afaqs! Round Table Conference: Taking stock of the liquor industry

The fourth Round Table Conference discussed the liquor industry - lock, stock and barrel. Some pertinent points raised were: what's ailing the industry, the advertising challenges and how they can be surpassed, and the need for innovative thinking.

After the successful completion of three round table conferences on automobiles, telecom and education sectors, the fourth conference in the series explored the challenges faced by the alcoholic beverages industry.

From multiple distribution models in various states to inconsistent, non-uniform taxation policies; myths related to drinking to the lack of quality spaces promoting responsible drinking, the conference delved into various points.

The panellists comprised Sundeep Kumar, director, corporate affairs and communication, SABMiller India; Harish Bijoor, brand expert, management consultant and chief executive officer, Harish Bijoor Consults; Dr. Anand Ramanathan, manager, KPMG Advisory Services; and Sanchayeeta Verma, general manager, South, Maxus.

Opening the discussion, Kumar highlighted the growth figures in both the beer and the spirits industries, bringing out the promise of the category.

From the manufacturers' point of view, explaining the challenges faced by the alcoholic beverages industry in India, Kumar emphasised on the inconsistency and non-uniformity of taxes levied across the country. "In Andhra Pradesh, 65 per cent of the consumer price of alcoholic products is from the government's side, including VAT, excise duty and the corporation tax," he said. Referring to inconsistent taxes, he said, "While the corporation's margin is 27 per cent in Andhra Pradesh, it is 4 per cent in Karnataka."

Commenting on the demand for alcoholic products, Ramanathan of KPMG revealed that India is a significant market - the third largest in Asia. "It's a myth that Indians don't drink. Per capita consumption of spirits in India is 1.3 to 1.4 litres per annum, while the global average is 1.6 litres. About 95 per cent of consumption comes from hard liquor, though," Kumar said.

Talking further about the ironical situation faced by the industry, he said, "Beer in India is costlier than spirits. The bulk content or the volume is taxed, rather than beverages with higher alcoholic content."

"It's like 'Robinhood-isation' in taxation - rob the rich who drink beer and compensate the guy who drinks 'tharra' (country liquor)," Bijoor said, while commenting on the disparity in taxation.

Emphasising further on the lopsided taxes, Kumar said, "Even if beer was sold at parity with the tax levied on other spirits, the cost of a bottle will come down to Rs 40-45 from the present Rs 80."

India is the only country having a segment called strong beer. Globally, beer is taken to be closer to soft drinks and is used more for refreshment. Beer in India has 7-8 per cent alcoholic content, whereas it is 3.5-4 per cent elsewhere.

Talking about the roadblocks faced by the alcoholic beverages category in branding and marketing, brand expert Harish Bijoor suggested that industry players find it difficult to take firm positioning stances because the liquor industry is a socially ostracised category. "Never mind whether your product has 3.6 per cent alcohol or 2.1 per cent, it will be equally difficult for you to promote yourself."

Throwing light on other issues ailing marketing and advertising by the industry, he said that since the category has illegal connotations and gender issues, it cannot be spoken about or advertised openly.

There was a general consensus among the panellists on the opportunity for the industry to improve its prospects. "Weaning away consumers from high alcohol content to beer can work well," Bijoor said.

Commenting on the lack of advertising and marketing opportunities, Verma of Maxus said that a lot more can be done. "One needs to think inside out while marketing for this category, starting from the bottle and the packaging to the in-store promotions. Association with movies can be used effectively; the digital domain can come handy for marketing," she said.

"A lot can be learnt from the retail industry in terms of marketing and advertising. Segmentation can help, especially in India. For example, if chips is a category globally, Kurkure was made in India," she said, commenting on the customised marketing techniques.

Agreeing with Verma, Kumar cited the example of how coffee drinking became famous and fashionable, thanks to brands such as Café Coffee Day and Barista.

Beer, he said, needs be marketed as a drink that can be had during any part of the day. "People should drink not to get drunk, but to enjoy the drink. An environment needs to be created to this effect," he opined.

"India is probably the only country where breweries don't have pubs. One can just have tasting rooms."

Referring to the lack of quality places where drinking alcohol could be turned into an experience, Kumar said that since licenses to sell alcohol are renewed annually, very few people get seriously interested. He suggested that the licenses should be issued for at least three years, extending to perpetuity unless other reasons are found.

Kumar added that forward integration, such as associations with sports and sports/gaming parlours to drive sales can work. States such as Haryana and Karnataka have started making progress in permitting company-owned outlets. "We want to make drinking beer an experience. Micro-breweries, where tasting sessions also happen, are coming up in Karnataka now," he said.

Talking about the perceptions linked with drinking beer, the panel members discussed how beer is the first drink. "Across all age groups, beer is for testing waters - it's a stepping stone to another destination - whisky," Kumar said.

Beer as a category has seen hardly innovation in the last couple of centuries, Kumar said. "It's like classical music - there is very little innovation happening globally." Other panel members also agreed that it was high time manufacturers thought innovatively. As his concluding remark, Bijoor urged companies making alcoholic beverages to think differently. "Don't get stuck in the rut, move out and experiment. See if it works," he suggested.

(Held in Bengaluru on December 22, the Round Table Conference on the challenges in the liquor industry was sponsored by STAR News)