India is a very large country but as far as the alco-bev sector is concerned it is like an amalgamation of more than 30 smaller countries, each with its own set of rules and regulations with absolutely varied and diverse provisions. Add to this the restrictions on movement of alcohol between each state and you have a real nightmare facing the people manning the supply chain management in the liquor industry.
Supply chain management obviously starts with manufacturing and the challenges set in immediately. Each state requires that the labels for liquor meant for sale within their state be printed with particular legends specific to that state as well as the verbatim that it is meant for sale within that state only. With each SKU of a brand normally having three labels, and a liquor company normally having a number of brands, every company has to get printed hundreds of different labels of each brand for sale in different states. All these labels have compulsorily to be approved every year by the excise commissioner of each state wherever one wishes to sell its liquor. Thankfully, most states now have online systems for approval of these labels which makes the job of the supply chain manager a bit easier.
The ex-distillery price of any brand has to be again approved in each state which is valid for one year. Manufacturers suffer as this price is normally not revised by the state governments during the year despite huge spike in the cost of inputs. This has happened during the current year as input costs have risen by more than 30% due to the effect of the Russia -Ukraine war. Add to this the fact that many times the state government feels shy of raising the ex-distillery price even at the start of the next year.
All liquor moves from the manufacturing unit only against permits issued by the excise department and after the full excise duty is paid against these permits. These permits have a validity date within which the goods have to reach their destination. However, sometimes permits expire before these goods reach their destination and this complicates matters as the permits have to be revalidated from the excise department before these goods can be unloaded. This can sometimes take a lot of time.
Most states now ordain that the manufacturer must open its own mother godown in the state where it wishes to sell its goods and from where it can make supply to the wholesalers of that state. This restricts the options of the manufacturer to supply, especially the smaller ones who may not have the funds or the facility to open their own mother bonds in different states.
Many states now provide that liquor must be transported only in closed containers. This not only raises manifold the cost of transportation but also restricts the ability of the manufacturers to supply goods as per demand of their brands due to the fact that there is a huge shortage of closed containers in the market.
Most of the provisions act to the advantage of the multinationals who have deep pockets and can easily invest huge funds into production facilities in a number of states as also open their mother bonds in different states. The most recent trend of the multinationals to offer huge discounts to bars and tie up with them for sale of their brands even to the extent of over 80 percent is very disturbing for the domestic manufacturers who do not have the might to match the spending power of the multinationals. This is happening around the country as the multinationals entrench themselves in different states and is a huge cause of concern for the domestic industry.
The author is chairman and managing director of DeVANS Modern Breweries Ltd.
By Prem Dewan