The Devastating Impact of a Simple Name Change: How Bira 91's Regulatory Crisis Led to Financial Collapse

Regulatory compliance delays resulted in a substantial 22% decline in sales for the popular craft beer brand.

A seemingly innocuous legal name modification to the parent company of Bira 91 has unleashed a series of devastating regulatory and operational challenges for the beer venture. According to The Economic Times, more than 250 staff members at B9 Beverages, the company behind the Bira 91 brand, have formally requested the dismissal of founder Ankur Jain, pointing to governance problems, salary delays, and outstanding vendor payments.

The crisis originated when the company changed its legal designation from B9 Beverages Private Limited to simply B9 Beverages Limited during 2023/24, eliminating the term "Private." This minor alteration produced unexpected and severe consequences.

Investor D Muthukrishnan shared on social platform X: "Bira 91 was one of the successful start-up stories of the last decade. It is a popular craft beer brand. They were growing so well. Reality is stranger than what you can imagine. A procedural goof-up has led to the whole company collapsing, and the founder is now being forced to exit by company employees."

He further explained: "All hell then broke loose. All the states immediately banned the sale of Bira 91, treating the new name as a different entity. They demanded fresh legal approvals, label approvals, product registrations and fresh licenses for every single variant. This led to one problem after another."

Muthukrishnan highlighted a comparison with Diageo India, noting that the company strategically maintained the name United Spirits rather than transitioning to Diageo India Limited specifically to avoid such regulatory complications.

The bureaucratic obstacles proved financially devastating. Although the name change appeared minor, it triggered a sales stoppage lasting months, compelling B9 Beverages to write off approximately Rs 80 crore in inventory while registering new product labels, as reported by ET. Compliance delays caused sales to drop by 22% and losses to increase by 68% for fiscal year 2023-24, with the company reporting a net loss of Rs 748 crore, which exceeded its total revenue of Rs 638 crore.

According to ET, executives familiar with the situation revealed that production operations ceased in July. Additionally, potential investor BlackRock, which had been in discussions to invest Rs 500 crore of debt into the promoter group, reportedly withdrew from negotiations.

In response to the employee petition, Jain stated that the company had not received any formal communication from the petitioners or shareholders. He did acknowledge outstanding employee payments: "It is true that we have employee overdues that have been persisting. These range between three and five months, depending on the level of employees, and include a delay in payments of tax dues as well."

Jain described the previous 18 months as exceptionally difficult due to "significant business disruptions" resulting from the name change, shifts in liquor policy, and fundraising delays. He mentioned that the company has attempted to address these challenges by restructuring operations, focusing on specific states, and working to improve profit margins.