40 Bira’s global am­bi­tions

Mint ST - - IN-DEPTH -

B9 Bev­er­ages’ Ankur Jain hopes to turn his ‘imag­ined in In­dia’ craft beer brand into a global leader like Ap­ple, Google or Nike

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 Rs150 a pint to Rs100 (re­tail price in New Delhi) to make it more com­pet­i­tive.

Bira was sell­ing at 10% 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 uti­liza­tion 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 Co., 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 vi­cepres­i­dent (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% of the com­pany’s sales were com­ing from pubs such as Beer Café, 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 fi­nal­ized 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. Termsheets 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% 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.

PRADEEP GAUR/MINT

Ankur Jain, founder and man­ag­ing di­rec­tor of B9 Bev­er­ages Pvt. Ltd, started out by set­ting up a firm that im­ported and dis­trib­uted pre­mium craft beer brands from Bel­gium, Ger­many and the US.

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