As India unlocks, will people step out for a drink, or stay home and order alcohol from Swiggy/Zomato, apps like Living Liquidz, or the wine shop itself?
The bottle of wine has found its way from an expensive restaurant to the personal kitchen cabinet, and ladies night is now happening over a Zoom call. The Coronavirus pandemic has, indeed, changed the way we consume alcohol, in more ways than one.
During Coronavirus-induced lockdown, liquor stores were deemed as a non-essential service and remained shut from March to May 2020. As India enters Unlock 5.0, bars and restaurants have reopened. The consumers now have the option to go sit down at their favourite restopub and enjoy a chilled one with a friend.
In this situation, the competition between different distribution channels, when it comes to alcohol consumption, takes on an interesting dimension. We have players like Swiggy and Zomato that have recently entered the alcohol home delivery space.
We also have independent players like Living Liquidz, HipBar and others - businesses that specialise in home delivering of alcohol, sourced from local wine shops. The customers can also opt to take matters into their own hands, by calling up the wine shops and asking an employee to make the delivery (on an unofficial note, of course).
Samar Singh Sheikhawat, a business consultant and former CMO of United Breweries (where he spent nearly nine years), points out that beer season in India is all but over, and now is the time for the spirits season (whiskey, brandy, etc.).
He adds that it’s possible that spirits will see a rise in consumption in colder places, but opines that delivery will contribute a small part to the bottom line of companies, which have faced mammoth losses this quarter.
“Even if you look at the quarterly results of United Breweries, you will see that there is a 40-50 per cent decline in volumes, and 97 per cent decline in net profit. It means there are now four quarters in a row in which there was a decline. The largest volume of alcohol consumption in the country happens in an out-of-home setting, irrespective of whether it is beer or spirits.”
He stresses that home delivery represents a very small part of the consumption, even with food and groceries. At best, it represents seven per cent of the consumption, even for essential items. Home delivery of liquor does not even amount to one per cent of consumption in the industry, he says.
Sheikhawat has worked with some well-known firms, including Cadbury, PepsiCo and Dabur. He explains that there are two types of consumption of alcohol – on-premise and off-premise. On-premise consumption includes restaurants, bars, pubs and other locations where one can have a drink.
Off-premise consumption means a person buys the product and consumes it at home or elsewhere. Sheikhawat mentions that the reality of India is that even in an off-premise situation, people consume it behind the store in their cars or at other locations and not necessarily at a household setting, as it is still looked down upon in the country.
Vineet Agrawal, marketing and commercial director, India Area, Brown-Forman, agrees that the on-premise channel has always been a very important contributor to the company.
“Though this channel has faced a severe setback and disruption in the last eight months, we expect it to start picking up as lockdowns have been removed and outlets are taking appropriate safety measures. However, it might still take some time for this business to get to the pre-pandemic levels.”
Brown-Forman is a company that owns brands like Jack Daniel's whiskey and Old Forester Bourbon. During the pre-pandemic period, the two primary channels through which Jack Daniel’s used to make its brands available to its consumers were off-premise, or the retail stores, and on-premise, like pubs, bars, clubs and restaurants.
Agrawal adds that the on-premise channel also plays an important role in recruiting new consumers for Jack Daniel’s and helps the brand interact with them in a relaxed environment and deliver in-person experiences. It is also a channel that allows consumers to experiment with cocktails and experience the craft of mixologists behind the bar.
He admits that off-premise consumption has emerged as the key channel this year as people are still not very comfortable to step out to visit the on-premise stores. And understandably, footfalls are still significantly lower than last year in this channel.
Agrawal acknowledges that e-commerce and online aggregators form a small channel, but hold promise. He explains that these platforms help in maintaining physical distancing and managing crowds in stores, which is important during the ongoing COVID pandemic.
A trend the company observed is that Indian consumers continue to aspire for premium brands. During uncertain times, like the ones we are living in currently, they tend to gravitate towards trusted brands.
