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The Indian alco-beverages industry is passing through a difficult time, though it had never been easy for it all these years. With GST set to roll out from April 2017, the industry’s woe-list is set to expand because liquor has been excluded from GST’s purview.
To analyse implications of GST for the industry and other issues, industry heads, senior professionals, journalists, trade officials, tax experts and marketers assembled at the five sessions of Spiritz 2016 ThinkPad at Hotel Leela Ambience, held on November 25–26, 2016.

The  speakers  travelled  long  distances  to  share  their thoughts on the subjects of import for the industry. Apart from GST, other topics of discussion were: India as an emerging market, the truth about prohibition policy and its applicability, new trends in drinking, and how much actually has translated on the ground of the Make in India drive of Prime Minister Narendra Modi.

The   speakers’   panel   had   a   mix   of   experienced professionals and younger ones. Both generations shared their own perceptions and suggested solutions for the industry’s problems. The audience was engrossed listening to the enriching discourses and asked questions after each session.

All   five   sessions   were   really   cerebral   affairs. The proceedings of each session are presented in the following pages.

 

THINKPAD DAY 1- Session- 1

What does it mean for the alco-beverage industry to be out of GST?

 

‘Alcohol going to be taxed more’

I P Suresh Menon – Adviser-Tax & Regulatory Affairs at USL (Chairperson of the session)

It is generally believed that GST is going to be good for the country. True, there is no doubt about that. The question is whether the GST as proposed will be implemented? With regard to implementation, it is said GST is not flawless but more of a flawed one. The reason is some constitutional exclusions which seem to be illogical, given the larger objective of the nation’s economic progress. The four notable exclusions are: petroleum, and gas, real estate and alcohol.

As the proposed law stands today, common market is a distant goal. About 51% of the taxable base is excluded from GST and its obvious consequence is that tax rates are going to be high.

Going against the much advertised objective of “one nation, one market, one tax”, what is proposed is not one nation-wide GST. There is a central GST and a state GST and the two will not talk to each other! Even today central excise duty and state VAT don’t talk to each other. So, what would be the difference after GST implementation?

Alcohol out of GST is a myth. Because while the finished alcoholic product is out of GST, the inputs of the alcoholic product, both goods and services, are going to be subjected to GST. For example, molasses, grain, bulk spirit, and Scotch, if transferred from one factory to another, would be subject to GST because GST has taken away the whole concept of production and sale. It is now a concept of supply which means stock transfers would be subject to GST.
In all likelihood, the new tax rates, applicable to goods and services, used in the spirits industry would be higher than the present ones. Already duties and taxes on alcobev products are multiple in various states. Cold drinks invite about 25% taxes on their ex-factory price but in the case of alcoholic products, taxes amount to 500-600% of the ex-factory price.

The  additional  taxation  post-GST  is  going  to  have  a multiplier effect on the end consumer price. That is going to affect the demand for alcoholic products and government revenues. People are not likely to stop drinking but step down the value chain – from premium whisky to something priced lower. People at the bottom of the chain would probably slip down to country liquor. If there is no country liquor, people may slip to the illicit or spurious liquor. So, these are the risks of alcohol being out of GST.

Opposed to the common tax rate which we find in many countries, in India we will end up with six tax brackets for different products. Classification of a product will be an issue, leading to litigation. The situation would be no different from what it is today.

Agricultural inputs are proposed to be excluded from GST but how far down the value chain would agricultural inputs continue to be excluded, we still do not know.

Let’s take a look at the GST impact on raw materials. Today extra neutral alcohol (ENA) manufacture from molasses or grain is not subject to any excise duty but VAT. But ENA is likely to be taxed in future. Similarly tax on freight from the present 4.5% may go up to 12%. And, this 12% will be the extra cost of those goods and agricultural produce which are out of GST.

The GST regime is also going to adversely affect recycling of beer bottles. Every beer bottle is recycled 7-8 times. On the first recycle you pay 14-14.5% excise duty and sales tax. Every time you recycle you pay between 4-5% local VAT. But under GST, the rate is going to be 18%, a huge jump from 4-5%. You can’t even leave those bottles behind because somebody will fill the bottles with some spurious stuff and sell it in your genuine bottle. Same is the case with spirits.

About 75% of the market is in government hands. As price increases don’t come easy, post GST we are going to end up with reduced margins. Even if you succeed in jacking up prices, you may end up with diminishing demand, leaving the space for illicit and spurious liquor manufacturers to flourish.

We have requested the government to look at the possibility of adjusting our enhanced taxation against state duties and taxes or refund it cash. In countries like Australia and Malaysia, refunds and adjustments are provided for products which are not covered by GST

 

‘GST to devour tax setoff of liquor industry’

Dr. Sanjiv Agarwal, Managing Partner, Agarwal Sanjiv & Company Chartered Accountants, Jaipur

The liquor industry is a highly regulated and heavily taxed industry.  But  it  has  a  good  market  share.  While  alcoholic beverages represent 25% of the F&B market in China and the US, in India their share is 34%, the largest in F&B market.

For most states in India, alcohol contributes about 20 to 25% of the state tax revenue.  And, it is the second largest contributor of the state revenue after petroleum, giving more than Rs 90,000 crores in taxes every year. The total tax impact for liquor companies ranges from 70-150% in most states as no set-offs are available.

Goods  and  services  tax  (GST)  means  any  tax on supply of goods or services. GST is a move from origin-based tax to destination-based tax. GST is not a tax on manufacture of good/service. It is a supply or consumption tax. The place of consumption of a good/ service decides the state that will collect GST. In other words, the producing/selling state gets nothing while the consuming state receives complete share of revenue.

Today only states can levy taxes on liquor beverages. This is a major reason why the liquor industry is not part of GST. No state wants to be stripped of its power of levying taxes on the liquor industry.

In the post-GST scenario, states will levy tax on the inter-state movement of liquor products. But for their intra-state trading, the centre will levy tax. So even under the GST regime, the liquor industry has to live with State excise, VAT and CST (Central Sales Tax).

GST comprises three types of taxes – State GST, Central GST and Integrated GST (IGST). None of these taxes can be levied on the liquor industry by the Centre or State. So instead of IGST they will continue with CST.

Service tax is also part of GST and cannot be levied on the liquor industry. Eventually, states will levy a higher rate of tax on liquor products because service tax will not be there. The taxes levied by local bodies, like octroi, are not going to be subsumed in GST hence will be applicable to the liquor industry.

Virtually, there will not be any tax setoff for services expenses and various regulatory fees like the licensing fee. In nutshell, 90% of the inputs of the liquor industry will not get any tax setoff. Only certain state taxes will get setoff. Consequently, the cost of production and market prices will go up, adversely affecting the sale and marketing of liquor products. Because of heavy taxation there may be no incentive for FDI to come into the liquor industry. There will also be inefficiency in the production and distribution aspects of the liquor industry supply chain. The FMCG sector will be benefited in terms of logistics and other supply chain advantages which are not available to the liquor industry.

Following the implementation of GST, service providers and vendors will have to adhere to dual compliances. They will  have  to  comply with GST  provisions as well as state provisions. For example, the hotel industry will be subjected to GST for their output but their inputs in the form of liquor will be subject to state taxes. As there will be not set-off for their liquor purchase, their output services will be costlier.

Every company is going to spend a lot on compliances, required  under  GST,  as  they  would  require  professional

services  for  doing  compliance.  Compliance  is  also  going to become a governance issue because the GST law has a provision for compliance rating by the government. If you don’t undertake GST compliances, then the cost of non-compliance is too high in terms of penalty. Compliances will have to be done for both – GST law as well as State tax laws.

The bottles and caps used in products of these sectors are part of GST but not the final product. The manufacturers who will be paying GST to the bottle and cap manufacturers will not be getting any tax setoff, hence their cost of production and market price will go up. Due to alcohol’s exclusion from GST, cost of production will also rise in the pharmaceutical and perfume sectors for which alcohol is an input.

GST would also necessitate reviewing the existing business models. At present the industry follows different models like manufacturing, taking distillery on lease, bottling on contract, franchising and the IPR arrangement. In the manufacturing model, we pay state excise duty. In case of IPR, franchise and distillery lease models, we pay service tax. But as service tax is getting subsumed into GST, this requires reviewing industry business models. Business verticals can be created to ensure that maximum tax credit on inputs is taken.

When the country moves into the GST regime, there are going to be major changes in VAT laws also. The definitions of turnover and of sale may change. Some accounting issues may also crop up in the post-GST scenario. Today, supply is not recognized in accounting and company law. Either you have a production or a sale, supply is not an accounting item. The Institute of Chartered Accountants of India will also have to revise accounting standards to ensure that the financial statements can be prepared on the basis of supply.

