It was about two years back, when the Indian government, seeing that sale of liquor had gone up appreciably, and observing a new trend in liquor consumption, allowed liquor to be sold through modern retail stores. This presented a golden opportunity for both retailers, liquor manufacturers and distributors to cull out new avenues for retailing.
Setting a precedent, Globus Wines, a Mumbai based winemaker, entered a strategic tie-up with retail chain Star Bazaar, and opened its first shop at Star Bazaar in Dahisar, Mumbai in 2007. Spread across 300sqft, the outlet stocks almost all major wine and beer brands in the country, including its in-house Miazma brand. Mumbai-based Living Liquids India Pvt Ltd retails over 1,000 different types of liquor brands and more than 300 wine labels covering every region of the world. It opened its first 400 sqft store within Spencer`s at Mumbai`s Inorbit mall in 2007. The tie-up with Spencer`s has now ended but the company has its own Wine `n` Beer sections at several hypermarkets. It is now present throughout the country through a chain of Living Liquidz boutiques following its tie up with Hyper City, Foodland Fresh, Bharti Walmart, Wadhawan Retail Spinach, Tata Star Bazaar and Aditya Birla More. With floor space ranging from 180sqft to 2,000sqft at prime locations within supermarkets, Living Liquidz has 11 eponymous shops and 23 stand-alone shops in Maharashtra alone. The Living Liquidz store at Tata Star Bazaar stocks more than 500 different types of liquor brands, and also offers customers wine tasting of Indian and international brands at its Wine Bar `n` Café, and conducts wine training and bartending workshops.
Indian modern retail is witnessing a great camaraderie between winemakers and retailers, and industry experts are of the view that very soon liquor products will be one of the fastest moving category in modern retail. Comments Mohit Kampani, Chief Merchandising at Spencer’s Retail Ltd, “Alcohol and wines complement our food and grocery assortment, and hence, is a vital part of our offerings to the customers. Moreover, with our focus on fine foods, the presence of wines and spirits is that much more relevant.” Says Sumedh Singh Mandla, CEO (Wines Division), Aspri Spirits, "In times to come, modern retail will drive the sales growth for imported liquor products in India. The phenomenon is very common across Europe and in several other countries. Unlike India, the retail segment there is bigger than the `on premise segment (that is, hotels and restaurants)."
Ushering a new era Generally, a store could only sell alcoholic beverages within a reservation, and provided the particular state`s law would allow it. Under this arrangement, a wine shop owner had to pay a certain amount as excise duty to the Government. There are different licence arrangements for selling liquor-based products like low alcoholic beverages (LAB), beer and wine, and there are hard liquor licences for whiskey and rum. The categories of licences vary from state to state as liquor comes under the jurisdiction and supervision of the state government.
But India`s liquor market is experiencing a more trade-friendly atmosphere ever since some states have liberalised their alcohol retailing laws, and allowed many supermarkets to stock spirits. For instance, the Delhi government has allowed private stores selling fruit, vegetables and groceries to retail wine, and ready-to-drink liquor like breezer and beer at supermarkets and convenience stores such as 24x7. Alcohol products are also available at the Indian Oil promoted convenience stores, at In&Out outlets and at Future Group`s Food Bazaar where the wine counter is operated by Sula Wines at some of its outlets. Diageo had tied up with Reliance Retail to sell its wines, and as already mentioned, Star Bazaar has an arrangement with Globus Wines.
Karnataka too has taken a significant step by issuing the country’s first ever wine policy that allows sale of liquor in marts and malls. Haryana and Maharashtra also permit supermarkets to retail wine, in fact, the latter state even facilitates grape growing and wineries as an important sector of agriculture. All of this is giving a big boost to wine sales and increasing its visibility and acceptance in the country. “Since wines are categorized under alcohol, starting a retail business in this category can be tedious and cumbersome. Retailers must be prepared to go through a legal process if they want to sell wine in their stores. Getting a license alone can cost them up to Rs 1 crore. Also, since a major part of the distribution network is controlled by government agencies, control over supply remains in their hands,” says Kampani as he gives a brief insight into the various legalities involved in getting liquor retailing certificate for a supermarket.
