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Pioneering India’s Craft Beer Revolution | Prabhtej Singh Bhatia @ Simba
318 Plays2 years ago
Those of you who came of age in the 90s and early 2000s would recall - drinking beer meant choosing between a regular strength beer or an extra strong beer. There was no such thing as choosing a beer for its taste and flavor. But the Craft Beer Revolution changed that and made beer more of a lifestyle choice. Dive deep into the Indian beerscape and learn how Prabhtej scaled up India’s coolest craft beer brand with no external funding. Listen on but remember to get yourself a cold glass of beer first!
Know about:-
- Brewery is good for local community
- Learning the trade
- Coining the name “Simba”
- India’s beer distribution system
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Transcript
Introductions: Founders and Podcast Intentions
00:00:00
Speaker
Hi guys, this is Triptej Madhya. I'm the co-founder at Falcon. Hi, I'm Akshay. Hi, this is Saurabh and you are listening to the Founder Thesis Podcast. We meet some of the most celebrated charter founders in the country. And we want to learn how to build a unicorn.
00:00:32
Speaker
Those of you who came of age in the 90s and early 2000s would recall drinking beer meant choosing between a regular strength beer or an extra strong
Craft Beer as a Lifestyle Revolution
00:00:41
Speaker
beer. And that was it. There was no such thing as choosing a beer for its taste and flavour. But the craft beer revolution changed that and made beer more of a lifestyle choice.
Building Simba: Challenges and Inspirations
00:00:51
Speaker
All of you beer fans will love this episode of the Founder Thesis Podcast in which Akshay Dutt talks to Pratteet Singh Bhatia, the founder of Simba, which is among India's leading craft beer brands. We go deep into the business of making and selling beer in India and learn how Pratteet scaled up India's coolest craft beer brand with no external funding. Listen on and remember to get yourself a cold glass of beer first.
00:01:15
Speaker
My family was in alcohol distribution and that's where it became natural for me to have beer because when I was in England and I saw a whole barrage of new beers that were coming there, through dog being my go to option. So I realized that when I came back to India for a holiday, there were barely any options here. So it was a good opportunity for me. So started. So you went for which course to UK? Like what was the plan to? I went for Economics and Finance. You were in the UK when you
00:01:44
Speaker
fell in love with the craft fair over there and then you came to India for a break and you saw that there's no good craft fair here. So what did you do next then? Did you start while you were graduating? Did you start working on it or did you come back and tell me that journey and you were probably like 2021 that time.
00:01:59
Speaker
Yeah. So basically when I was there for my first year break in India, I was just asking around and got a sense of how long it would take for us to get a brewery set up. So the first thing that the first challenge everybody told me is to get a license and it's going to be very difficult to get a license and it takes a long time.
00:02:16
Speaker
And I obviously did not want to spend my 20s in the bureaucracy. So while I was in England, I applied for the brewery license and I said, so I just had 1-2% here locally that would go around and make sure things are happening and that's it.
00:02:33
Speaker
And surprisingly and coincidentally, the day I graduated, a month after that, we had the license. So it took me like two years, but it's actually good for me. And then while we were scouting for the license, we were also looking for land. And in fact, that's when I realized how difficult it was in India to set up something because we had to buy three pieces of land. The first piece of land that we bought, the locals, the villagers were very against. We don't want a liquor factory near us and things like that. Obviously,
00:03:01
Speaker
They didn't understand how green and how good a brewery would be for the local community. But why is a brewery good for local community? The employment, beer, they use a lot of rice in its production. Most of the farmers that were there were in the harvesting of rice and we could give them those opportunities. They will get a better price. So it's not necessarily a fully automated plant. They'll get a lot of jobs.
00:03:23
Speaker
And one more question I have here, this license to open a brewery, is this like a state thing or a central thing? No, no, it's a state thing. That's why it takes that long. So like if you get a license from Delhi, then you can set up a brewery only in Delhi. Exactly. Exactly. And which state did you get?
Setting Up Simba: Overcoming Land and Licensing Roadblocks
00:03:41
Speaker
Chhattisgarh because that's where I'm from.
00:03:43
Speaker
And so we got the license here. While we got the license here, we went to the first village, they had a lot of problems and they started revolting. Then we went to a second. We actually did not want to build the brewery in an industrial park, primarily because there were a lot of steel plants around and they're not known to be very green in that sense.
00:04:03
Speaker
Not necessarily because you would have to invest that kind of money in order to. But ideally you don't want to have steel plants around when you're building a brewery because it's all product and all of that. That's when we bought the second piece of land and then we went and bought the third piece of land. But eventually we did not get it. So then we did not get the locals to agree. So eventually we bought a piece in an industrial area. Thank God it was a food park. Most of the outlets nearby were on food units.
