Could Pakistan beer take edge off relations with India?

RAWALPINDI, Pakistan — In a country where mullahs ceaselessly denounce Western vices and laws prevent restaurants from offering anything stronger than mocktails or Red Bull, the Murree Brewery somehow perseveres, churning out pallets of lager with an efficiency that would make Milwaukee proud.

A relic of British colonialism, the 152-year-old brewery has survived a 1977 government decree banning tippling by Pakistani Muslims, turning instead to a small but ever-present clientele of non-Muslim foreigners and Christian Pakistanis on the hunt for alcohol-enhanced answers to Pakistan’s 100-plus-degree summers.

A recent Pakistani government decision to allow beer exports to non-Muslim countries raises an intriguing prospect: Could Murree beer help relations with nuclear archrival India, a neighbor whose populace has a well-known craving for a cold one?

“Business has to prevail, it has to be the bridge, I would say,” Isphanyar Bhandara, chief executive of Murree Brewery, said during an interview at his office, where shelves of Murree offerings as varied as beer and 12-year-old single malt whiskey greet visitors. Government authorities, he continued, “have realized that keeping a lid on alcohol, allowing it in Pakistan but not allowing it to be exported, doesn’t make sense. It doesn’t make economic sense.”

Approval for alcohol exports, a government move aimed at generating more tax revenue, coincides with a recent thaw in ties between Pakistan and India, die-hard enemies since the partition of British colonial India in 1947. The two countries endorsed a most-favored nation agreement this year that fosters trade through the mutual imposition of lower import tariffs and higher import quotas. And Pakistani President Asif Ali Zardari’s visit to India in April was viewed on both sides of the border as an important symbolic gesture.

Murree can now do business with any non-Muslim nation, but India appears to be the likeliest market. Its beer sales are expected to double to almost $9 billion by 2016, according to a recent article in Bloomberg Businessweek. In India’s northwestern state of Punjab, Murree beer is already routinely smuggled over the border.

Still, Bhandara acknowledges that his marketing department has tough work ahead.

“We are keeping our fingers crossed and shouting at Indian Punjab to import our beer, but it’s a hard sell in India,” Bhandara said. “They are already producing beer in millions of barrels…. So it’s not that we are going to put crates on the border, and people are going to come and quickly snatch it up. We don’t see that happening, though we wish it would.”

Within Pakistan, sales are hardly a problem. At hotels in the capital, Islamabad, cases of Murree are hauled away by thirsty Westerners just as quickly as workers can stock them. Black marketeers make millions of rupees serving the legions of Pakistani Muslims who drink on the sly.

That Pakistani Muslims can get their hands on Murree beer, whiskey, vodka and gin doesn’t really bother Bhandara.

“Murree’s direct customers are institutions, not individuals,” said the beer magnate, whose non-Muslim family has owned Murree since the late 1940s. “I’m only allowed to sell my product at government-authorized outlets. If those hotels and shops sell to Muslims, that’s not my concern or jurisdiction.”

The people Bhandara might worry about the most, Pakistan’s array of Islamist militant groups, have never attacked the brewery. The reason may lie in its location, a sprawling red-brick compound less than a mile and a half from the army’s headquarters, Pakistan’s equivalent to the Pentagon, and not far from the residence of army chief Gen. Ashfaq Kayani.

Inside the brewery, a tidy, clockwork rhythm prevails that seems out of place amid the dusty bustle of bazaars and motorcycle-rickshaw-choked avenues of Rawalpindi. Workers and technicians, almost all of whom are Pakistani Muslims, tend to conveyor belts spitting out thousands of bottles a day of Murree’s honey-gold lager. In the distillery, an eclectic array of liquors is produced: Lemo’ Lime gin, Dew of Himalayas malt whiskey, Bolskaya vodka and, until recently, even an Irish cream.

Sabih ur-Rehman, a retired army major and Bhandara’s right-hand man, acknowledges that marketing a Pakistani-made Irish cream was a hard sell.

“I’d say it was one of the best products we produced,” Rehman said. “But the market wasn’t there. Those who drank it almost got addicted, it was that good. But it’s a liqueur and the alcohol percentage is less. So we couldn’t get customers interested.”

Murree executives are heartened by the federal government’s decision to allow exports, but their relationship with Pakistani Punjab provincial bureaucrats has been far from ideal.

Last summer, the brewery, which is already heavily taxed, got word from the Punjab government that Murree would be assessed a separate pre-production duty on ethanol purchased for use in its distillery, a move that brewery executives said amounted to double-taxing.

Murree balked at paying, and for six months the brewery’s operations were virtually shut down. Bhandara estimates his losses amounted to about $1 million. Murree threatened to take the case to court, but eventually agreed to pay extra duty on the ethanol provided it wasn’t made retroactive.

There are other government-imposed restrictions that the brewery grudgingly endures. Each morning, the brewery can’t open until a Punjab provincial inspector unlocks the gates. That inspector also has the keys for the buildings within the compound that involve alcohol production, including the brewery’s fermentation vats and storage tanks, the bottling department and the distillery. He unlocks only those departments that are expected to be in use that day.

“It’s done to prevent pilferage,” Bhandara said. “The government wants to ensure that for every drop that goes out, it gets its share.”

That share should increase if Murree begins exporting alcohol. In Pakistan, it’s virtually the only game in town; the country’s only other brewery, Indus, in the south, is tiny compared with Murree. Bhandara knows he doesn’t have the means to compete head-to-head with Indian beer giants such as Kingfisher. But as he begins scouting around for potential importers, he’s buoyed by one conviction. He believes his beer is better.

“As far as quality is concerned,” he said, “our beer beats any Indian beer hands down.”