 

‘Pain, turmoil for industry post-GST’

Shobhan Roy, Director General, AIBA

I would like to visualize the scenario post- April 2017 when GST will have been implemented. What is going to happen to the liquor industry? The liquor industry will not have benefits from the input tax credit. It will be covered by the state GST and it will have to complete all the compliances of a hashed-up GST which is being rushed through.

The post-April GST scenario will be something like what we are going through as a result of demonetization which is not directly affecting the industry but it has affected the government and consumers. GST will take us to a period of pain and turmoil. What is more surprising is the speed at which the government is forcing GST implementation.

Few days back we met very senior bureaucrats from a state. They said that they were put in a room for working out GST implementation after breakfast at 9 am and they could get out only at 9 pm. Ultimately, on the third day it became so exasperating that the bureaucrats said, “Do whatever you want to do. We are leaving”.

Given  this  state  of  affairs,  I  am  sure registration and litigation post-April 2017 will be something you and I cannot even imagine. The other thing that we discussed is the increase in the raw material prices which are not getting set off. We will pass the price rise to the consumer. Product prices will go up, volumes will shrink, and the government revenue from the liquor products will also go down.  But they look at the industry with a feeling that its consumers are willing to pay more from their disposable income. They are not realizing that we have reached a point where no further price increase is possible. So volume shrinkage or shifting down the value chain is bound to happen.

But then states say that even if their revenues fall, the centre is going to compensate them for five years. Due to the assurance of getting central compensation, the sympathy for the industry, which is supposed to be there as the industry is states’ bread and butter and gives them revenues for their daily expenses, is still not sinking in.

We were with a very senior bureaucrat of a state. Regarding the possibility of a decline in liquor revenues, he visualized the salary payment problem. He said, “Right now because of liquor, my state government employees get paid timely. Tomorrow if there is a revenue deficit, the only question in our minds will be when will the centre give our next compensatory instalment?” So you will have a scene where the centre will be controlling the finances of the states but in spite of this you will not be free of mandatory registrations.

I will give you an example – if a company has four manufacturing units and has warehouses in 30 states, currently it is required to take four registrations for excise purposes and 30 for sales tax purposes. Under GST, a non-liquor company would be actually doing 30 but a liquor company will have to take a total of 65. The 65 registrations will include your existing registrations and new registrations under GST. Sixty- five registrations means 65 timely submissions of the reports and 65 show cause notices to answer which you will need the services of financial consultants. In fact, the alcohol beverage industry will be using consultants and consultants a lot to supervise registration/taxation cases to save themselves in the years to come.

 

Raju Vaziraney, President, SOM Distilleries & Breweries Limited
‘ Mitigate GST impact with premiumization, value engineering’

GST is going to erode the bottom line of liquor companies. Listed companies like ours will be there but we will have no bottom line. We will not be able to make money in this business. Organizations like Ernst & Young and PwC are ready to give us the estimate of the exact loss that a liquor company would incur following the GST implementation, depending on individual company’s business plan for the next year or the next five years. So we can get an idea of how much loss a GST of 5% or 10% would inflict on us.
It’s best to first understand the magnitude of the problem and then make a plan to mitigate the problem. For the industry, it is very important to keep engaged with regulatory authorities, which we are doing through CIABC, AIBA and other associations. We know we are talking to a difficult customer as they are not going to agree the way we wanted them to.
Unfortunately liquor being a sin industry, the central government is skeptical about its inclusion in GST. I heard the Finance Minister saying in an interview that “alcohol (in GST) will be a show stopper”. Given the government’s opinion about the industry, it is important that we do three things. At least I will do them for my company.
One is to work on premiumization with renewed vigour. The Indian consumer is young, and he/she is prepared to pay more for a better quality and better packaged product. It’s the right time to bring new premium products or work on premium versions of our brands to offer better propositions to consumers at a higher price or the right price.
Over the years, the price rise in liquor products is quite modest as compared to other products. For example, we launched 8PM Whisky at the consumer price of Rs 180 in Delhi
1999-2000. Today, its price is just Rs 240, an increase of about in 35%. But during this period prices of petrol and milk have gone up by 500%.
The second thing is value engineering. I give you an example. Once the Chairman of my previous company, Dr. Lalit Khaitan, asked a liquid scientist working with Diageo, “What do you add to Johnnie Walker to make it Johnnie Walker Black?” The scientist replied, “Sir, it is not what we add, it is what we take out from the liquid to make it salient and brilliant.”
In India, we have a tendency of adding malt and VMS all the time to our brands or adding better caps or shining mono carton or a heavy 600 gm bottle. The consumer may not want this, but we keep overdressing our brand by overspending.
While doing this, we lose the focus on costing. All over the world it is the costing which drives profit not the price.

The basic raw material we can’t change but we can always revisit. It is not necessary that the consumer wants malt whisky all the time. He/she may want a lighter version. We have to look for new avenues and opportunities to give offerings to the consumer in terms of value engineering. As an example of value engineering, we have launched White Fox RTD with 6% vodka in a can. It has been accepted well in the markets where it has been introduced. It shows the consumer is prepared for a new-age product.

The third thing is the price increase which is difficult to achieve. Most of the states have got ad valorem tax. In other words, there are slabs and you can go to a higher slab and ask for a higher EDP. Time has come for the captains of the industry to look at it dispassionately without bothering about gaining or losing shares. We must look at opportunities to ensure that at least our existing bottom line remains intact.

As an industry, we should have a commonality of purpose. We must talk to regulatory authorities for a friendly excise policy. I am sure that collectively we will be able to mitigate the adverse impact of GST on our industry.
THINKPAD DAY 1 Session 2

India – An emerging market

‘Consumption set to grow tremendously across segments’
Kapil Sekhri Co-promoter and Director, Fratelli Vineyards
(Chairperson of the session)

We are a young nation, which is coming out of the stigma of secretive drinking and becoming liberal to social drinking. Alcohol is no more about getting drunk. Now it is about enjoyment as from art or a good movie/theatre. There are 20 million Indians coming into the drinking age every year with disposable income. So, the Indian liquor industry has a huge potential like all other industries. Though today India is behind China on various growth parameters, it expected to leave China behind across all channels.

At present we have low consumption across every segment of alcohol. But the consumption is bound to grow leaps and bounds across every segment. However, we as producers and importers of all kinds of alcohol must keep in mind that the Indian consumer is getting wiser and wiser. So, it is our responsibility to ensure that the consumer drinks the right stuff.

In alcohol segments, wine has a huge potential. If you want more involved wine drinkers coming in, then you need to ensure that good wine is available at a good price. As we have to catch legal age drinkers young, they should be able to explore more alcohol at the right price. Needless to say, alcohol in India is a price sensitive market and it’s going to remain so for the next 20 years. Let’s hope it continues to be price sensitive. Because the last thing we want to get into is unnecessary exuberance which came into Malaysia and Indonesia. We all know what happened there – the bubble burst.   We would rather have the most steady, consistent growth which India will definitely see.

A word for Chilean wines. It’s one of the largest growing countries in terms of global consumption of its wines. They are making wines globally. They have uncomplicated wine consumption. Their wines don’t have screw caps, and they don’t have to be decanted. Having Chilean wine is more about enjoyment rather than struggling to understand touch- me-not kind of wines. It’s good that India is catching up on Chilean wines.

 

‘Wine growth story part of emerging India’
Sumedh Singh Mandla, CEO – Grover Zampa Vineyards Ltd

Today there is a great growth opportunity for all the three sectors of the Indian alcobev industry. Among the three sectors, wine is the smallest while spirits lead the industry followed by beer. However, despite recording low volumes wine has higher growth than beer and spirits.

In the world, India is the second largest market for alcoholic spirits as per IWSR. If all liquor categories are included, then the country is the third largest market.   Five Indian brands figure among the top 10 most consumed spirits brands in the world, and many home-grown brands are selling more than a million cases.

India’s alcobev market is predominantly IMFL with 330 million cases and an almost equal number of country liquor. Beer is about 300 million cases and wine is over 4 million cases. In IMFL, whisky leads the pack with 61% share followed by brandy and rum. The growth of white spirits (vodka and gin) is better than brown spirits but their base is very small.

India is considered to be a difficult country to do business in, but it has eased its business environment following the start of the Make in India drive by Prime Minister Narendra Modi. In the present socio-economic environment, India is emerging as an important business destination.

Many international studies have predicted 10% growth for the Indian alcobev industry. Various factors are favourable to this growth. The country’s GDP growth is the fastest in the world. Every year 19 million consumers are entering the drinking age. Urbanization is happening at a faster rate than in the past. Social drinking is getting more acceptable especially in the main cities. Women are increasingly becoming more open to drinking wine, spirits and cocktails. This was not the case a decade ago.