00:04:31
Speaker
So we made our peace with that. And then we set up the brewery there. So this all happened while I was in England. The moment I graduated, we then went in and wanted to set up a brewery. I had already gotten consultants that have helped set up another
00:04:47
Speaker
set of breweries in india people who are ex ubi are the largest at the time we got a lot of help there and since my family was already in the distribution business so we did not have that much that many issues in terms of understanding of the business or getting the people to know who we are and we're not somebody
00:05:04
Speaker
absolutely new trying to get into the industry. So we could get our hands on a lot of good people,
Learning and Launching: Simba's Early Beer Offerings
00:05:10
Speaker
luckily. And while we were building the brewery, we got a lot of interest from the likes of UB and SAB Miller, who that used to produce Hayward, Miller, Fosters at the time. So they were
00:05:20
Speaker
both very keen on doing contract manufacturing. And it seemed prudent for me to not buy such a huge brewery or my own brand because we were just starting out. So these guys were in, they wanted to take up almost 70% of their capacity, which was great because we were building a larger facility and we wanted to make sure that we can understand how to go to scale, how we can understand, get operational excellence from these guys, which is what we exactly did. So we actually did contract manufacturing for two years. We did only contract manufacturing.
00:05:49
Speaker
and learn the trade from SAP Miller, how the breweries run. Because while we were very keen on building a brand and everything, when you're making a manufacturing facility, it's a lot of other things. Operational excellence and you're working in a competitive market. So you have to be very competitive. So we learned the tips of the trade in terms of how do you go about building a product range and things like that.
00:06:10
Speaker
But I think the one thing that we did not take from them whatsoever was how they brewed their briyere or basically the recipe that they used or the kind of cutting corners or things like that. Because we wanted a brand, we wanted to build a product line that was synonymous with our age and we wanted to give the consumers the taste that they've never tasted before. You want to do craft beer, which obviously SAB Miller is not craft beer.
00:06:35
Speaker
So we did that. And luckily for us, we managed to get a couple of goods because the brewery was running fine. And I had that much time then to focus on the product that we want to build. And I went to Germany quite a few times or went to other parts of the world to see what kind of products we can build. We do a lot of conferences and understood. And that's when we realized that a good two beers that we wanted, we shortlisted a wit and a stout.
00:06:59
Speaker
both of which were not really popular in India at the time, but we felt they would be the ones that most stand out and help us build our brand more than building the business. So we wanted to be positioned as something new, something different. And I think that's it. And if you look at the branding that we've done,
00:07:16
Speaker
Everything just speaks of that. So that's when we really got lucky there because we were the first ones to come out with a craft beer. And obviously, literally not the first. There were a lot of people that were trying their hand, but we did it in our own way. And we got lucky. I think the second largest New Age brand in the country today and the only bootstrapped one that has survived and strived. I want to understand the technical part of
00:07:41
Speaker
making craft beer and how it is different from making a regular beer like a Kingfisher versus a craft beer. How is the process different? Is it the ingredient? Is it the way in which it is done? What's the difference? Everything is different about it in the sense that the brewery itself can handle because we had made the brewery in a way that it could produce different beers, right? So a lager would be very efficiently run. It's the most efficient style of beer. That's why it's the most popular because it's the most efficient. That's the one that's been most cheapest to make.
00:08:10
Speaker
The cheapest to make, most competitive and therefore the largest set of consumers got accustomed to it. And why is that? Tell me from a technical person, like I want more details. Like why is lager so efficient? See, one of the key metrics that you look at a beer is the gravity of the beer. Gravity is basically how much sugar are you getting?
00:08:30
Speaker
for the raw materials that you put in, so basically the rice, barley, malt, whatever you put in, we actually boil that up to a level that it breaks down and we take out sugar from it. And that sugar is then fermented later on which comes out to become a beer. Now, there are different styles of beers and different styles of beers requires different kinds of hops to be used, different kinds of yeast to be used. And the yeast that you can use for a lager
00:08:57
Speaker
is the most efficient because it gives you the most alcohol with the least sugars in it. And that's one metric. So no sugar is good, you're saying? No, not necessarily no sugar. It's the idea is that the lowest amount of raw material needed to get there. Got it.
00:09:14
Speaker
like one unit of input will give you five units of output if you're doing lager versus four maybe in other cases for example efficiency was the name of the game for the longest time globally and that's why you see any brand that is an excellently in globally be it Carlsberg, Miller, Heineken
00:09:33
Speaker
You name it. They've all been lagers. They've had their own taste, but they're all lagers.
