Since lockdown, consumers are now making safer choices and have reduced experimentation substantially
The lockdown wiped out more than 50% of Diageo India’s sales during the April-June quarter, resulting in a consolidated net loss of Rs 246.6 crore. Abhishek Shahabadi tells Venkata Susmita Biswas how the easing of restrictions on dine-ins and social gatherings, and home delivery will shape the liquor industry.
What has been the impact of the pandemic on the liquor business?
From March 22 to the end of May — as alcohol shops remained shut — we had zero sales. It was a big blow to the category. Even when things gradually opened up, alcohol shops did not open all at once across the country. States took their time to open in a phased manner. July was the first stable month when all stores opened up. Bars and restaurants are just beginning to open now. In comparison to other product categories, alcoholic beverages took a lot longer to be available to consumers.
The other factor that impacted the category was the increase in prices of products due to states imposing special fees on liquor sales. We saw unprecedented price hikes in the range of 15-20%; and in states like Delhi, this increase was to the tune of 70%. We are now seeing a gradual recovery, and expect this to continue as normalcy is restored in the country.
The HoReCa segment is a big contributor to your business. How are you helping revive it?
The HoReCa segment contributes about 25% of the liquor business. As this segment slowly resumes operations, we expect a steady revival. Since players in this segment are our close partners and we are mutually dependent on each other, Diageo has made a commitment of Rs 75 crore to support bars, pubs and restaurants serving alcohol, to help them recover from the impact of the pandemic.
This investment will go into giving bars and restaurants a Covid-19 infrastructure starter kit, which will help them ensure the safety of consumers. Bars can sign up for the programme, and if they meet the basic criteria, Diageo will support them with this kit. We will also aid them in establishing partnerships with online reservations and cashless systems, mobile bars and outdoor equipment. We are extending this non-cash support to all our partners in the ecosystem.
With events being restricted, how do you expect the festive season sales to pan out?
Typically, there’s a swell in sales from October to December, because of the combined factors of festivals, weddings and holidays. This year, the celebrations will be subdued. We expect weddings, for instance, to be very intimate. The latest cap of 100 people on social gatherings is expected to give a breather to events. Given the restrictions in place, we expect these occasions to be toned down and contribute about 30% less than previous years.
Has home delivery of alcohol helped boost sales?
Home delivery is at a very nascent stage. Governments in about seven to eight states have given approval for home delivery of liquor. As the whole ecosystem is still getting back on its feet and enablement is an issue, a lot of states are not responding fully to the opportunity yet. In markets like West Bengal, which are at an advanced stage of giving approvals to aggregators like Swiggy and Zomato for liquor delivery, we are seeing gradual improvement in offtake. Yet, in those markets too, sales will be in the early single digits. It has not had a material impact on the business as of now. However, we definitely expect this to be a game changer for the category, as the ecosystem evolves.
How has the pandemic shaped liquor consumption in India?
Consumers are now making safer choices and have reduced experimentation substantially. Additionally, there has been a rise in value consciousness. As a result, we see consumers opting for brands that are widely accepted, and brands with which they have had stable experiences. We are betting big on brands that have a wide presence in the market like McDowell’s No.1, Royal Challenge and Johnnie Walker. Further, we are hoping that affluent consumers will stick to their preferred brands and purchase cycles, and will be less inclined to downgrade.