Another  factor  favouring  high  growth  in  the  alcobev industry  is  that  India  is  the  world’s  third  largest  economy in terms in purchasing power parity. In fact, this is a very strong consideration for anyone thinking of doing business in the alcobev industry. The new generation Indians have more disposable income and are more willing to experiment with their drinking choices than the previous generation.

Today  the  Indian consumer is upgrading to premium liquor categories. In whisky, the premium and   super   premium   segments   are   showing the  fastest  growth. In wine too, lots of people have upgraded from port/fortified segments to premium segments. This is a very positive sign of premiumization of the alcobev industry.

I think this is the ideal time when we can change a whisky consumer to a wine, beer, gin or a vodka consumer. Innovation and packaging, branding, and starting new segments will greatly help in recruiting consumers to the liquor segments other than whisky.

Diversity of India makes it a great market because  it  has buyers for every product, from the cheapest thing to the most expensive thing in the world. We have seen buyers happily picking up a wine worth Rs 5000 a bottle. However, the perception of value for money plays a great role in  the  buying  decisions  of  Indians,  particularly the middle class. The middle class expects better value for the money, be it food, automobile or alcobev  or  any  other  lifestyle  product.  So,  if you want to achieve volumes then you have to consider value-for-money pricing.

The 4.32 million cases Indian wine industry (as per IWSR) has been recording double digit growth for almost 10 years. It’s the largest growth after China in Asia.

Our wines and those of Sula and Fratelli are now exported to 21 countries. It’s a remarkable achievement for the Indian wine industry in a short span of about 25-30 years. For Grover Zampa France is the first export market and we are proud of this achievement.

In Europe, wine is produced and consumed as part of their culture. But there is no growth potential. The USA too after growing very well in the past decades has now limited scope of wine growth. In Asia and Pacific, Japan too can’t show much growth in wine. China is currently leading in wine but I think India too can record huge growth.

India has a huge potential to grow wine grapes because at present only 2-3% of the produce in 1,00,000 hectares of grape cultivation is wine grape. In contrast, worldwide is 90% grape cultivation is of wine variety.

Indian producers are trying their best to improve the quality of their wines. When we started we tried 33 different grapes and selected about 8 and continued to grow them for a period of time. Now lots of new Italian and Spanish grapes are being explored which again is a good sign of a growing wine industry.

Indian cuisine also has a strong role in spreading the word about Indian wines. It is getting more global and refined. It’s no more only about kebabs and curry, and we want to be the part of that growth.

Wine tourism is also a big opportunity for wine producers as well as locals to engage in commercial activities. Sula has led the way in this field. We and Fratelli are also doing some part of it.

Wine culture is growing fast in India. In future, high growth is expected because the number of producers and their operations will grow. I expect 20% growth. I hope that the producers who are currently operating at the micro level will start promoting their products at the macro level.
‘Good opportunity for Chilean wines in India’
Carolina Vasquez Muñoz, Trade Comissioner – ProChile Commercial Office – Embassy of Chile
Whether India is an emerging market, our answer depends on which liquor product we are talking about. Surely, for whisky India is a mature market, not an emerging one, However, in the case of wines, it is absolutely an emerging market. For Indian consumers, wine by and large is a new product. And, we also need to work in helping consumers learn about wines.

I have seen in some parties people using ice or water in wine because they think it’s similar to whisky. This I see as a clear signal of the emerging wine market. Changing this behaviour is a challenge we need to face. However, if it is something the consumer wants, then it’s fine with us. We face the similar situation in Russia where we export lots of wine. Russians add ice in their white wines. For us it’s not good but if the consumer wants it, then it’s perfect. We do try to maintain the essence of the product, but ultimately it depends on consumers how they want to enjoy it.

As the Indian consumer is open to taste new products and different flavours, I think it’s a very good opportunity for our Chilean wines. In Chile we see India as a very important market because it’s huge and we have space to grow. Obviously we cannot compare it with any other country like Japan, America, China or Europe because they are mature markets. You can find lots of Chilean wines there.

We don’t have to put so much effort in those countries. But now it is very important for us to conquer the Indian market in terms of wines. For consumers price can be an issue, as he/ she is new to wine. He/she may say, “Wine is an expensive product. I can buy a whisky for less.”

Now, it is a challenge for us to bring better products to India at less price. But this is something that we are working on and we can do that. We can customize our wines according to the needs of Indian consumers, as we understand that markets are completely different around the world. But, we need to work upon other matters, for example, the logistics chain. That is a challenge here. The weather in India is complicated, like Delhi is too hot for wines. That is something Indians and Chileans need to work together on.

India is growing so fast but I think you can do more and bigger. For that, certain things need to be done. I may be wrong in expressing these views. But, I don’t see any association for the alcoholic beverage sector. There are chambers of commerce but for other sectors. You need to deal with duties, regulations, government, etc but I don’t see unique boys who can discuss and put the things on the table with the government and try to work together. Though we all are competitors, these issues are there for all of us to tackle.

I am sure in next 10-15 years, India will be the biggest wine marked ahead of China. For that we need to be prepared and work together, not only for wines but for the entire industry.

 

‘India set for dramatic growth across categories’

Sudip Majumder – President, International Division, SV Distributor Pvt Ltd
India is considered as an emerging market in the alco-beverage world. Most of the international alco-beverage players have their shop in the country. Initially they entered India with an Indian partner and later on everybody set up a 100% subsidiary company. IDV, now Diageo, was the first to move in, followed by Seagram, Pernod Richard, Beam Global, Brown Forman and other major players. Today, for Pernod Ricard, India is no more an emerging market. It’s a big global market for them, even bigger than their home market France.

If we work systematically, India can be one of the biggest markets for any international/domestic player. The only thing we have to focus on is that we have to plan for 10 years or 15 years ahead. Pernod Ricard from day one knew what they wanted to achieve in India. And, growth opportunities were equal for all the big brands in all price segments because of India’s huge population. But Pernod Ricard did exceedingly well and now this achievement in India is a case study in international board meetings.

I have launched brands like Smirnoff and also sold brands like Armand  de Brignac and champagne Dom Perignon. I foresee a huge potential in the premium and luxury space in both BIO and IMFL industry. So far, whisky is the biggest buy in the spirits industry and vodka is also going to grow further. But, I foresee a dramatic growth in international brands of gin and rum in India, and even of Indian rums apart from Old Monk. My friend Gautom Menon did a fantastic job by launching premium Wild Tiger Rum. This rum is already present in 40 countries and everywhere it has been appreciated so well.

Whatever you do, if you do your homework correctly you are going to conquer the world. Amrut and Paul John have shown that. Radico Khaitan has also come up with Rampur Single Malt.

With the Indian market emerging big time, there is a need for a good set of single malt importers. Companies cannot set up their own operations in India because of so many legal issues and regulations. There should be more importers who are ready to set up pan-India operations with official manpower in place. Today barely 4-5 importers are working on pan-India level.  Most  of  the  importers  are  regional  players  either  in North or West or East hence it becomes very difficult for an international brand to get here.

I also see liqueurs as a promising segment. It is growing exponentially with the cocktail culture coming up big time in Mumbai, Delhi and Bengaluru. Because of the small base liqueurs can grow like 100% annually. Very few companies, which have explored business prospects in liqueurs, are growing at a rate of 30-40%. Some of them even at 100%.

Beer too has bright growth prospects.  Currently its base is very small. Our per capita beer consumption is below 2 litres, which is nothing in comparison to our neighbour China’s 30 litres. So there is no limit to growth in beer. More growth is going to come from the premium and imported beer segments.

In the imported beer segment, right now, only one player, Corona, is working. If there are 3-4 players, the entire segment will grow. If you go to any international city, you will see 50 taps of the drought beer. In India that thing has finally started, generally, with a like 10 taps. In Mumbai, a beer outlet has come up with 20 taps.

In wines, India has market for all segments. I think Chile has set a great example in terms of quality and price in India. All the good Chilean wines are fantastic and have affordable, value-for-money price. In India people are ready to pay a price for the good premium wine. That’s why some wines, priced at Rs 5000, are flying off the shelf. If promoted correctly, wine is going to see a substantial growth.

 

 

‘Beer, wine, RTDs set for high growth’
Ashwin Balivada, Executive Director, Cheers Group
India’s   alco-beverage   industry   is   growing at 8-10% CAGR. The growth is more in the premium segment, where it is 20-30% CAGR. The economy segment has recorded a low growth probably because of rising prices due to increase in duties every year. However, in the deluxe and above segment, people don’t not mind spending extra 5 or 10 rupees.

