Lots
of money and opportunity will eventually follow in India when booze is
concerned and it is the liquor delivery sector that has led companies,
services, startups and entrepreneurs alike to see a massive windfall. In India,
liquor sales take place through three licensed vertical retail, horeca (hotels,
restaurants and catering), and department canteen stores. The total horeca
licensed places are around 30,000 in the country and the stock in hand is for 1
month at any given time, which means that the total unsold inventory at various
horeca outlets throughout India would be around Rs 3,000 while liquor retail
sales are opening, the service industry continues to be deferred due to corona.
According to the All India
Brewers Association (AIBA), the liquor industry is contributing revenues to
state governments about Rs 2.5 lakh crore. In the 40-odd days when liquor trade
was closed, states lost revenue of around Rs 25,000 crores. After the lock down imposed in the country on 25 March, all liquor shops and distributors in the
country were closed and production, services and supply were also halted.
Although customers were supported by eCommerce and app-based logistics
companies to get on their doorsteps a continuous supply of food and vital
goods, alcohol buyers were left in the lurch.
The
Indian food aggregators such as Zomato and Swiggy seem to have heard the
alcohol lovers’ anxious prayers. The company has confirmed in a major
announcement that it is making a foray into supplying alcohol to customers at
their doorstep. The company is on the road to set an example for the entire industry,
having already diversified its interests into grocery stores and home
essentials delivery less than a week after launching similar services in
Jharkhand Zomato and Swiggy launched
home delivery of alcohol in Odisha as part of measures to avoid overcrowding of
customers in shops in the midst of the coronavirus pandemic. Zomato would soon
spread to other towns, such as Rourkela, Balasore, Balangir, Sambalpur,
Berhampur and Cuttack, beginning with Bhubaneswar.
Swiggy said in a separate
statement that their home delivery service went live in Bhubaneswar and
Rourkela last month after receiving the necessary approvals from the government
of Odisha and plans to extend to other major cities in the state. Earlier this
month, the Supreme Court requested states to allow non-direct contact or
digital purchases and home delivery of liquor during the lockout phase to avoid
the spread of coronavirus due to crowding in the shops, there will be age
checks at the time of order as well as at the time of delivery of the product.
Users would be asked to submit a valid proof of Identity to be qualified for
order, which will then be checked by the delivery partner when the order is
issued. The service called Zomato Wine Shops would be available on the Zomato
app's homepage and will enable users to select any product from the listed
retailers and have it delivered right outside their doors of place orders.
All
orders will carry a unique OTP which the customer must provide at the time of
delivery. The news has certainly grabbed the eyeballs throughout, with
businesses of all scales, especially those who are up and coming, looking to
expand their horizons, vertically or horizontally, aggressively and actively.
Within no time the internet became abuzz with the news of many other existing
businessmen and investors who have set their eyes on this untapped Indian
market and this has led to many unanswered questions which are as follows
1. Will Liquor delivery
be the next multi-billion startup idea for entrepreneurs in INDIA?
2. Whether this
kind of business model is high-risk high-gain for entrepreneurs and investors?
3. Will it be a new cash cow for the economy?
Liquor Delivery: The Trigger
It will come as no surprise that the market for
liquor has skyrocketed since the shutdown, consisting of such a vibrant
customer base. As the government eased restrictions on the movement of
essential and non-essential goods from 4 May, it also took the decision to
allow a fraction of liquor outlets to reopen throughout the country. This prompted
other consumers around the country to flout social distancing norms such
desperate acts by the people prompted the government to consider viable ways to
curtail the spread of coronavirus and offered the involved parties an immense
opportunity to capitalize on such a huge market. Whether or not liquor delivery
was originally in every organization's plans, the pandemic's onset has
intensified the effort to diversify their operations.
This
actually has an impact across multiple facets. Startups such as HipBar,
HipCask, sites such as WineBazar.in and LetsBuyDrink.com, etc., have already
been doing business in space, facilitating the home delivery of alcoholic
beverages in that time, also achieving varied levels of success, sometimes due
to the grey area in operation and sometimes due to changing state government laws.
It is precisely these issues that have made this lockdown the perfect
opportunity to rake in the extra cash for these companies.
For
certain nations, overall tax based on alcohol consumption amounts to as much as
25 per cent. annually, Delhi with per capita GDP higher than the national
level, receives over Rs 5,000 crore. Last year Karnataka earned Rs 21,400 crore
from the liquor sales. In this time of crisis, states like Kerala and
Meghalaya, which have the highest per capita consumption rates for alcoholic
beverages, along with Goa, which is also a tourism-driven industry are severely
impacted. The central government has proclaimed itself to be hit hard, and the
GST reserves and revenue sources of the states have dried up.