He elaborates,“Some of the fundamental legal formalities involved in liquor retailing liquor include completing all paperwork required by the state excise department under the Ministry of Excise; choosing what kind of store one wants to set up (whether franchise, self-owned or shop in shop); acquiring a list of licensed liquor suppliers; and setting up legal measures for the store as directed by the particular state`s excise law. Retailers need to understand the state laws, city laws and the restrictions, not to mention the zoning laws in the vicinity. For instance, the liquor store should be situated 100 to 300 metres away from any educational institution, place of worship or hospital.”
He adds, “Different states have different restrictions for selling liquor in Modern Trade and General Trade stores (what to sell and what not to sell). Non-compliance is treated as a criminal offence. In most of the states, the alcohol industry has a three-tiered distribution system. The beer, wine and liquor manufacturers sell their products to a distributor who in turns sells them to the retailer. Since many of the control states do not have a distributor acting as a middleman; the manufacturers sell directly to the State Alcoholic Beverage Corporation, which acts as the distributor. Some regions like Gurgaon have a four-tiered distribution system where the manufacturer sells to a distributor that sells to a larger retailer, which in turn sells to a Modern Trade Retailer.”
“Excise policy is a state subject and the policy vastly differs by state. We would like to see LAB licences being made available more easily since they are extremely difficult to obtain,” says Kampani. Mandal feels that having more rational duty structures at both the centre and state level; easy, low cost and convenient policies; and creating awareness and educating customers with workshops and wine tasting sessions, will help in increasing sales of liquor.
Creating consumer experienceTrends that are driving consumption of alchohol and wine drinking in India can be attributed to increasing disposable incomes, more westernised lifestyles, growing number of expatriates, perception of wine as upmarket, sophisticated and fashionable, increasing awareness of the health benefits of wine, and the possibility of growing vineyards and setting up wineries.
Wine is the preferred drink in several countries as it is seen as more healthy than many of the synthetic drinks. It contains only 10 percent alcohol, is a light drink, and is not as intoxicating as alcohol. Soaring deamnd for it is seeing both national and international brands foraying into this category. As consumtion of wine and liquor becomes more socially accepted, more and more people are embracing these products, and are not averse to including them in their grocery shopping list. Potential buyers are being helped along by retailers who are creating an environment where product awareness is facilitated in an interactive way, and designed to encourage customer to try out the alcohol products.
The changing profile of the drinker (youth and women are now included) is also prompting retailers, especially of supermarkts and convenience stores, to provide the best environment for them. Godrej Nature`s Basket, is one such gourmet retailer chain, which is reaping the benefits from the increasing consumption of wine in the country. It stocks the widest range of domestic and international wines, and frequently conducts wine tasting and appreciation sessions at its stores that are located in upscale localities. Even wine makers and distributors are leveraging their brands on the health factor. Since TV endorsements of liquor products are banned, but in-store advertisements are helping liquor companies in creating brand awareness. Says Kampani, “Sale of alcohol is assisted in nature, whereas food and grocery is not. Since Indian consumers are still experimenting with different brands and flavours, we provide wine advisory services in select stores. And while marketing spirits in India is governed by state laws, which generally prohibit promotion of alcohol, we comply with the norms and rely on our assortment width, preservations and presentations to promote sales.”
Getting the format rightWith standalone wine shops getting jazzed up and adding an element of spunk to their interiors, these outlets are actually gearing up to compete with the shop-in-shop formats in the supermarkets. With their trained staff and an air of exclusivity, they provide the desired ambiance and comfort for the shopper to examine, taste and buy the products. Diageo, the world`s largest spirits manufacturer, is in sync with the needs of Indian consumers. The company`s Johnnie Walker Select slick outlets are designed to resemble a
bar. Prominent retail display at each of these stores are devoted to Diageo`s premium brands, but brands of other companies are also sold here. An interactive kiosk guides consumers through mixers and cocktail recipes, and value-added services such as valet parking, gift wrapping, etc, make ther shopping experience even better.