The beer segment is also poised for good growth. From the present 280 million cases it could go up to 500 million cases. Craft beer and premium beer are expected to show good growth.

In the case of wine, good thing is that people are now realizing that wine can also be enjoyed. Ten years ago people were drinking wine only with cake. Now they get together with a bottle of wine, sit down and enjoy it.  Though at present wine’s share is less than 1% in the alcobev industry, it could go up to 8-10% by doing 40-42 billion cases. The white spirit segment is also small in India.

I myself knew nothing about wines five years back. But last time when I had wine with my father, we liked it and discussed it. Wine is the thing for a person aged between 27-30 years. A person who is 32-35 may prefers a rum or whisky but today the same person at some point is drinking wine or white spirits.

Every year we are adding about 20 million consumers in the legal drinking age. These people have a lot of disposable income and are ready to experiment. I think they will move to wine, beer, RTDs and cocktails. These segments are also popular with women who are joining the drinking population in rising numbers. So, these segments have tremendous growth potential.

During my interactions with consumers at the retail counter of a duty free or a superstore, I have found they are willing to experiment. This is a good sign because we want people to drink more wine, more beer, and more white spirits, which is also good for the industry ecosystem.

As far as pricing is concerned, I would say that in Goa a liquor product selling at less than Rs 175 per bottle comes in the economy segment, and products selling more than constitute the premium segment. For example, Imperial Blue and above would be premium in India and below that would be economy.

To popularise wine, reduction in wine price and its availability in small packs are necessary.  Regarding the price impact on one’s liquor choices, I give my own example. When I was studying in 2009, my dad used to give me Rs 100 daily. After accumulating Rs 400 in four days, I had the option of buying 180 ml of Old Monk and spend the rest on food or buy a bottle of wine. I preferred the first option (Old Monk).

So, by bringing down wine prices we can generate more trials. If our low-priced wine comes within consumer’s reach and he or she likes it, then probably we can achieve more volume. Wine in smaller bottles can also extend consumers’ reach. If you ask me, I will not be comfortable in buying a 750ml bottle of wine.  But if a 180ml bottle is available, I will definitely prefer wine.

We have to give more options to consumers. If premium spirits can grow, then why not premium wine or beer? Unfortunately, beer and spirits are equally taxed in most of the states. If you have two bottles of beer against two drinks of whisky, the former is little heavy on the pocket. So there is need to rationalize beer taxation.

 

THINKPAD DAY 2 SESSION-1

Complete or partial prohibition– Is it a workable policy?

 

‘Prohibition does no good to any stakeholder’
Raju Vaziraney, President, SOM Distilleries & Breweries Limited
(Chairperson of the session)

 

Prohibition is largely politically motivated. Certain individuals do it for their vested interests without caring for the three stakeholders – the consumer, the liquor industry and the exchequer. While the exchequer loses money, the people running underground liquor trade make quick money illicitly.

Unfortunately prohibition is not deliberated or discussed with the industry, and political people take decisions without understanding the implications of prohibition. For example, prohibition was clamped in Haryana in 1996. But it had to be lifted after some time. The irony was that the Haryana government lost Rs 1200 crores due to prohibition and all the people who thrived by selling liquor illegally became mafia and bootleggers and they still damage the liquor trade in Haryana which is an important state bordering Delhi. The industry has not come out of it even 20 years after the lifting of prohibition and we suffer lots of payment loss. OTC sale is not there of the brands because they are sold across the border.

Let me tell you about the prohibition in Andhra Pradesh. There was a brand called Old Tavern when I used to work in Shaw Wallace.    Old Tavern used to sell lakhs of cases per month before prohibition but after prohibition it vanished because the company was unable to put as much stock legitimately as was required in the illegal market. Good brands got killed during prohibition because illicit brands and small regional brands prospered without ensuring any quality and without any brand promise. And, the consumer had to drink substandard quality. Ultimately the consumer gets shifted from premium to semi-premium or even lower category.

Another interesting case is of Mizoram which was dry for so many years but privately people admitted that it was the “wettest dry state”. When the consumer is getting liquor, why hide it. It is important that the consumer or the industry or the exchequer should not suffer because of the arbitrary ad hoc decisions.

The latest prohibition in Bihar was a politically motivated decision. Till the end of March, the Bihar government was expected to run about 650 shops through a small corporation to ensure legitimate consumption of liquor and stop country liquor. But on April 4, the government suddenly announced total prohibition. This led to hundreds of thousands of cases lying in the godowns going waste. Crores of rupees of the industry got stuck. But the consumer is getting all the stuff from across the border though he is not sure of what he is drinking.

Even the forces personnel bore the brunt of prohibition. There is a huge SSB canteen in Patna which serves Bhutan and Nepal. The canteen takes 10000 cases per month. But it was also not allowed to keep any liquor stock. When an officer or a soldier joins the Indian army he knows liquor  is his perk, his right, his staple food. But now he is not allowed to drink.

Companies like Molson and Coors have also suffered. It had

set up a beautiful state-of-the-art brewery in Bihar but it went dry because of prohibition. In the context of Bihar prohibition, Carslberg MD had reportedly said that he did not  want to do business here.

On the one hand we say ‘make in India’, on the other hand state governments have their way. People have lost jobs, crores of rupees have stuck and stocks have been lost. There is so much lack of confidence among the investors with respect to Bihar. Instead of 4000 crore rupees going to the exchequer maybe now 3000 crores will go to the grey market.

The industry must have a strategy how to avoid such a motivated decision which is ad hoc and which is dangerous for all the stakeholders.

 

‘Dry Gujarat as wet as watermelon’
R.K. Misra, Veteran journalist from Gujarat

I begin with an example. There was a friend of mine who was a crime reporter in Gujarat. He was a regular drinker. Once he came to Delhi where Bishan and me were working in those days. One afternoon he wanted to have his favourite brand of whisky. We bought it from a shop in the city. To our surprise, he had just one swig of the whisky and said, “Bekaar hai, nakli maal milta hai tumhare yahan” (It’s useless. They are selling fake whisky in your city). Then I replied, “Brother, the problem is with the brand you drink in Gujarat, not with the same brand you are drinking now.” That in a nutshell sums up the prohibition story of Gujarat.

Gujarat was born dry but it is as wet as watermelon. It oozes liquor from every nook and cranny of its ample frame. You may have a problem in getting your favourite liquor brand in Delhi but you may never face such a problem in Gujarat.

In Gujarat, there is a three-tier pyramidal drinking structure based on the type of spirits. At the bottom is what is consumed in cities, which is basically hooch. The next tier is of desi (country liquor) which is consumed in rural areas. At the top of the pyramid is IMFL. There was a time in the early 1960s when getting a bottle of army rum used to be an exercise which one would have to undertake once a week. In contrast are the present times when rum is freely available.

It is estimated that Gujarat consumes liquor worth over Rupees 30000 crore per year across the three tiers of its drinking pyramid. Of the state’s 18000 villages, at least 70% have their own local brewer who makes desi out of fruits/ vegetables which is largely meant for captive consumption by the drinkers in the village. The quality of his stuff is by and large better.

In the cities, hooch is freely available at every nook and corner. Hooch begins from 18 rupees a glass which is sold in matkas with added water. You dip a glass in the matka, drink it and move. Premuim brand of hooch is available in pouches at Rs 25 per pouch. This you can take home, add some water to it and then drink it.

The management of liquor trade in dry Gujarat is something that management gurus need to study. The bootlegging trade and the police involvement in terms of management at both the levels is exclusive and highly streamlined. It goes up to every level and it touches every chord. You cannot operate a liquor point without the knowledge of the police. You have to approach them and get their permission. The permission is given for sales worth 8 to 10 lakhs. You can’t sell more than that. And the guys keep looking at you periodically.

For every police station there is a point person called vahivatdllar.  He  could    a  constable  or  head  constable. He does all the collection. Then over four police stations there is another level of hierarchy headed by an assistant commissioner of police. The vahivatdaar from the police station level reports to the vahivatdaar at the ACP level. The ACP too gets approval from his superiors and this way the system operates right up to the very top. It also decides postings  in  which  the  political  say  is  important.  Even  for the sub-inspector’s posting the order comes from the home minister’s office.

In the past when a liquor tragedy happened in Surat, a probe was ordered. The probe found that the constable vahivatdaar of the area had amassed properties worth Rs 300 crore, so you can see how the system works.

During my long stints in the Surashtra region with the Times of India, I happened to visit a place where country liquor used to be manufactured. Out of curiosity, I asked the manufacturer how did he ensure the quality of his stuff. The gentlenman told me that he kept half a dozen dogs and when a batch of country liquor was ready then as a test it was first fed to his pet dogs. And the dogs were checked for the effect of the liquor for 24 hours. If dogs were found OK, the liquor would be released in the market.

