Devans expands beer footprint as costs squeeze margins

Devans Modern Breweries is expanding its beer business into some of India’s biggest alcohol markets even as soaring costs and state-controlled pricing squeeze margins, betting that a wider distribution footprint and a push into premium spirits can sustain growth.

India—a warm, tropical country with promising demographics and increasing affluence—remains one of the largest markets for global brewers. But the opportunity comes with structural constraints: the industry is heavily taxed and there are only about 80,000 alcohol retail licences across the country, including stores, pubs and bars.

The maker of Godfather beer expanded into Maharashtra last year and recently entered Madhya Pradesh. It plans to enter Andhra Pradesh, Kerala, Karnataka, Goa and West Bengal later this year, according to Prem Dewan, Chairman and Managing Director of Devans Modern Breweries.


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“Devans growth is being driven by the extension of our area of operations,” Dewan said. The company expects Maharashtra to become a significant growth market following its entry last year.

The expansion comes as brewers grapple with higher costs for malt, rice, glass and packaging, while state excise regimes make it difficult to pass those increases through to consumers.

“The biggest challenge in the beer business are the relatively low margins across all states which has been compounded by the huge increase in cost of all inputs due to the West Asia war,” Dewan said. He also pointed to higher excise taxation on beer compared with Indian-made foreign liquor as a constraint on demand.

Both beer and spirits are being hurt by states’ reluctance to raise ex-factory prices, he said. “Passing on the same to consumers is a big issue due to the reluctance of the state excise departments to increase rates,” although the company has begun reviewing price increases in a couple of states.

More than 20 million people enter the legal drinking age every year in India. Yet beer accounts for just about 10% of the spirits market, with per-capita consumption of roughly two litres, below that of most Asian markets. That leaves considerable room for growth, but also highlights the regulatory and distribution barriers facing brewers.

Devans is also seeking growth beyond beer by building a premium spirits portfolio. It has launched GINGALALAHU craft gin in five states and plans to expand it further. A new product is planned before Diwali, alongside ready-to-drink offerings, while the company develops a broader premium liquor portfolio.

Godfather, introduced in the early 1980s, remains central to the strategy. Demand has recently strengthened across territories, Dewan said, as the company focuses on product quality.

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“Godfather is an iconic brand having been introduced in the early 80’s and has lately picked up demand across all territories,” he said.

The company’s strongest growth markets currently are Jammu & Kashmir, Jharkhand, Assam and Tamil Nadu. Godfather is now available across most Indian states, with nationwide availability targeted for next year. Dewan said the broader footprint should help insulate the brand from competition from regional domestic brewers and multinational companies.

Younger legal-age consumers are also moving away from the traditional preference for strong liquor, with moderation, experimentation and lighter drinking experiences becoming more relevant, Dewan said. Devans is developing products around varied flavour profiles and formats.

Devans ruled out acquisitions and plans to focus on expanding its own portfolio. It is investing in a malt-spirit maturation facility, with results expected next year.

“I do not see any real risk going forward in the future,” Dewan said. “We are very optimistic about the strength and quality of our brands.”