A report published last year named the CSD as the county’s biggest retail channel for alcobev brands. What has contributed to this phenomenal success?
I would like to start with tracing the existence of CSD to 1927. It was meant for the British troops serving in India with the purpose of providing them daily-use items at affordable prices. The philosophy to provide our servicemen with the best of products at lowest possible prices has continued till today.
Back in the 20s, the word retail was unheard of and none of the brands that now line our retail shelves even existed.
What steps have you taken to build transparency and the confidence of all stakeholders?
I am working on many fronts to overhaul the entire system, around the ideals of superior transparency, speed, clarity and customer satisfaction. There were a few issues, I agree. But I am trying to resolve them.
Earlier, all processes were slow, be it placement, replacement, procurement, price change, or even introduction of a new item. We want to speed it up as the companies would like to have a bit of conviction in the decision-making process. After all, we are the largest stakeholders. I am streamlining the entire process, as our partners would like clarity, from the business perspective.
Ease of Business
One of the issues is to make it easy for our partners to do business with us. I want to bring in transparency to our rules, and make it easy for them to understand how and why we introduce or discard different items. I don’t want any secrecy as I don’t want people walking out from here to wonder about the reasons for inclusions and exclusions. I want to remove all kinds of ambiguity.
I have divided inventory into various segments. Let’s take the liquor segment: I encourage all the major players who come to meet me to suggest improvements. I also take in their opinions on how to bring about better transparency to the process.
Today, the industry has the confidence in me to take up issues with that states such as Kerala, Bihar and Jharkhand. The Excise Commissioners are also quite co-operative in resolving problem areas concerning CSD.
For instance, during our last trip to Hyderabad, we met the excise commissioner. Some problems had held up supplies of wine for about four-five months. We could resolve the issue, in Hyderabad. The city has several training institutions such as the Air Force Academy, Artillery Centre, Military College of Electronic and Mechanical Engineering and Ordinance Centre.
We held a partners’ meet, and a seminar, within two months of my taking charge. It was attended by all leading companies. There I emphasized on the need for a corruption-free department, where nobody would ask for any consideration for doing business. I standby what I said in the meet: “I will lead by example.”
Very soon, we will have the second edition of the partners’ meet. In that I would highlight how we have changed the norms and explain how we are bringing in more transparency. I am quite proud about how smoothly we rolled out GST, despite being such a vast supply-chain
Organization spread across all the states. Of course, the transition happened because of the relentless work we put in for four months in the run-up to the GST. We held numerous discussions with the finance ministry and the GST council and they gave us an amenable tax rate. Our procurement norms are a bit dated, so now we have set up a full-time team to bring up the currency in the system, in line with the current norms. All the manuals have been revised and will be issued in Jan’ 18.
Opening communication channels
I believe communication is extremely important when we have to foster good partnerships. I want to stress that I have enhanced communication with the companies. Every day, I email four to five companies across segments, not just liquor—and I set aside an hour to just answer emails, be it from the companies or complaints from customers. I feel it is my duty to address their difficulties with the CSD’s functioning. I encourage people to come meet me, or drop a line over email. The companies have responded well to my initiative, be it Diageo, PernodRicard or Radico, they all come and freely discuss their issues with me.
How many CSD canteen stores are there in India? Are these different for Army, Air Force and Navy?
Regardless of the service we belong to, all of us get a smart card for liquor, which comes ‘charged’ with our entitlement (how many units we can buy). This is based on rank for both serving and retired personnel. The card is valid across the country. When I swipe my card, it will show how many units I have bought in the month, and how many more I can buy.
The restriction on buying liquor is for two reasons. One, we would like to regulate how much liquor a person consumes and second, even more important, is that we don’t want individuals to buy from here and then sell it outside. It tarnishes the armed forces’ image. I don’t claim that it doesn’t happen, but we are trying to curb it. Also, it’s not my job to be the police, and neither do I have the resources for policing.
We have 4,500 outlets, and given the numbers, it is currently impossible to stop the misuse from happening at all. The scale of wrong doing is small; but the wrongdoers do get caught and are punished accordingly.
Does the CSD stock a range of liquor brands? How is it that CSD’s price points for Alcobev products are so low compared to the civil market?
The liquor industry has grown phenomenally in the past 15-20 years. Niche products such as wines, cognacs, high-end whiskies, single malts, among others, that have come into the market did not exist earlier and there is a definite shift in the tastes and preferences of the consumers.
The canteens compared to 20-30 years ago, when all we got was Mohan Meakins’ Golden Eagle beer or Khodays’ Peter Scot whisky.
Also, you have to understand, we are not here to make a profit. This is a welfare measure for the troops. We add a slight margin to cover minor expenses to the price at which we procure from the companies.
Tell us about the process and basis of selecting alcoholic beverages for CSD?
Ninety five percent of the footfalls at our canteens is that of jawans, up to the subedar major rank. We have to cater to their palate, they are my biggest consumers. We understand their palate, because we have grown together.
As I mentioned, tastes are evolving all the time and now there is a growing demand for wines, beers, single malts and even stuff like vodka premix or flavored vodka, which were not available before. These are niche categories, which have evolved over a period of time. We are trying to ensure that the canteens are stocked with the best products available in the market. We are also stressing now on going for good brands as these come with quality control checks and balances.
Do you include or exclude products from CSD on the basis of demand? What was last year’s volume of purchase for Alcobev products?