Another incident is of the Porbandar town, the birthplace of Mahatma Gandhi. A newly posted, young IPS officer had clamped down hard on bootlegging in the town. However, his marriage made things different. His wife, the daughter of a top railway officer, was not a particularly good cook. She would be on the telephone for hours, taking cooking instructions from her Delhi-based mother. The resultant telephone bill of over a lakh of rupees came as a shocker for the officer. However, a bootlegger helped the officer overcome the shock by paying the telephone bill and got ‘permission’ in return to operate one booze joint.

The booze joint the bootlegger set up was a classic example of ingenuity. He got an underground tank constructed in a locality. The tank was connected with a pipeline through which the liquor was poured into it. On top a hand-pump was installed with a glass tied to it. To a stranger, the hand-pump would appear as the one bored for extracting water from the ground. A small box was kept near the hand-pump. The drinker would pump the glassful, put the money in the box and walk away. Those trying to shortchange would be caught by the bootlegger’s cronies hovering nearby.

 

‘The path is somewhere in between’
Mukesh Khetarpal, Founder – Indus Corporation

India has this colossal problem of excessive drinking. Unfortunately, one-third of the Indian liquor consumers indulge in hazardous drinking. Such people drink because they want to get drunk. So, hazardous drinking is surely a social problem. There are so many people living below the poverty line, and many of them would like to spend their money on booze when their families are not even able to have a decent meal. Can we say about these people that it is their business if they want to drink and if their liver goes bust?

There is a warning implicit in statistics which say that you make one rupee from liquor, but you actually spend two rupees on health care. So we can’t say that hazardous drinking is the business of a person who indulges in it. We too have some social obligations towards the society we live in.

Some people say sharab ki bottle saare gam kharid leti hai (liquor helps you overcome your sorrows). But that’s the cheap way of overcoming your sorrows. Everybody experiences pain and sorrows. It means all have to drink liquor to dissolve their sorrows. There are so many families that have gone under because of the death of their bread-earners due to drinking.

But prohibition has its own problems. Whenever there is prohibition, illicit liquor or hooch comes into the picture and hooch kills. So there may be a case against prohibition. But if you drive from Delhi to Chandigarh, you would find signs of so many road accidents on the highway. More than half of these accidents occur because the vehicle driver bought a paoua from a highway theka (liquor vend), had the drink and did some drunken driving. So actually booze kills.

Is  prohibition  the  answer?    Maybe,  not.  Several  states have gone for prohibition, like Gujarat, Haryana, Tamil Nadu, Nagaland, and Andhra Pradesh. Except Gujarat, all reversed their prohibition. But in Gujarat too, tell the people well-versed with the state, getting liquor is so easy.

We all know liquor contributes 20% of a state’s revenue. Without that 20% Andhra Pradesh was hard-pressed to pay salary to its school teachers during prohibition.   Here 20% means only excise, no sales tax, etc. In some states, the liquor revenue accounts for even 25%. And, the loss of liquor revenue accompanying  prohibition is one big reason of prohibition’s failure. Just to give an example, Tamil Nadu earns Rs 29000 crore in the form of excise revenue in one year. This huge earning poses a big challenge to us in proposing prohibition.

Will Nitish succeed with prohibition in Bihar? The fact is his state has already seen a couple of hooch tragedies. But women who, fed up with their drunken husbands, voted Nitish to power on his prohibition promise. Now Nitish can’t go back on his word. But how long Nitish will be able to hold on to prohibition by paying the price of huge revenue loss?

I think prohibition won’t work as it would encourage bootleggers. Then of course you have greedy politician. We all know how the elections are funded. You won’t be able to enter a state or your brand won’t be passed unless you pay off. The liquor lobby has been funding politicians.

In the context of state revenue loss, the picture becomes clear when we look, for instance, at the ex-distillery price of a bottle of rum which is perhaps cheaper than Coca Cola. The ex-distillery price of a semi-premium whisky happens to be just Rs 40 a bottle. But by the time it hits the market, the bottle sells for 600 bucks. About 70% of this price is tax and maybe 30% the margin. So lots of revenue is riding the liquor business, as India is also the largest consumer of whisky in the world.

So what we should tell Narendra Modi ji – prohibition or no prohibition? I think the path is somewhere in between. We need to encourage certain mode of restriction. We need to see that laws are diligently enforced. Overseas if you are caught driving drunk then your driving licence is suspended for three years.

How about liquor companies spending a certain percentage of their money on de-addiction centres? Let them put the money there. How about liquor manufacturers giving some kind of grant to those families whose earning members die because of excessive drinking? I think liquor companies have some social obligation. Awareness needs to be spread about the adverse effects of excessive drinking. Certain restrictions need to be enforced and tighter laws formulated to regulate drinking. That’s my recommendation.

 

‘Moderation a better option than prohibition’
Ravindran V, Sr Vice President – Sales and Marketing, Amrut Distilleries

According to the Seventh Schedule of the Constitution of India, prohibition is a state subject. It is left to the states to implement prohibition totally or partially. In the past, some states opted for prohibition and then withdrew it. Majority of the states do not have prohibition. Super power America  also  initiated total prohibition in 1920 because the problem of excessive drinking was very serious in the country. Though prohibition in America lasted for 13 years, lots of liquor was smuggled  into  the  country  during  this  period from other countries, even the far-off France. Prohibition also meant opportunity of business for  the  unorganized sector and bootleggers in America. The failure of prohibition in America is a lesson for us.

In  India,  Tamil  Nadu  opted  for  prohibition three  or  four  times  in  the  past  four  decades. Every time the state government found that the smuggling of elicit liquor could not be adequately controlled. Besides, due to the smuggling Tamil Nadu’s liquor-related revenue was going to the neighbouring state, Pondicherry. Many people who handled the smuggling from Pondicherry to Tamil Nadu became millionaires and billionaires.

States impose prohibition because of political reasons. When there is no prohibition, the husband is happy but the wife is not happy because the husband  is  spending  on  drinking,  giving  no money to the wife. This issue is picked by the politician. So to get women votes, prohibition is imposed. But after getting to power, the prohibition is removed. This is the experience of my own state, Tami Nadu.

Today the Tamil Nadu State Marketing Corporation (TASMAC) owns about 6500 shops, which were earlier owned by private parties. In the past, these shops were closed with the announcement of prohibition.  When DMK came to power, it opened TASMAC shops.

The latest example of prohibition is Kerala where my company sells almost 2 million cases. We are the second largest liquor seller in the state next to Diageo.

For the past 20 years, Kerala has been voting the opposition to power. It has two main political coalitions – United Democrtic Front (UDF) and Left Democratic Front (LDF). These fronts win  polls alternately. Before this year’s Assembly polls, the ruling UDF wanted to do something to retain power. Liquor drinking is a big issue in Kerala where people are drinking a lot. Due to heavy drinking by people, liver cirrhosis cases were rising and lots of liquor-realted deaths were reported. Even many churches had recommended prohibition. So the ruling front went in for partial prohibition.

In Kerala there are over 800 bars and an equal number of government shops selling liquor. The government decided to close the bars as a partial prohibition and also proposed to close 10% liquor shops every year thus bringing the state under total prohibition gradually. It was a political decision as the UDF wanted to win not only in the forthcoming polls but also in future polls. When  the  bars were closed, IMFL was selling 20 lakh cases and beer was about 8 lakh cases  per month. During the one year of prohibition, shops were reduced from 800 to 400 and in two years to 300 shops. IMFL sales came down from 20 lakh cases to 15 lakh cases but beer sales rose from 8 lakh cases to 16 lakh cases. The inference from this changing sale profile is that people will get their quantum of intoxication no matter in whichever form. So, if don’t get my quota of three pegs of hard liquor, I don’t mind going to the beer parlour and gulp down three bottles of beer. But I end up spending three times more money on three bottles of beer than I used to spend on an IMFL nip.

When elections were held, the UDF lost the polls. Had prohibition not been there, people would have voted UDF back to power. Similar thing happened in the Tamil Nadu polls. All the parties except AIADMK promised that if voted to power, the first decision of their government would be total prohibition. In contrast, AIADMK leader and the incumbent CM Jayalalitha said she was also in favour of prohibition but her government would study it. And, she was voted back to power.

As long as the other states continue to sell liquor, it is practically impossible for one state to implement prohibition successfully. There will be smuggling of liquor from other states which would encourage bootleggers to flourish. Their stuff is dangerous for the health of the people. People have died because of hooch tragedies. Illiterate people who drink hooch do not know that it has not been manufactured by following government regulations.

