Founder & Partner,
Gateway Brewing Company
Being the frontrunners in kegging craft beers in India, Gateway Brewing Co.’s Rahul Mehra learnt the ropes from scratch. BW speaks with him on the ups and downs of kegging in India and what he sees as the biggest challenges.
He feels that apart from the challenges of quality and government regulations and policies, the topmost challenge today is to brew enough for the demanding customers who love Gateway’s beer styles.
WHAT IS YOUR EXPERIENCE ABOUT KEGGING AND SUPPLYING TO OTHER RESTAURANTS AND BARS? HOW PROFITABLE HAS IT BEEN FOR GATEWAY?
From the very beginning we were extremely sure that this is the model we wanted to follow – to make good beers available across Mumbai, not just be a brew pub known for good beers. We did dabble with the idea of a brew pub, but that was mainly because we weren’t really sure that the policy change we applied for, to allow craft breweries to sell beer in kegs, would come through. Being the first guys to operate under this model in the country, we had to learn and build everything from scratch – right from a cellar style dispense system that we’ve installed at each bar which makes sure that the beer stays fresh under a controlled environment throughout the lifecycle of the beer, to an end-to-end cold chain that we employ today. When you handle manufacturing as well as cold chain distribution in the beer trade in India, any one would say that it’s hard to be profitable. But the positive response we got from the industry as well as our drinkers right from the start ensured that we’ve been profitable from the word go.
WHAT WERE THE INITIAL CHALLENGES YOU FACED AND HOW DID YOU OVERCOME THEM?
The kind of challenges has evolved as our work has grown over time. Most of the initial challenges were getting the policy in place which took years of back and forth with the involved ministries. Once that came through, there was the challenge of setting up cold chain distribution and having to build what is now, one of Mumbai’s largest draught dispense network is something we never signed up for and had little experience with. So, these things were learnt on the job. We never had a full-fledged sales team to begin with, bars would usually approach us to have our product placed once the word got out. Given how small bars in Mumbai are, the challenge was to allocate a space behind the bar to plug in the draught beer setup. We knew from the start that we won’t have the leeway to serve 8-10 beers that brewpubs make, so we had to focus on 3-4 styles of beer.
Today after 3 years of operations, the challenge is to be able to keep up with the consumer who is far far more demanding of better and newer styles of beers. This is what drives us to make constant upgrades to our brewery in terms of capacity as well as knowhow.
HOW DOES THE EXCISE POLICY OF MAHARASHTRA AFFECT KEGGING?
As of today, Maharashtra has the most progressive microbrewery policy in the country. This is for two main reasons – it allows us self distribution and packaging in kegs. It’s because of this policy that we are able to have over 100 bars in the city serving craft beer on tap, 80 of which we supply to, and it’s because of this policy that we can have craft beer festivals with over 50 different beers on tap – something no other state, except to an extent Goa, has the policy in place for.
DOES THE DUTY STRUCTURE CONTROL YOUR MARGINS? IF SO, HOW DOES IT PUT A CONTROL ON GOOD QUALITY RAW MATERIALS?
The duty structure applicable to microbreweries is still the age-old formula that is used for large scale macro breweries. It’s linked to the manufacturing cost as well as the selling price. An increase in any of the above increases the duty rate.
Add to this, there is the licence cost which is higher per litre compared to large scale brewers. What this kind of a structure would or could do is prevent microbreweries from using expensive raw materials. But in reality, this has never been a deterrent. I don’t think any craft brewery here resorts to using cheap quality raw materials even with such pressures if at all, at least at Gateway it has only helped us use newer local ingredients, something that we are in a constant search for. That is largely because our drinkers are not just ready but also demanding of a high quality product.
Large breweries use malt substitutes (adjuncts) which are cheaper sources of fermentables (sugars). Microbrewers only use barley or wheat malt which is more expensive; this means that inherently our manufacturing cost has to be higher, which in turn increases the excise duty. So yes, it does control our margins, but this is something we do plan to propose to the excise ministry in the future.
Till then we’ve taken this in our stride and it doesn’t seem to have stopped us from experimenting and pushing out some great craft beers to our drinkers.
Maharashtra has the most progressive microbrewery policy in the country. This is for two main reasons – it allows us self distribution and packaging in kegs.
ARE YOU GOING BEYOND MUMBAI AND PLANNING TO SELL OUTSIDE OF MAHARASHTRA?
We currently sell in Mumbai and Pune only. With kegging operations and cold transport, there is so much we can reach out too. Furthermore, the market is growing at a steady pace and there is always a set of consumers who want newer styles of beers on tap. This keeps us pretty busy.
WHAT IS THE COMPETITION AND HOW DO YOU SEE THE FUTURE?
Unlike the macro breweries and more recently the wine industry, craft breweries have progressed and grown mainly because of collaboration and camaraderie rather than competition.
There is a healthy competition in the industry today when it comes to who is making better beers, not who is selling more. For now, we craft brewers are collective in our fight against the mediocre yellow fizzy liquid that has been sold as beer in our country since ages. We are here to provide options to beer drinkers and maybe, at times, humour them a bit with the kind of beers we put out.