The multi-brand Spiritz & More experience store in Bangalore is an upgraded version of Wine Supply Depot, one of the oldest spirits retail stores in the city. An initiative of United Spirits Ltd, it was opened with the aim of of reaching out to the elite class of consumers and enhancing their liquor buying experience. Said, Vijay K Rekhi President and MD of the company during its opening, “Spirits consumption in India has gone through a radical change with the upwardly mobile, globally exposed customers wanting to buy their spirits at internationally accepted retail formats. If wine drinking has to be encouraged, retailers need to create an environment where consumers can view different brands, taste them and experience them at leisure. Spiritz & More is an endeavor to leverage the demand for our premium spirits where browsing and assisted choices are key consumer requirements. As part of our overall distribution strategy, we are planning to partner with several other traditional spirits stores in Bangalore, and introduce them to the advantages of staying connected with the consumers through modern retailing.” Spiritz & More currently has 12 outlets in the city with plans to re-brand another 16 outlets in 11 cities by 2011.
While some liquor companies bet on standalone or exclusive stores for retailing, Aspri Spirits Pvt Ltd, a sales, marketing and distribution company, feels that shop-in-shop is a better and safer retailing format, plus the investment required is much lower. “Shop-in-Shop is potentious for retailing liquor because it is more convenient and also a great platform to organize consumer interaction and tasting during new product launches,” says Mandla of Aspri Spirits. “The company works with major retail chains such as Spencer`s, Hypercity, Metro Cash & Carry, Spar, Reliance Retail and Godrej Nature`s Basket. Currently, it is distributing wines, spirits and beer of about 42 leading global brands sourced from 18 countries, in India, and has plans to add seven more brands this fiscal.
The investment involved in opening SIS and standalone stores also differs, that is why both of these formats come with their own pros and cons. The capital expenditure for setting up a liquor store depends on the size (per square feet area). The license fee varies from one state to another, and is also different for general/standalone stores and for shop in shops,” informs Kampani.
Lessons from the WestIn the USA and the UK, alcohol products sell really well in supermarkets. Although consumption is catching up in India, retailers need to learn and imbibe certain retailing tactics from their western counterparts to make alcohol products more attractive to the consumers. Agrees Kampani at Spencer`s, “Better displays and storage in in-built chillers and beer rooms within the store have changed the face of liquor retail abroad. But this is hugely capital intensive, and the concept is yet to be introduced in India. However, we have imbibed a few lessons from liquour sellers abroad. Some of them tell us that though consumers enjoy shopping for wines and spirits, they don’t necessarily consider themselves proficient at selecting the right stuff. This has made us realize that a store`s layout should have enough space to encourage consumers to browse, preferably aided by a knowledgeable salesperson, who can provide the relevant information on the different brands, their flavors, ingredients, country of origin, right food pairings, etc, so that the shopper can buy with confidence.”
He adds, “Some of the product information can also be tagged at strategic touchpoints on the customer’s shopping journey within the store. Detailed product information on display shelves, especially for wines, and in-store media, will further encourage exploration and learning. The whole idea is to have shoppers leaving the store inspired, informed, surprised and eager to return.”
Opportunities galoreToday, alcohol and beer drinking is becoming socially accepted in India, especially in the metros, where it is a common sight to see the urbane youth, including women, drinking in pubs. According to a study, the past decade has seen a significant increase in consumption of alcohol. Sale of alcoholic beverages is growing by about 20 percent annually. Indian liquor brands have also registered significant growth in recent times as more and more liquor companies are venturing into the business.
With changing lifestyles, growing awareness of wine and alcohol-based beverages, and the increasing availability and convenience for shoppers to buy them from food and grocery outlets, the alcohol aisle in supermarkets is set to grow bigger and better. According to Kampani, alcohol based products are one of their most profitable categories on a per/sqft basis as they contribute about 2.5 percent to the total bill value. “Our shoppers consider the spirits assortment very much a part of their grocery shopping. The largest seller is wine, followed by beer and then spirits. Liquor retailing through modern retail format has great potential for all these reasons: convenience, quality and education.”
Retailers catering to an upmarket clientele, or modern standalone stores located in premium localities, are reacting to the changing environment by upgrading their stores with an ambiance that offsets this exclusive product category. They are providing value added services to enhance the shopping experience, upgrading their branding and product displays, and creating better operational efficiencies to capture a strong customer base. Systematic displays indicate that these retailers are positioning their wine and alchohol as a serious category to lure discerning customers. Displays, especially of wine, according to its flavour (dry, sweet, colour); its country of origin (France, New Zealand, USA, Spain, India, etc); or region-wise (Nagpur, Pune, Himachal, etc); or, according to the pricing (ranging from Rs 400 up to Rs 1lakh) makes the selection process easier andeducative at the same time.