In the absence of liquor, people also get addicted to drugs, which is also a dangerous development.   In Kerala, many of the young students after being deprived of hard liquor have opted for snake bites to get their intoxication. Small snakes are smuggled from China. A bite by such a snake on a person’s tongue injects poison into his body which gives the effect of intoxication. Each bite costs 1000 rupees and its effect lasts for three days. People resort to these intoxications when liquor is suddenly banned which was easily available earlier.

Revenue loss from prohibition is another big concern for the states which collectively earn Rs one lakh crore from liquor taxes. As per the WHO records, 38.3% of the world’s population consumes alcohol regularly. On an average, an individual consumes 6.2 litres liquor per year. About 30% population of India also drinks. Of this drinking population, 11% is into heavy drinking which is hazardous drinking. On an average, an Indian drinks 4.3 litres of alcohol per year. But the rural average is much higher at 11.4 litres per year. We need to address the high consumption in rural areas which happens because of illiteracy.

Moderation is better option than prohibition to control heavy drinking. The liquor industry must advocate moderate drinking. We all should join together and worlk with every state government to promote moderate drinking as part of our CSR. We should conduct a publicity campaign to educate people to avoid excessive drinking and adopt moderate drinking. As an obligation and responsibility towards society, we should earmark some of our profits for running de-addiction centres. Just like debit card/credit card, a plastic alcohol card can be introduced. Charge annually for this card and set a drinking limit for an individual of drinking age. Every time the individual drinks, he/she needs to show the card and also his/her thumb impression may be taken. Collectively, we can evolve and implement methods to promote moderate drinking.

 

 

THINKPAD DAY 2 SESSION 2

New-age drinking – What is trending?

 

‘Individualization is the new trend’
Pradeep Gidwani, Industry Veteran and Founder, The Pint Room

There is a lot going on in the world not just in the drinks space. What’s happening today is a contrast of what had happened in the period between the 1960s and the 1990s. Then it was all about standardization, efficiency, getting the same product everywhere, looking identical, feeling identical. In that era standardization was happening across categories – burgers, jeans, drinks, etc.

We have seen beers like Heineken and Carlsberg and spirits like Johnny Walker keep producing. We have seen McDonald’s completely standardized across the world. We have seen jeans like Lewis absolutely standardized across the world – same trend, same color, same material, everything standardized.  And this was pretty much happening in the alcohol industry as well .

But the post-1990s, began the era of individualization . We have moved from standardization to individualization. We see this happening in almost every category. For example, in spirits, take Scotch. We have moved on from the era when we were all literally happy drinking Johnny Walker Black Label, which was then something to really aspire for. Today, we are looking at single malts and within single malts we are looking at specific malts. Each of us has his/her own taste whether it’s Highland malt or Islay malt.

We see a very similar trend in beers. From standardized mass-produced lagers  like Heineken, Carlsberg and larger Budweisers, we have moved to craft beers. This trend is increasing across the world. Countries like the United States have about 13% share of craft beer in their beer consumption. Another trend is the big revival of artisanal gins across the world.
We have also seen a new trend in rum. In the past rum was rum and only rum. Now spiced rum and mature rum have come into the picture. Vodka is too no more a standardized clear liquid. We are seeing a whole host of flavoured vodkas. And the same thing is happening in burgers. A basic burger, like hamburger from McDonald’s, has been transformed into craft burger. And, we have our own Indian burgers by the name of Burger Singh.

Today people want individualization. They are looking for niche. Premiumization  is also happening. All of this is really manifesting itself in various formats. For example, it could be an interesting ritual. If I look at tequila, there is a ritual attached to India – lick, shoot and suck. If I look at beers, Corona started a very interesting trend with a lime on top.

Glassware is also being used to create trends. In the case of beers, different glassware are being used for different styles of beer. Flavours are also seeing increasing use. Today we are talking about flavours in vodka like cranberry and blueberry flavours. And all kinds of flavours are coming in.

We are also talking about seasonal drinks. They are asking for seasonal beers, like saison beers and beers for Christmas. Then ingredients have also become important. People are using ingredients in gin and saying my coriander or dhania seeds come from this part of the world.

We are talking about countries like Japan. Suddenly everything Japanese seems to be a trend. Sakes, shochus, Japanese single malts are in demand. So the world is seeing quite a dramatic shift with the new-age drinks coming in.
‘Let’s focus on experiential drinking’

Praveen Krishnamurthy – AVP (Platform Marketing), HipBar

What we actually see nowadays is a shift from just brands to experiential drinking. It’s not much about the alcohol anymore. It’s actually about what is the experience we are actually going through while drinking. Let me take wine as an example. We were talking about seasonal drinks. That is what I have seen in Tamil Nadu.We have taken the effort to distinguish between summer wines and winter wines. Basically we have crisp whites and sparkling in summer and then we move on to light reds in the winter or what you can define as the Chennai winter. You can’t handle the heavy Cabernet because it is too hot; it will not be a pleasurable experience. But definitely you can have a pinot noir or a merlot, something more light.

People have desire to differentiate and they have been able to create experience around it. A lot of emotional experience

is linked to new-age drinking as compared to the past when it was just about consumption.

In new-age drinking, trade also needs to be given a different focus. So far, brand promotion has concentrated on the supply side of business. We have always worked about the system, the infrastructure and excise. But we lose sight of the person who is actually consuming our product. There is no promotion effort focused on the demand side. If you look at your promotions, everything has actually gone to the bottle shop, towards the retailer side and the outlets. But none of them is actually working with the consumer.

So I think the new age has to be different.We should move from the demand side rather than from the supply side. If we decide to change that then the new age is going to come.But if you are sticking to the same platform and you keep doing exactly the same thing you used to do, you are going to get probably the same results.

Let’s look at the experiential way of getting your brand out and look at the demand side rather than the supply side.

 

 

‘Things around drink influence your experience’
Ankur Chawla, Director Beverages, JW Marriott, Aerocity, Delhi

 

The primary reason for the things changing over the last 15 years in the alco-beverage field is globalization and people from  India  travelling  abroad  a  lot.  These  travelling  guys (global citizens) come back to India and demand the products they have tried abroad.  So, the demand is coming from the consumer side. And, I am sure the industry is also living up to the consumer’s expectations.

These consumers are ready to experiment more and more, and they either have good knowledge about drinking or their access to knowledge is much higher than what was 15 years ago. Their demands are also very specific, unlike the people whom I used to encounter five years ago. They would just come to the restaurant and ask for ‘the most expensive wine that you have’. They were not bothered about the grape that was in the wine, or where the wine comes from. But today the learned people really go into details. They want to know much and have something which is good value for money. And they are ready to pay more if they see value in it.

Experiential drinking or which we also refer to as sensology is also gaining importance. It’s not just about the liquid but it’s

also about the kind of experience, starting from the server who comes to you to deliver the wine to how the drink is delivered; the aromas of the drink, the taste, texture, everything in and around that particular drink

There is also a huge trend of Indian mixers. In fact, 80% of your drink contains a mixer. A huge variety of mixers are available across the globe but not much in India. Another big thing is the gin bar. It may open in India. Gin bars serve a large number of gin variants. There are also gins made in the home with home- made ingredients or with botanicals grown in the backyard.

Recently we did a vodka-based promotion where we had about seven different herbs on the bar top itself in small little pots. As you order the drink, the bartender plucks the herbs and these herbs (like rosemary, sage, mint, etc actually come out of the plant in front of you and go into the drink that is served to you. Now it’s really an experience.

There is a lot of innovation happening in serving vessels, particularly for cocktails. Mostly we are going in the right direction in glassware innovation. But I think there is a lot going wrong as well. I remember going to a couple of bars and restaurants. After the drink comes to me, I am thinking where to take a sip from because the vessel is a beautiful looking truck or similar object in which there is liquid and the straw comes out from somewhere. When I ask the server is it food grade, the server takes a small pause before telling me that it is. This creates a little bit of doubt, Regarding cocktails, I think we still need to go back to the basics and study classic cocktails and the reasons due to which these drinks are still popular after a very, very long time of theircreation, rather than just creating new drinks.

 

 

‘Flirting with brands to create a
sense of individuality’

Ashwin Balivada, Executive Director, Cheers Group

Out of seven billion people in the world, about three billion people drink. And, among the drinkers, 30% people are below the age of 30 which is one billion people, trying to change the world in every aspect they can think of.

In the case of India, 49% of people are below the age of 30. A good number of this lot has a very high disposable income. People are trading up, drinking better alcohol every day. People are open to experimenting with new sets of ingredients and spirits.

Three years ago I had just got to drink Old Monk, Thums Up and water. But today when I drink Old Monk, I mix it with my set of lime, spices and other ingredients  which probably add to or reflect my personality.