India's Craft Beer Growth and Simba's Market Strategy
00:09:38
Speaker
And even Kingfisher, for that matter, India, we had neighbors 5,000 that was doing very well. Even that was a lager. There are different styles of lagers, different quality of lagers, but they were all, at the end of the day, a lager. And we realized that, you know, there were times where we wanted to make sure that we were able to give the world. And India was a country that was 100% consuming lagers. Yes, absolutely. In my college days, we had no craft with.
00:10:01
Speaker
Exactly. So even in, maybe in a couple of microbreweries in Bangalore, you had some options available, but that was like the end. So we realized that there's a huge potential here and there's a very large market and it's growing very fast and the people's aspirations are growing very fast. People are not, people are now
00:10:17
Speaker
exposed to far more because they're not just exposed to the options available in the market, they're also exposed to all the options that they see online. People's aspirations will change and I think that kind of really helped us pick our niche. We built two products to begin with, Simba Witt and Simba Stout and these two products really took off for us.
00:10:35
Speaker
And how are these wittens out different? Like you use a different kind of yeast. That's how they're different. So this is completely different, right? So basically in wheat, we're using a French malt that comes. We're using malted wheat apart from just barley and rice. We also use wheat. And then we add orange peel and coriander seeds to the brewing process. And that's where things are different because in a lager or a brewery that is only set up for lager, you can only add the raw material once.
00:11:02
Speaker
In a craft brewery, you can actually infuse raw materials at every stage of the beer and have the capability to take them out as well. And the yeast also. So there are different types of yeast. One type of yeast actually settles down. So most of the yeast actually settles down. But in some craft beers, the yeast end up settling upwards. The fungus kind of goes up. So you should have the capability to withdraw those particles from the beer prior to production.
00:11:28
Speaker
And that is what we did in the technical part of the project. So with you said has wheat in it. And that probably gives it a different color and taste and all that. And what about stout? Yeah, it's cloudy. It's cloudy. It's not clear. And it has that orangish flavor. Also, it has something like a whole garden. And then there is the stout that we built.
00:11:48
Speaker
that we use. It's a dark beer, so it's almost black in color. We use chocolate malt, coffee malt. Again, very expensive, very high quality. Something like Guinness, if you have to compare it to a global brand. These options are not available to the Indian audiences and definitely not available at a price point that they would be able to afford it or at least go at scale. So we did that.
00:12:09
Speaker
And then we're from Shatras Girl and nobody expects a beer coming out of Shatras Girl. We're a remote part of the country where we will only don't expect world-class product or brands to come out. And we cognizant of that. While we really did not like the fact but our feelings did not really matter to the customer. So we actually went ahead and launched our beers from Goa and the entire branding was positioned.
00:12:32
Speaker
as if the brand is from Goa. And that is one destination in India that's known to be counterculture, anti-establishment in all ways and senses. And we're a huge hit there. We got the perfect start. We launched the beers there. It was a rage everywhere. People were going gaga. And the best part is people from Delhi, Bombay, Bangalore, everybody come there for partying. And they realized that this is an amazing brand that's come up. And we started getting demand from everywhere in the country.
00:13:00
Speaker
So one question here, you had a license for Chhattisgarh, so now do you need to get state-by-state license for distribution? Distribution license would be different. Yeah, so you have to register. So building a brewery is a far more difficult business than selling it. So selling it is still much more easier because you can register your product. It takes some time. It's a bureaucratic time point. From a time point of view, it's a little hassle, but it's not really very difficult to do it. It's very common.
00:13:26
Speaker
And why did you, I want to understand the branding approach like calling it Simba and then you have that very unique. I think it's a monkey right on the logo. It's a lion, mascot, lion, man. It's a lion. So how did you do the branding of it? Actually what we did was the name actually was very cool because it was something that my uncle gave me.
00:13:47
Speaker
And we realized that is one name that it's very easy to pronounce for somebody who's living in a metropolitan to somebody who's living in a village. And eventually we wanted to build a brand that easy to use half, but it was not looked down upon. Like any simple words are also very, they're not very high end in that sense, in people's minds.
00:14:05
Speaker
We didn't want people to have preconceived notions of a name and this was one name that we felt that did not have any preconceived notions with. If anything they had it with like Simba, The Lion and The Jungle and which kind of helped so we could actually turn things and for a lot of people so the large part of the audiences we could actually build the narrative around the name and and that really helped. So now we are setting in across the country and nowhere like it's the easiest thing that people remember the name wise.