He adds that it comes with its fair share of challenges, including the nature of glass packaging, which is fragile, and ensuring strict adherence to legal drinking age guidelines.
“However, the platforms have demonstrated great agility and collaboration to find solutions to these challenges by coming up with tamper-proof safe packaging and tech solutions for age verification,” he adds.
However, Agrawal agrees that even with e-commerce and online delivery being allowed in some states in India, the off-premise channel will continue to stay relevant as the aggregators also procure liquor from these wine shops.
“Local wine shops play a very important role as liquor can only be billed through outlets licensed to sell alcohol. Their role and contribution have further increased with most of the consumption shifting to in-home. Purchases at local wine shops also help consumers to touch, feel and physically experience the brands before they make the choice of what to purchase,” says Agrawal.
We reached out to a Swiggy spokesperson, who informed us that the company ventured into home delivery of alcohol in Jharkhand, Odisha and West Bengal through a ‘Wine Shops’ category.
“Prioritising safe alcohol delivery with cashless and no-contact delivery options, Swiggy leveraged its existing technology and logistics infrastructure to ensure consumers could stay safe and maintain social distance,” said the spokesperson in a statement.
The statement added that even now, with movement restrictions easing up, Swiggy is catering to 98-99 per cent audeinces for alcohol home delivery in 24 cities it is present in. To ensure safe alcohol deliveries, Swiggy has partnered with HyperVerge to enable AI-face recognition for mandatory age verification and user authentication.
Customers need to complete a one-time instant age verification by uploading a picture of their valid government ID, followed by a selfie, which the platform will use for authentication. All orders will carry a unique OTP, which needs to be provided by the customer at the time of delivery. The AI-based verification has very stringent guardrails and there have been zero reported instances of any underage ordering through Swiggy.
At the core of it, he explains, a wine shop also needs permission to deliver the goods so a lot of these deliveries are illegal, on paper. However, nobody complains because the wine shop is getting sales and the consumer is getting delivery at the convenience of his home.
Sheikhawat mentions that in the peak beer season and in lockdown, people ran out of stock in their homes as one went into lockdown with a two-day warning.
He explains that a liquor retailer will not prefer to provide home delivery as he can’t charge a delivery fee, like a Swiggy or Zomato can. However, right now, stores are open so a customer would not prefer to pay extra for a delivery fee.
"The customers are also calling up the shop specifying the order and they are going to the premise to collect it. While collecting, they wear the mask, have the items placed in the boot of the car and make the payment accordingly. Even in this situation, we have found a way to make the delivery contactless. This falls perfectly in between the customer going to the store to pick up the item and the shop making a home delivery,” says Sheikawat.
Anupam Bokey, chief marketing officer, ABD (Allied Blenders & Distillers), has a different point of view about on-premise consumption. He explains that the company (which makes products like Sterling Reserve whiskey, Officer’s Choice rum and Kyron brandy) was not affected by the loss of on-premise consumption during lockdown months.
“Whatever off-premise consumption was there before has gone up because we don’t have an opportunity to socialise on-premise now. We also saw people upgrading to larger packs when they did buy from stores in a bid to reduce store visits. This was a compensation of sorts to companies, but yes, on-premise consumption is still low,” says Bokey.
He says that the company has seen on-premise occasions open up in Delhi and Gurugram. In large consumption markets, it has opened up quite well. Anecdotally, people have reported that 50-60 per cent consumption levels are there on key celebration days.
Bokey tells us that e-commerce participation will enable consumers to access the category more easily, and ease restrictions on physical stores in a big way. But first of all, one needs to observe if there is adoption in the category. He adds that this year during Diwali, demand was quite muted in the category. Festive season normally sees huge levels of pickup in the category, but that wasn’t the case this year.
He adds that although e-commerce companies like Swiggy, HipBar and BigBasket can deliver, there’s no means of promotions or communicating this new channel. “It’s still early days. We don’t have too much data on this, but as far as we can see, Swiggy in West Bengal has been seeing a good response from the consumers,” he signs off.