Recently I saw Jameson   doing fantastic branding for creating a new-age whisky culture. Whisky is not just heritage and Scotch. It can be Irish. It can be a mixing with pine apple juice or lime.   This thing is picking up today in the drinking culture.

In beer, the whole craft thing is coming up. In some microbreweries in Bangalore, I have seen about 17 taps serving different kinds of beer and the consumer is also open to try all of them over a period of month or so. He is also open to having new flavours every weekend, every month. People are ready to experiment and people are ready to associate the drink with their personality, culture, friends and eco system.

Among new brands, my friend Ankur has come up with Bira

beer which is doing phenomenally well in Goa. He has come up with a different brand positioning. Bira is priced one and half times the price of regular beer. The idea is that you actually getting out there, having the bottle of Bira in hand sitting on the beach in Goa. It creates a certain kind of brand value.

I am heading a project in England which is sponsored by the UK government.  It’s called Zymurgy Inc. We are creating a British way for the world. This whole thing I can relate to new-age drinking. When we did market research we found that Britain was more about having heritage, old school, preen, the Union Jack. But the new-age British culture is about rustic music, punk, being rebel, creating something which is out of the box. It’s something like the difference between British Airways and Virgin Airlines. You have a completely different feeling when flying on British Airways than on Virgin Airlines.

In our project we tried to identify the kind of consumers who  associate  with  the  brand.  Local  brand  ambassadors are  being  created. We are not marketing this brand as a mainstream product. Actually, we are looking at it as a product to fill the gap between craft and mainstream beer. I see craft beer as extremely local. It is within the radius of 30 miles, but mainstream beer is the thing which goes across the world. We wanted to create something between the two and associating it with one billion people who are ready to experiment. This I think is the ideal strategy for Zymurgy.

While interacting with consumers across stores, duty free and certain bars across the country and across the world, I have found that there is a fixed brand the consumer is drinking For example, he is interacting with Blender’s Pride every day, but he is also flirting with other brands like Teacher’s, Black and White, Johnny Walkers and single malts. He is trying to create a sense of individuality when he is drinking. In the future probably a mix of several malts – a thing like a mix of Japanese malts, Scotch malts and Indian malts – could be a fantastic whisky to look.

Bringing  a  cocktail culture to whisky would be a value creation in the segment. In future, I see a lot of signature bars coming up, like exclusive single malts bars, Indian blended whisky bars, craft whisky bars, and gin bars. This is something very exciting to look at.

Regarding new-age drinking, change is the only constant because what was there a year ago is not there today and what is present today I am not sure that it is going be there six months down the line.

 

 

‘Now, drinking is about health, flavours, innovations’

Paritosh Bhandari, Co-Founder – Tipple Brands
I  would  highlight  some  current  trends  of  liquor  production and consumption which are popular in the world. First is the healthy and happy trend, which is about healthy alcohol. There is a Heineken campaign which promotes moderate drinking. The campaign is actually a shift from regular beer and alcohol advertising. A Heineken commercial says that the sunrise belongs to moderate drinkers

A notable development in terms of healthy drinking is moving away of beers from 8%-10% alcohols to about 2% or even 1% alcohol, for example, Foster’s Lager. Apart from strong alcohol beer, people are also moving away from sugar, which is really the new tobacco. This is evident in the success of Skinnygirl vodkas, gins, tonics, etc. It is all about usage of natural ingredients and no added alcohol or sugar. The brand did business of about 200 million dollars in four years.

People are now associating with events which are about healthy body and healthy mind. One such event is the London Beer Mile. In Canada, in an attempt to associate beer with health, a post-workout beer, called Lean Machine, has been launched. The beer has got certain post-workout proteins and vitamins that get your body in shape again.

In vodka a health-related innovation is Bellion Vodka, launched in Las Vegas recently. Formulated by a guy from Hyderabad, Bellion is easy on your liver. It cuts down the harmful effects of alcohol by almost 93%.

The second trend is of flavours. We see lots of flavoured beers,   flavour   ciders,   flavoured   vodka,   flavoured   gins. Everything has got flavoured. Two years ago, Fireball, a cinnamon-flavoured whisky, was launched. It turned out to be the fastest selling brand of any alcohol. People are moving towards flavoured products and light whisky, light rum, light gin and so on.

However, there is also a trend of beers with very high alcohol. One such beer is Brewdog with over 55% alcohol which blurred

the distinction between spirits and beers.

A lot is also happening in ciders. Gone are the days of only apple cider. Now ciders made from kiwi, passion fruit, raspberry, etc are also available. In vodkas also, you now have glazed donut-flavoured and bacon-flavoured vodka. Bacon-flavoured vodka became a huge trend in the USA two years back.

Even brands like Jack Daniel’s and Glenfiddich have shed their old imagery and are moving towards flavours. Jack Daniel’s has come up with a honey-flavoured Tennessee whiskey. Glenfiddich recently launched the first single malt Scotch whisky ever finished in craft India Pale Ale beer casks. In the cocktail space also vegetable flavours like carrot and cucumbers are being introduced.

The third trend is innovation which is more than the buzz word.People are adopting and adapting their lifestyle to new innovative products. We have seen 0 degree or 1 or -1 degree chilled beers. Now, a start-up, called Beyond Zero, is selling a machine which freezes alcohol into small cubes of ice.

Thanks to innovations wine is no more a drink which is

caught up with a lot of rituals around it. Now wine is on tap and

 

in cans. Just open the can and have wine. In the vodka space, the innovation is the vodka made from cactus and cow milk. One of the largest selling vodkas in the UK is the Black Cow Vodka which is made from cow’s milk.

Another noteworthy innovation is of non-colour whisky similar to rum and vodka. World’s first non-alcoholic distilled spirit, Seedlip, has also hit the market.

There is a trend of brands going for specific categorisation so far unheard of. For example, a beer, called Animee, has been specifically made for the women. Beers are even made for dogs. I got one for the friend’s dog from London, which is now being stocked in lots of bars and pubs in London.

The drinks industry is going through a technological breakthrough. Now, a cocktail making machine is there to be your bartender. It mixes everything kind of fresh and serves you cocktails in no time. To keep tab on your drinking, technology is  being  integrated  with  your  smart  phone. The  innovative DrinkTracker actually tracks your drinking to tell you how many calories you have consumed, how many alcohol percentages

you have consumed and whether you are fit to drive.

 

‘New-age consumer will keep drinking beer’
Rahul Singh, Founder and CEO , The Beer Cafe

When you say change is the only constant, my views are slightly contrarian. Yes change is the only constant. But sometimes some things are left the way they are. And, I think beer is one of them. You can have variations in beer. It has happened. Beer’s is the oldest recipe known to mankind. Consumption-wise, it’s the third largest beverage after water and tea. And that’s why I like it and keep it simple. I am not a fan of hot n happening because hot n happening means that something would exist for a little while.

We invest huge money in our businesses, so I don’t want to experiment with OPM (other people’s money). The idea is we want a stable business. So, relevance is the word that I have always used in our setup. We are a start-up. We began three years ago. We always do a one-year plan and keep chiseling on it.

Today we have 42 outlets in 12 cities in seven states. It is a challenging business. For myself, a textile engineer, trying to sell alco-beverages was a kind of chalk and cheese. We have seen considerable transition that has happened due to new-age drinking. People want to aspire for better things; they want to drink better; there is nothing wrong in it. But sales have to chase trends.

While starting business, we were convinced that we would start selling on a higher growth rate than spirits which is the trend in the world. But in India the scenario is absolutely lopsided in favour of spirits. However, three years after starting our business when we pulled out our performance report from the monitor, we

found that our growth is remarkable. That’s the good side of our start-up.

Unfortunately, beer in India is taxed based on the volume of the liquid but the tax should based on the alcohol content because the consumer is paying for alcohol. The consumer should not be paying taxes for the water in beer.   But the government does not see things in this perspective. Every state is concerned about its revenue and they don’t even see the quality.

We promote responsible drinking culture. We don’t serve any strong beers. We only serve beers, not craft beers which is a misused term. Craft beers are specialty beers.  We are serving about a million people  every year.  We don’t have a single case against us with police or excise or any other challan which means people come to consume beer at our outlets for responsible drinking.

I am convinced that as more beers come to India and Indians  try  more  beers  like  Bira  and  Witlinger,  beer  will continue to grow. My friend Ishan’s  beer is the best Indian

beer I have ever had. This beer called Rhino is produced out of Gwalior. He struggled for four years to get licences and now he is on. The beer is available in Haryana and is coming to Delhi now. I can bet if you had that beer you would feel so proud. It is produced from river water, not ground water.

