January 2011 - Posts
After a total sale of 40 million cases of IMFL between 2009-2010, the Andhra Pradesh Beverages Corporation Limited (APBCL) is expecting a growth of 10 per cent in volume in the coming financial year.
This is in keeping with the sales over the last three years which have been increasing consistently. Since April 2010 the monthy sales have fluctuated, with the highest sale months being July and August (refer to table). Last year (2009-2010) the total sales of the AP Beer market decreased to approximately 24.9 cases from 29.2 million cases in the previous year (2008-2009), however an estimate of the monthy sales this year show an increase from 2 million (2009- 2010) to 2.5 million (2010-2011).
AP Beverages Corporation Limited (APBCL) is the sole wholesale distributor of Indian made foreign liquor (IMFL) and other alcoholic drinks in the state of Andhra Pradesh. Formed in 1986 with the objective of providing pure, clean and hygienically packed arrack, the Corporation also has the functions of setting up Arrack Bottling units for carrying arrack operations and controlling the IMFL Depots located in the state.
The Corporation invites tenders from manufacturers all over the country by issuing an open tender notification in the press for supply of IMFL and Beer on Rate Contract basis. The Government constitutes a Subcommittee consisting of very senior officers of the Govt. for conducting negotiations and finalising the tenders. The southern states of Karnataka, Tamil Nadu and Kerala have also adopted this method.
To many the presence of a Corporation supervising the alcohol industry seems more like monopolization and they prefer the free market but as Kariakal Valaven, Managing Director, APBCL informed, “This is almost like a free market. There is no manipulation. Though we call for a tender, brands can always supply here. The only difference is the price fixation which is decided by a committee and the MRP is regulated keeping in mind the market forces as well as the consumer. This corporation system ensures that the alcohol market is more organised. As a result of this structure every drop of consumption can be recorded and accounted for. ” The Corporation also believes that the presence of such a system protects the consumers from the harm that is caused by spurious liquor by controlling illicit distillation. Under their purview the liquor is first chemically tested and only later released. Thus the high quality of the liquor is being maintained. At the same time the price fixation, due to the tax structure ensures that the end consumer price is still high enough to prevent them from consuming more. An additional responsibility of the Corporation is to oversee all violations and unauthorised sales which are checked by the enforcement department.The state of AP has the largest number of distilleries in India totaling 32 and 9 breweries. And though it has been a slow one there has definitely been a growth/expansion of distilleries and breweries in the state. In the last three years there have been 3-4 new distilleries (bottling units), one of which is likely to start operations by the end of October. Alcohol is sold through 6500 retail outlets and 1500 bars in AP.
In the AP market there is no restriction on the number of brands that are allowed into the market in the mid and premium segments but only 15 brands are allowed in the lower segment. Reports suggest that in a price-wise segmentation of brands (MRP for a quarter) the following brands have the highest
Upto `. 59:
Bagpiper No. 1
Upto `. 70:
Mc Dowell’s Brandy
Upto `. 88:
Mc Dowell’s No. 1
Classic Blend Whisky
Seagram’s Imperial Blue
Upto `. 100:
Seagram’s Royal Stag
In the higher segments Seagram’s Blenders Pride, Seagram’s
100 Pipers and Teacher’s are the most prominent brands.
Speaking about the trends in the alcohol consumption in AP, Valaven said that as with most other markets, the AP market too has recorded a considerable increase in the medium and premium segment as compared to the lower segment (as is evident in the report). According to him this has been the status over the last three years and is a result of the greater money circulation that there is today, amongst the middle class in society. Additionally there are a lot of new brands in both these segments and the price difference between the medium and the lower segment brands is not much.
Paradise for Tipplers, Hell for its Victims!
Lights, Camera, Action! Visualise this scene from a 70’s Bollywood movie: a scared waiter brings orangecoloured liquor in transparent bottles and serves them. You got it right: country liquor! Such country liquor bars, frequented by many in the island city Mumbai till recently, are on the wane. A report.
Not only the changing skyline, but also the changing lifestyle and habits of people are causing the slump in country liquor sales in the island city. The demographic profile of the area has seen a sea change in the past few years.
Currently, there are around 350 country liquor shops in the island city. According to the excise department official, the department has not issued any new license for starting new country liquor bars since 1973. As of now there are only 1,500 licensed bars operational in the state. In a move that is sure to raise eyebrows, the Maharashtra state excise department has come up with a proposal where restaurants, pubs and bars in the state holding an FL-III license (required to sell alcohol) can sell country liquor.
The bizarre bid is yet another attempt to boost the state's revenue. Though the proposal mentions that country liquor can only be sold and not served at these pubs and bars, government officials fear that the norm will be violated.
According to the source in the excise department, they have been given an annual target of ` 6,000 crore. "To meet the target set by the state government, the department is seeking various options to boost sale of country liquor and Indian Made Foreign Liquor (IMFL), which are most popular among tipplers in the state," said the official.
