One of the fastest growing liquor markets in the world, yet restricted by government policies and taxation system, etc., India has been a yes and no country for liquor brands/ businesses overall. Interacting during a session at The Financial Express Boardroom 2022, Chaitanya Rathi, Chief Operating Officer, Sula Vineyards and Prabhtej Singh Bhatia, CEO and Co-Founder, Simba Beer, unanimously suggested that India needs to do away with the ‘ad hoc decision making practices’ and bring in ‘consistency in terms of policies’ when it comes to alcoholic beverages industry.

India is infamous for the kind of taxes and policy implementation that follows the liquor industry in the country with brands in the segment continuously looking at alternatives for better ease of doing business in the country. At the same time, as lucrative a segment as it is, the hindrances rarely get to have an upperhand here. The country, in the last few years, has seen local and new players as well coming to the fore.

What could have been different?

India has a varied tax and policy measures across different states when it comes to alcohol and the category, unlike other goods, does not fall under the purview of the Goods and Services Tax (GST) and so the revenue from it goes directly to the state government.

“The ad hoc decisions by the state governments around alcohol make it really difficult for the entrepreneur to have the confidence to set up a business in this segment. Basically, any kind of issue – political or macro – it’s the alcoholic beverage industry that bears the brunt of it. If there is a budget deficit the government tries to get more money from the industry, if there is a political discussion happening, liquor sale is banned or restricted. So, we are always at the receiving end. I feel there needs to be some kind of consistency. It’s better to regulate it than to ban it,” said Chaitanya Rathi.

Meanwhile, Prabhtej Singh Bhatia pointed towards the legislation and bureaucratic processes that proceed the liquor industry. “In any case, 70 per cent of what consumers pay goes to the state government and while that will not change, the industry needs to be more incentivised to launch better and newer options for the interest of the consumer. The difficulty here is that the cost of bringing a product (bureaucratic measures/ policies) to the market is much higher than the cost of creating a product. I feel there should be some amount of cohesiveness where India feels like one single country when it comes to alcohol.”

While the country gets huge revenue from the sale of alcoholic beverages, every state has a different parameter of taxation and regulation when it comes to this category. Even during the Covid-19 pandemic, there was a series of newer kinds of taxes on alcohol and most of them at varied rates. Around 21 states had increased excise duties, maximum retail price (MRP), bottling fees, and imposed COVID-19 specific fees, cess and surcharges to avoid revenue shortfall and meet consumer health needs.

In states such as Assam, Rajasthan, Karnataka and Uttar Pradesh, changes were brought in through hike in excise duty slabs; while in states such as Delhi, Haryana, Odisha and Telangana, specific COVID-19 related cess/fees were implemented. The impact on final prices of the products ranged between 5-25 per cent; except in Delhi, where prices increased by 70 per cent initially due to imposing of a special corona fee of the same percentage.

With such uncertainties, the liquor industry also ‘faces low interest from investors’.

What’s working though?

While the hindrances are many, alcoholic beverages companies have found their way in the domestic market with many homegrown brands making a space for themselves in the segment. Sula Vineyards and Simba being two mainstream brands offering to even international markets. “Sula is already exporting to 20 countries. However, I feel there is more to offer and better profits to claim in the vast Indian market than from exports,” said Chaitanya Rathi.

Also, the power of digital media is further helping the segment grow in ways more than one. Unlike earlier, liquor brands now are able to advertise their products through digital medium, social media channels, etc. While for Sula, what has been working for it is its ‘vineyard visits for wine tasting’, Simba has been mostly about word of mouth and social media posts by its consumers. “Music festivals, events, etc. have been working great for us in recent times, besides digital platforms,” said Prabhtej Singh Bhatia.

Online delivery is another experimental area for liquor brands in India today wherein many states have allowed ‘online delivery’ of alcoholic beverages, they are yet to allow ‘online selling’ of these drinks, going forward.

Furthermore, the liquor industry leaders also talked about measures that could help Indian consumers become a more aware and conscious drinking population than it is now. India has a large burden from alcohol use disorder. According to a report by the Ministry of Social Justice and Empowerment (MoSJE) of India, every third alcohol user in India needs help for alcohol use problems and only about 1 in 38 people with alcohol dependence report getting any treatment or help.

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