Beer is here to stay. This four-letter word is my life. I believe the new-age consumer will keep consuming it.

When we started off, we had two or three beers on tap. Tap beers from the sales perspective of beer companies is a very difficult proposition. They prefer to sell beer in cases not kegs. But consumers when they come to an experiential place, they prefer beer on tap and consume it in a cup or glass.

We have just opened our new outlet in Lower Parel Mumbai where we have 25 beers on tap. Three years back I was in a dilemma about the number of tap beers in our start- up, but today we have 25 beers on tap about 50 beers in the bottle chiller. We are very proud of what India has given us. So, three cheers for beer!

 

‘The informed consumer wants value for money’
Malay Rout, CEO InAct

Today the consumer is informed. He/she is well aware of what he/she is drinking along with the credentials of the drink. So it’s no more just a cocktail but the ingredients and why they are available in that glass. Alcohol consumption is gradually becoming a complete experience. Drinking is no more for getting drunk. Earlier one’s liking for a particular brand used to be life-long loyalty. But now brand awareness is the mantra. So people are ready to try new drinks on regular basis.

Earlier all cocktail menus were very similar and offered few options. But today a variety of cocktail menus are available. Noteworthy are premium menus which offer innovative cocktails that are developed after lots of trials. Today thanks to their extensive exposure to the new developments in cocktail world, the bar staff is trying on daily basis to come up with new improved versions of cocktails. Today mocktail seems to be the stepping stone to the world of experiments with alcoholic beverages.

What is new in today’s drinking may sound very simple but it has undercurrents of a revolution.  For example, vodka with soft drink has given way to vodka with tonic water and a dash of lime cordial. So it’s no more generic but very personalized. In domestic wines, premiumisation is happening big time which is a healthy sign.

The inclination to secure value for one’s money has played a vital role in shaping people’s drinking choices. They are ready to pay depending upon the quality of service and the product they are getting. So the idea is to have the options so that one can choose the best fit. The cheap stuff will not sell any more.

When I started the Wine & Spirits Club of India, the idea was to educate people how to enjoy the drink so that one becomes capable of analyzing one’s drink. We must all strive to understand alcohol in a better manner so that we could really enjoy it.

 

THINKPAD DAY 2 SESSION 3

Make in India – Does this slogan match the policies?

 

 

‘Make in India a great initiative’
Sumedh Singh Mandla, CEO, Grover Zampa Vineyards Ltd
(Chairperson of the session)

 

Make in India is the current government’s flagship initiative, launched  by  Prime  Minister  Narendra  Modi  in  September 2014. The idea was to make India a renowned manufacturing hub because the agriculture and service sectors in India have grown much faster than the manufacturing sector. In the last couple of decades, the agriculture growth was about 28% andthe service sector has grown by 56% in contrast to the 16% growth of the manufacturing sector.

Make in India is a great initiative to upgrade manufacturing and create a new hub for the Indian economy. Another important  objective  is  to  create  job  opportunities  for  the Indian talent and skilled manpower. The target was to create 10 million jobs by accelerating economic development and boosting trade and GDP.
India   also   wants   to   get global recognition as a business destination by increasing the ease  of  doing  business.  Lots of  people  are  scared  to  enter the Indian market because we are a big country. Besides, government   policies   are   not easy to understand; markets too are very difficult to understand. Now  the  government  is  trying to ensure that it becomes easy to do business in India, and the Indian manufacturers are able to sell their products worldwide.

After the launch of Make in India, the government facilitated a single window clearance for new projects. This is something which has really helped lots of people to come forward and sign new agreements. International business houses are being encouraged  to  produce in any segment in India and also roll out exports from the country. About 25 sectors are included in this programme. In these sectors, tourism and hospitality is a good opportunity for the wine sector.

Lots of Indian and foreign multinationals have participated in the Make in India campaign.  Many of them have pledged lots of money in various states and markets. States, especially Maharashtra, Karnataka and Gujarat, are aggressively inviting international  companies  to  be  part  of  the  Make  in  India campaign.

The Centre says MoUs worth Rs 21400 crores were signed during a week-long promotion of this campaign, which was a big achievement. Among the participating countries, notable presence was of Germany, Russia and China. So Make in India has created a very open format where India has been marketed quite well. What we need to see now is whether our policies are sufficient to ensure that the new projects move forward. Some of the projects have moved forward but lots of them have still not taken off.

  • Let the light of the lamps brighten your life,
And give you success and guidance to walk towards your dreams.Wishing you a prosperous Diwali.
  • Anthony Wills, managing director of Kilchoman Distillery is known for its fine blend of single malts across the globe. He says that the Indian drinker loves peated whiskies. As for the Indian single malts, he says that the Indian market is growing at over 20% every year. With more global exposure and overseas travel, the Indian customer is looking for new and interesting brands to enhance his taste rather than to get drunk.

With greater awareness of premium products, including single malts, the urban people are also drinking less and better.  As for availability and growth in the Indian market, Anthony's brands are available in Travel retails like  the  Vault  Collection  counters at International Duty Free shops in Chennai, Bangalore and Delhi.

#SpiritzMagazine #SingleMalts #InterestingBrands #TravelRetail
  • Labrodog Blended Scotch whisky has been declared as the “Emerging brand of the year” in the recently conducted event Goa State Best Brands Awards, organized by Dewan Mehta Foundation. This year the competition was greatest in its history, having more entries than ever where winners represented some of the finest products from around the country. 
The honor highlights the Cheers Group’s commitment to premium products throughout their portfolio of Scotch whiskies and Premium Indian whiskies which makes it standout amongst the most awarded alcobev company in the country.

#SpiritzMagazine #ScotchWhiskies #PremiumIndianWhiskies #AlcobevCompany
  • Rampur Indian Single Malt (RISM) produced by Radico Khaitan Ltd has been awarded gold medal at the Monde Selection 2017. Ever since 1961, Monte Selection has been evaluating, testing and awarding a large number of consumer products with its remarkable quality label. It brings seventy specialists from all over the world to taste and test products in an independent way. RISM is available in more than a dozen countries including USA, Canada, UK, Germany, UAE, Hong Kong, New Zealand, Ghana etc. and many new markets in the rest of the world are being opened. 
#SpiritzMagazine #RISM #SingleMalt
  • Silvestris, from Gratavinum, has been chosen as one of the thirty best natural wines in the world by Decanter magazine. The declaration was made on the basis of blind tasting of natural wines, organized in January 2017, with over a hundred distinct wines from around the globe participating. The three eminent wine specialists- Simon Woolf, the honor winning English wine and beverages author; Sarah Jane Evans, an honor winning writer who is additionally the co-seat of Decanter World Wine Awards; and Andrew Jefford, the editorialist for Decanter.com were responsible for the wine assessment. They selected their top 10 natural wines after tasting 122 wines from all over the world. 
#SpiritzMagazine #NaturalWines #WineAssessment #Silvestris
  • A leading player in the international wines and spirits business in India, Aspri Spirits, organized a women only exclusive sit-down dinner in honor of Andrea Freeborough, Cellar Master, Nederburg recently, in Mumbai. Set in the elegant Olive Bar & Kitchen, Mumbai, the lavish specially came up with four-course wine along with Chef Rishim Sachdeva’s menu blended perfectly with ‘Nederburg the Winemasters’ wines. In the ideal setting of dinner, Andrea Freeborough interacted with visitors and took them through a delightful history of the brand, the process of making wines, their best-seller wines and much more. 
#SpiritzMagazine #NederburgWines #AspriSpirits #WineMaking
  • Baptiste Loiseau marked the history by becoming the Cognac’s youngest cellar master three years ago. The 34-years cellar master from the Cognac region is very passionate about the region, products and its terroir. 
This young legend performed the dual task of maintaining the tradition while innovating at the same time. He first created Carte Blanche à Baptiste Loiseau, the exclusive limited edition that has been created last year for the House of Remy Martin and available at Duty Free stores worldwide. The second Carte Blanche is to be launched in October this year as a preview, in the United States.

#SpiritzMagazine #CellarMaster #CarteBlanche
  • In the world of wines, Burgundy is the famous wine produced from the lush eastern France. Mumbai-based Wine Park has brought a range of high quality Burgundies from the label Vincent Girardin in India. 
The addition of Burgundy wines has improved the impressive portfolio at Wine Park— both from old and new wine worlds. The Vincent Giradin Labels in India include 2014 Bourgogne Cuvée Saint-Vincent Blanc, 2011 Chasagne-Montrachet Premier Cru Morgeot, 2012 Meursault Premier Cru Genevrières, 2013 Puligny-Montrachet Premier Cru Les Referts among many others. 
#SpiritzMagazine #WinePark #Burgundies #WineWorld

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