We have this two-fold criteria of sales and volume. While we have generic categories such as dark rum, white rum, entry-level whisky, middle-level whisky, blended whisky and single malts, we also have segments of gins and vodkas. A particular brand is compared with the mixed-generic category; if it achieves that much sale and volume compared to its peers, we keep it, if not it is removed. It’s a mathematical process— we try to be fair—there is no bias of any kind. Whatever goes up for deletion, a proper show-cause is given to the company. We even give them a chance to explain their point of view. Most of them come and meet us, and discuss the deletion.
As far as brand availability is concerned, we don’t have any restriction, but you have to realize there is a limit to the inventory that we can hold.
Last year our volume of alcoholic beverages purchase was at about Rs 3,400 crore.
Could you please share your procedure of enlisting new liquor brands?
We make those decisions based on market survey. For products to be considered, they must have a good standing in the civilian market: good sales and popularity. Soon, all our market surveys will be done by AC Nielson. We selected this agency after several rounds of discussion. The survey helps us ascertain the presence, record and quality of a product before its introduction to our canteens. This is very important as these products will be consumed by our people. I don’t want my people to consume completely unknown brands.
Do you have any kind of fees for registration the brand in CSD?
Yes, we do have. The charges are available on our website, in the open domain. It’s just to cover the administrative expenses. You can go to our website and see the process of introduction—everything is available there.
Does every force – Army, Air Force, Navy separately connect with the vendors for its requirements or it is a centralized process?
It’s a centralized process. We take care of all the URCs. We see what their demand is; it’s based on their dependency. Each URC has a fixed dependency. Of course, there is also a floating population. People, more or less choose URC from their neighborhood.
There are limited choices in beer, tequila and wines. What is being done to bring in more variants?
I will disagree with you here. Tequila, of course, is a small segment. It can’t be compared with beers and wines. So, we will keep tequila out of this discussion. As far as beer is concerned, we have Kingfisher (strong & regular), Fosters, Hunter, Woodpecker and Hayward’s.
How do you ensure product quality and smooth operation in CSD?
We are quite strict on our quality control norms. As a result, our customers have a lot of trust in the CSD products. Apart from FSSAI certification, each new item has to undergo to lab tests before being introduced into the CSD. If we receive a complaint about any product, the entire batch of that product is subjected to undergo the CFL tests. Unless the products clear those tests, they cannot be sold within the CSD. What is important is the goodwill of our troops and their families. Going ahead we mean to raise the bar of quality checks.
We also do random checks, or as and when a customer complains. If we notice any deficiency, the complete batch is frozen and a sample of sent to the CFL. Depending upon the outcome we take action.
There are some canteens which are not in good shape. What is your strategy to revamp them?
I want to disagree with you here. The URCs today are well equipped. They are at par with any mall you can talk about, especially liquor ones. There are a few that need to be upgraded and we are on the job. Overall, however, there is a big change in the way the URCs used to operate. We are now accepting payments only through cards; we started this about six to eight months ago.
Nowadays, servicemen, retired and serving, buy many products (except liquor) from outside. What is the reason behind it?
I don’t agree with you. If you look at the FMCG sector, we are the largest consumers of products of Hindustan Unilever, Proctor & Gamble and Nestle. If our people are not buying, we wouldn’t be the largest. And why wouldn’t they buy? Especially since the introduction of GST, the kind of tax benefits we get are unmatched. At times, the prices of cosmetics are 40 percent less than MRP and that’s huge.
Take for example white goods: electronic items such as ACs, televisions, refrigerators—we have products from LG, Whirlpool, Sony, Havel’s, Bajaj and Whiteline. It is the same with cars; the latest models are introduced at the CSD immediately upon their launch. We have almost all the variants of Maruti Suzuki, and cars from all the major brands such as Ford, Volkswagen and Hyundai and Tata Motors.
How do you see the growth and future of CSDs?
I am happy with the way we are growing. Honestly speaking, growing in terms of turnover is not our aim. We are welfare oriented. Despite that, we have already crossed Rs17, 000 crore. This year it could be a much higher number. In terms of volume and sales, we are phenomenal. But I repeat: our sole objective is to make quality products available to our soldiers across the country at affordable prices.
What steps should be taken to make shopping at CSD units more enjoyable?
We are evolving. However, looking at the future, I would like to do something for our retired colleagues, who live primarily around larger cities. At times they come from far-off places, sometimes they travel about 20 km from like Gurgaon to Delhi to spend a day in the canteen.
I feel they don’t come all the way to save some a few rupees on toothpaste or a cream but to connect with their old colleagues and associates, and relive their service life— the environment and see the men in uniform. We would like to make shopping a comfortable and convenient experience for them.
They could visit the places with their spouses in the morning, and spend the entire day sitting, chatting or shopping, and enjoy the environment over a cup of tea or coffee. It would be a great day out for them, if we provide some nice shelters.
If we could make some 25-30 nice day-out facilities at these mega centers, it will be a befitting gesture for jawans and officers equally. Let them mingle and enjoy. It’s like coming back and connecting with the present generation.
It’s a general feeling in the Alcobev industry that the procedure of getting registered a brand in CSD is not free of corruption. What are you doing in this regard?
I want to root out all forms of corruption. I don’t want any kind of wrongdoing. While I will do my utmost to stamp out corrupt practices at my end, the companies too must cooperate and ensure that they never indulge in dubious practices to increase sales. I know there is intense competition amongst the companies, but they should let their products speak for themselves. They are already spending quite a bit on advertising and research. They should let the consumers decide, and if they like the brand and the blend, they will buy.
I reaffirm that I want to bring transparency in our processes. I don’t want someone sitting somewhere commenting on how and why decisions are made within the CSD. I have greatly enhanced communication with the companies. I would like to hear their point of view and they should hear my viewpoint and together we can ensure that this business stays in the right and virtuous path.