds.
Until now, the company has been funded solely though internal accruals and by shareholders, but, Manepally indicates that it is actively on the lookout for external funding to fuel expansion plans.
Understanding the business model
Once the beer cartons are shipped into the country from Belgium, they are transported to Karnataka State Beverages Corporation Limited (KSBCL)’s national warehouses. “In our case, we’ve setup government certified excise-bonded warehouses, to which we transport our cartons from KSBCL, within a limited period of time. From there, the cartons get shipped across the country based on orders,” he says. In future, even when the company manufactures locally, Manepally indicates that every alcoholic beverage has to be routed through the KSBCL.
He believes that the model has proved beneficial on two fronts; firstly, it has helped understand the distribution process, the market and its customers better. Secondly, because the beer is imported, the company is permitted to stock its beer in outlets, which are not otherwise open to local manufacturers. “There is a concept called BIO (bottled in origin) which locks out stocking options because bigger brands pay restaurants a lump sum and buy a majority of the shelf space. This cannot be exercised for imported brands,” he states. He adds that as more customers are becoming aware of the different varieties of craft beer available in the country, restaurants across states are gradually shelving the option of pre-booked shelf spaces and are stocking more local and imported varieties at their restaurants.
Arriving at a price point
Currently, the duo has adopted the bottom-up pricing strategy to arrive at a price point for Geist beer. Apart from tracing the cost right from the manufacturing phase, at every stage, there is a concept of a cost card, where the company has to declare its freight on board charge, cost, insurance and freight charge, duty fee and warehousing charge. The only cost that is flexible is the advertising, marketing and promotion cost (AMP).
Keeping in mind the pitfalls it can confront, in the form of rupee fluctuation or drought at the manufacturer’s end, the company tries to lock-in the manufacturer to a yearly contract, where it declares that unless the cost of raw material exceeds 10 per cent, the additional charges will not be levied on the company. On the other hand, it has the opportunity to revise the cost card as often as needed, thus, it changes the AMP costs, keeping in check the market fluctuations.
Building brand Geist
The company employs three branding strategies, the first being educating the waiters at restaurants about how beer is manufactured and hosting beer-tasting sessions for them to get a feel of Geist, and recommend it to customers. Secondly, it has setup a microbrewery called BrewSky, at Bengaluru, where customers can taste fresh beer. “Our microbrewery project is an extension of our bottled beer business. In this case, we see our customers face-to-face and that’s a big plus,” shares Manepally. Lastly, it employs social media marketing strategies through sites such as Facebook and Twitter to engage its target audience and share updates on Geist.
Going forward, Manepally indicates that there are several factors driving the growth of beer consumption and demand in India. For one, he says that the customers’ (18 – 34 age group) understanding of beer know-how has enhanced, making them want to associate themselves with specific brands and with particular tastes. Secondly, as more Indians travel around the world and experience world-class products, they expect the same back home. That is what Manepally wants Geist to be, a world-class beer.
“We believe that our way forward will be to manufacture beer within the country and deliver an experience that is fresh and one that exceeds customer expectations,” says Manepally, on a parting note.
Beerworks Restaurant and Microbrewery Pvt. Ltd. (Geist Beer)
Founders: Narayan Manepally and Paul Chowdhury
Future plans: Setup local manufacturing units and microbreweries in India, record a turnover of Rs. 100 crore
THE QUICK FOUR
The perfect brew for an Indian
Indians, at the moment, don’t like very bitter beer. They prefer ones that are slightly sweeter and aromatic. And of course, they’ll choose fresh beer over bottled beer any day.
Your biggest competitor
Bad beer. That’s all.
How did you negotiate your first sale?
Bear in mind that I was an electrical and electronic engineer, I knew zilch about beer. So was the case with Paul. So, when the first container arrived in India, I remember both of us sitting across each other and looking absolutely clueless. I asked Paul, who do we sell this to? So, we called our friends, asked them to pick up the beer and said, no discounts whatsoever. One of them happened to own a restaurant so we asked him to buy a few cases and stock them there. That, literally, was our first sale.
Your love for beer
A beer should promise what it says on a label, which is, when you drink this beer, you should have a memory of this beer and that moment should be a fantastic experience.