India’s liquor market has seen a shift to premiumization during the covid-19 pandemic, a trend that has benefitted Moet Hennessy India, managing director Ipsita Das said. The company, part of leading French conglomerate LVMH, makes premium wines and spirits such as Dom Pérignon, Moët & Chandon, Glenmorangie and Belvedere. Das, who joined Moet Hennessy in January explained how her company is navigating the pandemic, and shared her views on the shift to retail sales and home delivery of alcohol. Edited excerpts from an interview:
What has been the impact of covid-19 disruptions on liquor business?
A: We’ve had some spots of good growth last year in the fourth quarter but overall the business has suffered. The entire industry has declined by 30% in 2020. Beers and ready-to-drink categories were the most affected. Wine, thankfully, declined only by about 17% even though there was no on-trade (restaurants and bars) consumption. We did struggle to keep the volume up as channels of businesses were shut. Our volumes came down by 30% plus in domestic market. We operate in travel retail (airports) which is 40% of our business. That saw a big decline because of international travel ban.
Having said all of this, we kind of managed to do decently well. For us, it has always been about playing in the premium-plus segment.
There was this move towards premiumization and this was not just in India. A huge focus on premiumization has come in. We had been pushing for it for a long time…I think covid did it for us. Overall, premiumisation has given a boost to my business for sure.
Which of your brands did well?
A: 70% of India is a still a whiskey-drinking market. So Glenmorangie Original was selling in large numbers last year. It’s more expensive than the faster-selling single malts in the country. But it kept volumes for us thanks to consumer changing.
Our wine portfolio that includes still wines – Terrazas, Termes, Cloudy Bay and our home-grown sparkling wine Chandon-did well during the lockdown because of the spike in home consumption. We also saw trade up with cognac where we are already market leaders, where Hennessy V.S got traded up to Hennessy V.S.O.P in south of India.
Why did consumers trade up?
A: Premiumization happened because people did not stop drinking and there was no other space to spend. You are not travelling or splurging on fancy dinners. So alcohol became a de facto place to spend. That’s why we saw this premiumization happen by default.
Also, when people are celebrating less or fewer times, and they are doing just for themselves or by themselves, they do not want to compromise.
If I want to have wine by myself and my family I will make sure, I pick up the best bottle. That was self-preservation and self-celebration amid everything that was going on around us.
How do you cope with India’s poor quality of liquor retail?
A: We are present both in retail and on-trade. We have huge focus on on-trade (restaurants, hotels) where we could talk, meet and see consumers and craft an experience.
After covid, we realized we have to focus on retail. It used to be 50:50 split earlier between on-trade and retail. In the last 18 months business moved 70% to retail and 30% on trade.
That’s a huge transition for us. In retail, we are present only in high-end outlets. If you look at the entire point of sale system, and this is an absolute guesstimate – if there are 90,000 point of sales in India, we are at less than 5,000.
There are very few large-format liquor stores in India. You have Tonique in Bangalore and Hyderabad which is exactly how you would want your alcobev store to look like. Most outlets are traditional vends – with a small window and railing in front. We want to be present in more stores but we would want them to be bit more refined. But retail should change as home consumption is going up.
How is home delivery of alcohol going?
A: Last year, we were talking of 5-6 states. This year we are talking of 8-10 states. We want to ride the e-tail wave.
It has the potential to change the way people have access to alcohol. We did a survey a few weeks ago where from 18,000 plus responses received, 80% consumers said they would like home delivery of alcohol. But how do we make it mass, and bigger? We are still struggling with regulation. It is a huge mess in terms of standardization.
Although alcohol is a state subject, we should see how we can evolve a singular policy – under certain guidelines.
Who owns the licence for home delivery in states where it’s allowed?
A: In West Bengal last year, the government made a modification in the law and few players responded with an Expression of Interest and an MoU was signed between regulatory bodies and some of these companies. There was Swiggy, Big Basket, Amazon and Spencer’s, among others. There you can just order alcohol like you order groceries. Even Odisha allows aggregators.
But in Maharashtra the aggregators are not allowed. It is the people who have their retail shops who are either now using WhatsApp or version of their store app or website to take orders and deliver.
There are different models for different states decided by the excise folks. But if it’s standardized, it could give a uniform experience to consumers wherever they may be.
How much does home delivery licence cost in West Bengal?
A: As far as I know there is not a large upfront payment like you need for vends in Delhi. But there is a commercial deal – in terms of renewal of licences, which is very basic.
It is speculated that home delivery licences will cost ₹200-300 crore?
A: Nobody knows. Nobody has it till now. Let’s see what the final regulations are.
How does home delivery work in other countries?
A: In different parts of the world we have home delivery – Singapore, Hong Kong, Australia… and they are doing really well. I am not even taking Europe or US as examples.
India is still figuring out. But whenever home delivery is allowed we need to have guidelines written in rock. And making sure they are executed to the T by every supply chain partner who comes on board.
Does any state in India allow home delivery licence to liquor companies themselves?
A: None of the liquor companies have got the home delivery licence themselves. Yes, it happens in other parts of the world. For example, Moet Hennessy has a direct-to-consumer (D2C) platform selling liquor to the consumers directly through the website. It’s live in UK and Germany.
There are pros and cons of doing business directly. There is an ecosystem that makes the business thrive with companies, distributors, retailers and aggregators. Yes, if we do direct business, there would be fewer players in the value chain, and hence may be better pricing for the consumer, but it has its own disadvantages. Driving consumer adoption directly through an app or website is not easy, and economies of scale matter.
(The above news was originally posted on www.livemint.com by Shuchi Bansal)