In a recent article published in Economic Times, Prem Dewan, the Managing Director of DeVans Modern Breweries Ltd., delves into the intricate challenges faced by the alcohol beverage (alco-bev) industry in India, particularly in supply chain management. He highlights the unique nature of India’s alco-bev sector, resembling an amalgamation of over 30 smaller countries, each with its own distinct set of rules and regulations.
The supply chain complexities commence with manufacturing, where each state mandates specific legends on liquor labels for products meant for sale within their boundaries. This requires companies to print numerous labels for each brand, with every label requiring annual approval from the state’s excise commissioner. Despite the challenges, the advent of online approval systems in most states has eased this aspect for supply chain managers.
Prem Dewan points out that the ex-distillery price of any brand must be approved annually in each state, posing a challenge for manufacturers when state governments often refrain from revising this price despite significant input cost increases. The article notes a more than 30% spike in input costs due to the Russia-Ukraine war.
Moving on to the logistics aspect, Dewan discusses how liquor transportation is strictly regulated through permits issued by the excise department. Permits expire, and sometimes goods do not reach their destination in time, necessitating revalidation. Additionally, many states now require manufacturers to open their own mother godowns in the state where they intend to sell, limiting options, especially for smaller manufacturers.
Further complicating matters, some states now mandate that liquor be transported only in closed containers, significantly increasing transportation costs and limiting the manufacturers’ ability to meet demand. Dewan emphasizes that these provisions often favor multinational corporations with substantial resources to invest in production facilities and open mother bonds in various states, posing a significant challenge for domestic manufacturers.
In conclusion, the article raises concerns about the recent trend of multinationals offering substantial discounts to bars and establishing exclusive partnerships, creating an uneven playing field for domestic manufacturers lacking the financial might to compete. Prem Dewan’s insights shed light on the evolving dynamics of India’s liquor industry and the hurdles faced by manufacturers in navigating the intricate supply chain landscape.