Why David can’t get the better of Goliath this time. (bunder vs kingfisher) – Big Investor Blog

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Start ups are judged on Sales growth.

Listed companies are judged on PAT and Free Cash growth.

Not surprising then, companies will try to game the above metrics.

Bira 91, the CRAFT KID on the block made a crazy splash In India over the last few years with the hope to improve and raise the culture of the beer lovers in india. It kinda acted like a messiah for the poor uncultured people who were apparently stuck to the sad kingfisher and moderately happy budweiser.

For all the pomp and show, Bira’s SALES in 2019 was 420 cr compared to Kingfishers post tax profit of 550 cr.

Im saying that again, Bira’s PE funded, irresponsible sales with a operational loss of 200 cr managed to sell just 420 cr. i.e it basically had a loss of 50% of its sales. Yeah yeah, operational leverage and all have to play out. DONT GIVE ME THAT CRAP. A company in middle india called Som Distilleries has a brand called Hunter Beer, which is a NEW DESI brand too has been able to profitably make sales. Just no PE funds !

After the big splash in the craft beer market, which i don’t personally peg at more than 1.5% of the Indian Beer market, Bira 91 saw that the sales weren’t really kicking in.

Ankur Jain and his colleagues began scratching their own and each other’s heads like a band of monkeys and came up with an idea to game the sales metric once again. TASTY CHEAP STRONG BEER- THE EXACT OPPOSITE OF POSH WIT BEER.

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Now he and his band of Bira monkeys are yet again running around the country pushing or rather showing the beer down retailers throats by greasing the Liquor stores like crazy. They expect to clock a turnover of 700 cr this year, up from 420 cr. I’m pegging the losses to go up at least 50% from last year.

Just like every river finds itself merging into the ocean in the end, consumer companies usually find their route to the stock market. Bira 91 with this fiscal attitude of shock-and-awe might be able to entice the PE guys, but not the grand old daddies in the stock market.

You are not a tech company bro !

There is this writer called Rajiv Singh in Forbes India, who seems to compare Bira to the story of David and Goliath. He He He.

http://www.forbesindia.com/article/work-in-progress/how-bira-91-went-from-craft-brew-to-the-smalltowns-drink-of-choice/57175/1

Before you make comparisons of the story, watch the untold story of David and Goliath here.

  • David was smart and small and Goliath was large and stupid. Heineken is large but not stupid, Bira is small but not smart enough.
  • Goliath is pissed off that David is challenging him. Heineken is not pissed at all at Bira 91, in fact they are happy that Bira is creating new markets that they can come in aaaram se and dominate them. (check out the new Kingfisher Ultra Witbeer)
  • David is powerless and Goliath is powerful. Wrong again, David has enough weapons to attack without getting attacked. When Bira 91 is allowed to sell without profitability and Kingfisher will get killed if it does not make profits, Bira aka David actually has the advantage in sales.
  • David and Goliath are fighting the same battle. Kingfisher on the other hand is fighting a battle on profitability and Bira on Sales. Not the same battle yo !
  • Giants and Oligopolies are both big but structurally very different. Tiny men and Start-ups are small and nible, but some stand on their own and others need irresponsible cash to exist, much like a man on life support in a hospital.
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Now Bira 91 is shifting focus on the strong beer market. When you move down the value chain and want to go mass or mass premium, the importance of the supply chain is massive. Think D’mart. Think Zara.

You need a different mindset to operate from niche to mass premium. Of course when you give away freebies the mass will come in 10x more hordes than the premium, but freebies are limited.

Though Bira Boom is making some noise, Heineken has introduced AMSTEL in India and Carsberg has its Elephant and Budweiser has Magnum. There is no unoccupied space. It will be a battle of market share.

Gimmickry can get you sales no doubt, but if that gets you sales, sustaining it is a challenge. That’s where the big boys know a ton of things compared to the monkeys at bira.

Kingfisher a.k.a United Breweries a.k.a Heineken is a large part of my portfolio because of their simple mission statement.

“DOMINATE EVERY CATEGORY AND GEOGRAPHY OF INDIA – PROFITABLY”

BUY.

Am I an interested party. Hell yeah !

Enjoyed at Mysuru last week.

P.S – Did i upset the Bira team by addressing them as a monkeys, well you should have picked a better logo man !

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Nitin Siddamsetty
Nitin invests across various sectors - Consumer, Food Processing, Real Estate, and many others. He is a CA and manages his family office. He loves to write about Stocks, Businesses, and other Financial Concepts.
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