India, one of the world’s fastest growing liquor markets, has been a yes and no country for liquor brands/businesses overall, owing to government policies and taxation systems, among other things. When it comes to the alcoholic beverages industry, India must abandon ad hoc decision making practises in favour of consistency in policy. Neeraj Sachdeva, the Director of Lakeforest Wines talks about the importance of uniformity and policy measures in Indian alcohol industry.
India is infamous for the type of taxes and policy implementation that plague the country’s liquor industry, with brands in the segment constantly looking for alternatives to improve the ease of doing business in the country. At the same time, as profitable as this segment is, the impediments rarely gain an advantage. In recent years, the country has seen both local and new players rise to prominence.
When it comes to alcohol, India has varying tax and policy measures across different states, and the category, unlike other goods, does not fall under the purview of the Goods and Services Tax (GST), so the revenue goes directly to the state government. The ad hoc decisions made by state governments regarding alcohol make it extremely difficult for the entrepreneur to have confidence in establishing a business in this segment. “Basically, the alcoholic beverage industry bears the brunt of any issue, political or otherwise. When there is a budget deficit, the government tries to get more money from the industry; when there is a political debate, liquor sales are prohibited or restricted. So, we are always at the receiving end. I believe there should be some consistency. It is preferable to regulate it rather than prohibit it,” says Neeraj Sachdeva, the Director of Lakeforest Wines.
Meanwhile, Neeraj Sachdeva emphasises the legislation and bureaucratic procedures that govern the liquor industry. “In any case, 70% of what consumers pay goes to the state government, and while that will not change, the industry needs to be more incentivized to launch better and newer options in the consumer’s interest. The problem here is that the cost of bringing a product to market (bureaucratic measures/policies) is much higher than the cost of creating a product. When it comes to alcohol, I believe there should be some level of cohesion so that India feels like a single country.”
While the sale of alcoholic beverages generates significant revenue for the country, each state has its own set of taxation and regulation parameters. Even during the Covid-19 pandemic, there were a variety of newer types of alcohol taxes, most of which had variable rates. To avoid revenue shortfalls and meet consumer health needs, approximately 21 states increased excise duties, maximum retail price (MRP), bottling fees, and imposed COVID-19 specific fees, cess, and surcharges.
Changes were implemented in states such as Assam, Rajasthan, Karnataka, and Uttar Pradesh through increases in excise duty slabs, whereas specific COVID-19 related cess/fees were implemented in Delhi, Haryana, Odisha, and Telangana. The impact on final product prices ranged between 5% and 25%, with the exception of Delhi, where prices initially increased by 70% due to the imposition of a special corona fee of the same percentage. With such uncertainties, the liquor industry also face low interest from investors.
Despite numerous obstacles, alcoholic beverage companies have found their way into the domestic market, with many homegrown brands carving out a niche for themselves. Sula Vineyards and Simba are two well-known brands that cater to both domestic and international markets. “Sula currently exports to 20 countries. However, I believe there is more to offer and better profits to be had in the vast Indian market than in exports,” Neeraj Sachdeva says.
Furthermore, the power of digital media is assisting the segment in more ways than one. Unlike in the past, liquor companies can now advertise their products through digital channels such as social media. While Sula’s ‘vineyard visits for wine tasting’ have been successful, Simba has relied primarily on word of mouth and social media posts from its customers. “Music festivals, events, and so on have been great for us in recent times, in addition to digital platforms,” says Lakeforest Wines Director Neeraj Sachdeva.
Online delivery is another experimental area for liquor brands in India today. While many states have permitted ‘online delivery’ of alcoholic beverages, they have yet to permit ‘online selling’ of these beverages in the future. Furthermore, the leaders of the liquor industry discussed measures that could help Indian consumers become a more aware and conscious drinking population than they are now. Alcohol use disorder is a major problem in India. According to a report by India’s Ministry of Social Justice and Empowerment (MoSJE), one in every three alcohol users requires treatment for alcohol-related problems, and only about one in every 38 people with alcohol dependence receives treatment or assistance.