40 Bira’s global ambitions
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.
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.
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.
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.