00:14:30
Speaker
Yes. And everybody I speak to has heard of it. And it's just a lovely feeling that way. And we actually were very clear from day one that we are not in it for the short game. We want to build along from brand and we want to build it tightly. Luckily, we had this app builder contract manufacturing that was going on, which was able, we were able to pay off the breweries dues with it.
00:14:51
Speaker
and still had 10-20% capacity left to us for us to experiment and things like that. And I think that really became a game changer for us. And we started building the brand. Today we are in a position where I grew. In fact, we now contract manufacturing five other plants across the country. Yeah. And obviously consume our entire capacity.
00:15:11
Speaker
So which year was Goa launch? It was in 2016. Sorry, 2017. So how do you track sales number? Is it like liters sold, bottles sold? What is it? Like cases? What's the metric? Cases is mostly. Cases is the metric. So what was your sales in cases sold in 2017? And what do you expect this year? What will you close at? Just to understand the growth of it.
00:15:35
Speaker
Yeah. So the first year we sold only 1 lakh cases. Next year that you're planning, we're closing with about 4 million cases. Wow. Okay. So next year means 31st March, 2023. This year would be about 22, 22, 23 lakhs. But this is also largely because of the second wave hitting during middle season. And April, June is like... So in fact, our business has been hampered with two times they've been forward waves and they've both been in during the summer season. They have really taken a toll on the beer industry.
00:16:03
Speaker
When you say double digit share in your top states, what is the base here? Is it all beer or is it craft beer? Craft beer on its own has no category. So I'll have almost 80% share in most states than where we are. But we're talking about the whole beer category.
00:16:23
Speaker
desperately waiting for a premium option, right? So people who are anyways premiumizing from in whiskey or people who are drinking bagpiper have gone on to McDonald's, number one McDonald's guys has gone to Royce and the guy has gone to something and then 100piper blenders fried. There's that journey that has been charted out. That's really not happened with beer. So it's either the base ones and or some international ones and that's it. There's no room for experimentation there. And
00:16:46
Speaker
Then we realized that there's a category right in between them where people want a better product. They're happy to pay a premium. They're definitely not ready to pay a multiple, but they're happy to pay a good premium for your beer for a good quality product. And that's what we realized. That was a sweet spot. And we managed to do exactly that and build a good business out of it.
00:17:09
Speaker
If you like to hear stories of founders, then we have tons of great stories from entrepreneurs who have built billion dollar businesses. Just search for the founder thesis podcast on any audio streaming app like Spotify, Ghana, Apple Podcasts and subscribe to the show.
00:17:29
Speaker
God, it's better. And how does your number stack up with others? Like you're saying four million cases next year, two and a half million cases this year. What would we say a number for Bira or like just to understand the market size? So I think Bira would be at about six million or so, six to seven, I guess. And all the others have actually exited the market. Most of the crowd viewers actually could not
00:17:54
Speaker
so i think due to covid and yeah yeah and obviously gamefisher is huge they're at maybe 80 million or something okay obviously they're mass market and they have like a whole range so yeah got it okay and here i'm guessing is like a distribution led business right if you figure
Navigating Distribution and Regulation in India
00:18:14
Speaker
out distribution then what's up is that right
00:18:21
Speaker
So, is one of those things that's important?
00:18:25
Speaker
but that you cannot do without, but it doesn't mean that you can have anything and push through the troops, which that's also true to some extent, to be honest, but it won't last. So if you're going to build a lasting company, you have to get the distribution and you have to get the product right. And does beer distribution work different from, say, FMCG distribution, where you have distributor, wholesaler, retailers? Is it the same here? Wholesaler, like distributor, wholesaler, retailer? Then how does it work?
00:18:54
Speaker
Every state has its own laws. So in most states today, the government is a single distributor. Okay. So you sell to government and then the retailers buy from government. Retailers buy from government. Yeah, because that's primarily because they want to make sure they want to secure their duty. Where people are paying their duty while supplying and then the retailers are paying their duty while picking up the product. So there's no duty while. Which actually works out also because in a lot of cases what happens is the retailers don't end up paying. But if you're buying through the government, then you have to pay.
00:19:23
Speaker
So there's that discipline also built in, which is great for a small brand because larger brands can take out money, but smaller brands it's very difficult because otherwise these retailers might take you for a ride. This was the first part of Koksha's conversation with Prabh Tej. Just search for the founder thesis podcast on any audio streaming app like Apple Podcasts, Spotify, etc. for part two in which they explore his journey as a fintech founder.
00:19:48
Speaker
If you like the Founded Thesis podcast, then do check out our other shows on subjects like marketing, technology, career advice, books and drama. Visit the podium.in, that is, T-H-E-P-O-D-I-U-N.I-N for a complete list of all our shows.