In
the aftermath of these spectacular results, states are pushing for a regulated
compliance and delivery allocation to account for lost sources of revenue. It
has also encouraged app and web services to continue their work and to
stabilize their companies by expanding their offerings to multiple outlets and
governments of the state. States such as Chhattisgarh, Punjab and West Bengal
have all launched online portals and mobile apps that offer door-to - door
alcoholic beverage distribution (9am-7pm) based on age verification by means of
Aadhar numbers.
At
the other hand, many companies have also requested state governments to
encourage them to move forward with the distribution services in tandem with
Zomato, with their near rivals Swiggy obviously interested in entering the
space. ISWAI, the Indian Spirits and Wines Association of India, a representative
body, has also called for more clarification on the standards and legislation
for alcoholic beverage distribution through the states but the biggest
challenge for Swiggy and Zomato will be the detailed clearance required by each
state government to expand this line of business.
A Multi-Billion Dollar
Opportunity for Entrepreneurs
Such technological measures will not only
provide the government with effective ways to fight the spread of COVID-19
while maintaining regulations, but will also enable potential entrepreneurs to
benefit from the clientele. The delivery model which works on the app has garnered
huge success in India. Though Zomato,
Swiggy, Big basket has already been riding high with their unicorn status,
there are more than 1,0007 logistics start-ups, including Dunzo and JhutPut,
seeking to gain a substantial market share.
India's
alcohol industry is the world 's third-largest with an estimated $35 billion
behind just two big nations, China and Russia. According to Euromonitor International, a
well-known research firm, India's spirit industry – which includes whiskey,
brandy, rum and vodka is estimated to grow 25 percent by 2022 to 2.92 trillion
rupees ($41bn). Combine it with India's beer market, by 2022 the combined
demand is expected to be as high as $56 billion to $60 billion (4.4 trillion
rupees).
With
the increase in the rise of smartphones, the rapid use of digital payment
systems and the growth in customer trust in technology-driven delivery firms
the app-based liquor delivery start-ups could comfortably account for not less
than 1% of the overall market over the next two years, which will amount to
$600 million (3,800 crore rupees) now that Indian delivery startups are growing
it would be safe to assume that India 's online liquor delivery market would be
nearly $ 3 billion – $4 billion business in the next 4-5 years.
Liquor Delivery: The Challenges
It is just the dawn of India's liquor delivery
market. Just like every emerging sector, it always comes with a range of its
own policy challenges, as well as emerging businessmen. The government has to
re-examine its liquor policies to gain entrepreneurs' trust. The uncertainty in
the business model of liquor delivery is a major problem and companies like
HipBar have already felt the brunt of that.
The biggest barrier to the sale of liquor continues to be the disparity
of laws between various jurisdictions. Retail laws are not only special but
there is also a disparity in income, rates and also age limits.
The
major challenge is about managing inventories. Imagine a consumer order on the
app for a particular variety of beer, and something else is delivered which is
not desired also retailers worry that online businesses such as Zomato , Swiggy
and others may threaten profitability, which is a major deal in the liquor
store industry due to the high sale license price. For businesses like Swiggy
and Zomato there are no rules as retailers believe they won't be able to access
the orders they normally receive because applications can monitor the whole
chain from ordering to last-mile delivery. Just a few retailers could go for
exclusive Zomato and Swiggy tie-ups. In this situation, when exclusivity comes
at a premium, smaller retailers would miss out on the market. Data misuse by
food delivery apps could monopolize consumer data from liquor distribution,
claimed by some restaurants in the food delivery space. Retailers want to own this data as they
think consumers will be linked directly to sellers.
To sum up
Governments in almost all states have imposed on
the alcoholic drinks a heavy 'extra corona tax' to maximize revenue, thus
helping the operations of delivery services. Brewery workers have also called
for this model to be affirmed, because it will help thousands of workers to get
paid and restaurants, roadside dhabas will benefit from this arrangement which
have been dry all along this time. What seems to be a controversial issue on
the surface can be the one which provides the economy and its related
businesses with a big cash flow it is really an opportunity worth exploring for
entrepreneurs. How far the liquor delivery firms extract the revenue will rely
on the policies the government chooses to adopt.