Delhi entrepreneur finds success in a mug of beer

Why would an apparel retail professional with a textiles degree raise a mug of beer and say cheers? "Destiny is not a matter of chance; it's a choice. It took 20 years of working with lifestyle and sportswear companies to realise that I was destined to become an entrepreneur. By chance, I met another professional-turned-entrepreneur who came from the world of beer. The idea of beer clicked and we launched The Beer Cafe in Delhi," explains 43-year-old Rahul Singh. The venture kick-started in 2010 with an initial investment of Rs 1 crore with partner Pradeep Gidwani but Singh bought the brand a year later.

Betting His Life On It
This may sound dramatic, but Singh mortgaged his house against a bank loan to see him through the first phase of his business. It was a huge gamble and, fortunately, it paid off. "You have to work like your life depends on it because, sometimes, it does," remembers Singh.
The biggest challenge while launching The Beer Cafe was finding the right location. "I wanted it closer home in Gurgaon and was able to jump the queue and get a store at Ambience Mall. So, the first Beer Cafe opened in April 2012." The diverse and eclectic mix of customers from the Delhi-NCR region looking to unwind after a hard day's work saw the cafe buzzing very soon. Ecstatic with the response, Singh quickly rolled out five more beer cafes in the first year of operation, four in Delhi and one in Chandigarh.

What's So Special?
The Beer Cafe serves 50 varieties of beer from 17 countries along with Indian and Italian cuisine. The outlets have special RFID (radio frequency identification)-activated PYOB (Pour Your Own Beer) cards, draught beer taps and beer tanks. The RFID-activated card is prepaid and works on any of The Beer Cafe locations in the country. All one needs to do is pick a pre-cooled beer mug and use the card to pay for it. The beer enthusiast is only charged for the amount of beer he pours (minus the froth).





















       Rahul Singh, owner of The Beer Cafe

Store Dynamics
The Beer Cafe has six outlets in Delhi/NCR (Connaught Place, Vasant Kunj, Kirti Nagar, Saket, two in Gurgaon) and one in Chandigarh. The plan is to launch 13 more locations this year (four more in Delhi, four in Punjab and five in Mumbai, Thane and Pune). All Beer Cafe outlets are COCO (company-owned, company-operated) and Singh has no plans to take the franchise route.
The Beer Cafe prefers heavy footfall locations as it's not an indulgence- or an occasion-based restaurant but more impulse-led. Malls, high streets around other cafes and commute points like the airport and metro stations are preferred locations. The average store size is 1,200-1,500 sq ft and the investment is between Rs 60 and Rs 80 lakh. A large part of the investment goes into technology and equipment. Break-even takes 15-24 months.

Revenue Model
Around 65-70 per cent of the revenue comes from beer. Of this, 50 per cent of sales are from draught beer. About 20-25 per cent is from food sales and 5-10 per cent comes from the sale of other beverages. The average spend is Rs 1,000 plus taxes (inclusive of beer).
The Beer Cafe received its first round of VC funding of Rs 25 crore within a year of operation from Mayfield, a California-based venture capitalist. "They believed in the concept as much as we did and were convinced of its potential to grow. The fund is being utilised to roll out outlets and setting up a robust backend team. In phase two, we will enter small towns. We think there is a huge potential there," says Singh. The first year brought in Rs 5 crore in revenue. Singh says he expects the figure to quadruple this year. "The target is to cross Rs 300 crore in top line in the next three years."
 













     The Beer Cafe, Vasant Kunj, Delhi

Burps & Bumps
The biggest challenge was the regulatory system. Beer, with an alcohol content of 5 per cent, is considered liquor in India, and lack of a uniform excise policy makes things difficult. Compliance and paperwork is both time-consuming and complicated. The multiple licences (tourism, music, food safety, fire, pollution and health) is also a huge challenge.
Taxes and other levies are another knotty issue. "Being a low-on-alcohol beverage, beer should not be taxed as hard liquor. WHO recommends that countries wean people away from hard liquor and move towards healthier alternatives like beer and wine. The regulatory authorities in India should align themselves with global standards," says Singh.
Beer is the third-largest beverage consumed in the world, after water and tea. Industry estimates put India's per capita annual beer consumption at 1.5 litres, whereas it is 35 litres in China, which is by far the largest consumer of beer (20 per cent more than the USA in second place). With beer consumption in India growing in double digits, The Beer Cafe feels it is on the right track.