The excise revenue in the state has been steadily increasing from ` 825 crore in the year 1993-1994 to ` 3930 crore in the year 2007-2008. In the year 2007-08, revenue incurred from country liquor duty was ` 1,192 crore, and IMFL was Rs 1,636, according to figures available with the state excise department. In the year 2009-10, the revenue earned was approximately ` 4,000 crore.
Country liquor, the cheapest form of alcoholic beverages, could soon give consumers a different kind of kick with the (BIS) Bureau of Indian Standards setting fresh manufacturing norms for country liquor.
India’s country liquor market, a commoditised and often chaotic business, is estimated at ` 25,000 crore, with annualiaed volume sales of over 220 million cases. At one point, the country liquor market was projected at 2.5 times that of the more visible and heavily branded Indian Made Foreign Liquor (IMFL) industry, but has been yielding ground to the latter rapidly in recent years with various state governments banning the country liquor for garnering higher revenue from that of IMFL.
In context, it must be mentioned that IMFL sales is growing at around 10 per cent annually. Country liquor, however, has remained almost stagnant in absolute size as consumers upgrade to IMFL on the back of economic expansion, and with more states banning the segment citing social risk. The BIS Standards exist for all other categories of spirits. The standard characteristics of country liquor vary with the States, with its alcohol strength in Maharashtra at 42.8% like IMFL, but 36% in Uttar Pradesh where the purchasing power of the mass consumer is believed to be lower.
The Country Liquor to add spice to kick uses flavours - like the “masala” flavor or the “mango tango” flavour that are quite popular in Uttar Pradesh and Maharashtra. Several big markets, especially those down south, have banned country liquor immensely benefiting the IMFL sales.
Country liquor was wiped out of the southern markets when Karnataka became the last state to ban it a couple of years ago. However, country liquor continues to go strong in northern States like Uttar Pradesh, Haryana and Punjab, while Maharashtra is one of the bigger States in the west. Country liquor is essentially made of rectified spirit (RS) which flows from fermenting and rectification of molasses.
It may not undergo certainly multiple distillations as in the case of IMFL, leaving it with a higher content of untreated or low quality alcohol.
Country liquor is mostly retailed in 750 ml and 180 ml packs, but heavily skewed in favour of the latter. Maharashtra and Uttar Pradesh are the biggest country liquor markets in India.
The Haryana government has decided not to increase excise duty on country liquor and India-made foreign spirit and has also kept the maximum number of retail outlets at the same level as in the current year.
The government expects to collect ` 2,200-crore revenue from excise in 2010-11 as against anticipated collection of ` 2,000 crore in the current financial year. As outlined in the current year’s policy, the government has decided to renew the vends of both country liquor and India-made foreign liquor at a reasonable increase of 10 per cent and 5 per cent (except L-2 vends of Gurgaon, Faridabad, Palwal, Mewat, Rewari and Narnaul, which would be renewed at an increase of 8 per cent), respectively. The move is expected to bring stability in retail trade. Those vends where license cannot be renewed due to any reason, would be allotted by inviting sealed tenders.
A new provision of permitting transfer of license has been introduced in the policy. During the next financial year, licensees whose licenses have been renewed during the current year, will be allowed to transfer the vends if they wish to do it due to any unforeseen exigencies.
The government has further decided to grant wholesale licence of IMFL (L-1) to those retail licensees who have contributed maximum revenue or a particular district in terms of license fee of L-2 vends. The step is expected to ensure better liaison between the wholesale and retail trade.
With a view to devolve more resources to the municipal committees and Panchayati Raj institutions of the state, the government has taken a decision to increase their share from ` 2, ` 3, and ` 1 per bottle in case of country liquor, India-made foreign liquor and beer to ` 3, ` 5 and ` 2 per bottle, respectively. It has also been decided to provide ` 10 crore for encouraging barley cultivation amongst the farmers of Haryana.
Gurgaon - The millennium city is guzzling alcohol like never before. Records provided by the excise department revealed that the city sold liquor worth ` 295.23 crore during 2009-2010.
In 2008-09, liquor worth ` 165.22 crore was sold. The figure rose by ` 130 crore this year, which is an all-time high for the city. The city reported a jump of 36% in sale of country liquor.
Interestingly, consumption of liquor tripled in February this year compared to the corresponding period last year.
People bought liquor worth Rs 1,489 lakh this February, while last year sales in the corresponding period were ` 572 lakh. Meanwhile, the department earned ` 226.4 crore from the opening of tenders for liquor vends. The revenue in terms of license fee came after tenders were openedfor 98 Indian Made Foreign Liquor (IMFL)and 48 country liquor vends.
This year, the Haryana governmenthas decided not to increase the rate ofexcise duty on country liquor and IndianMade foreign liquor and has also kept the maximum number of retail outlets at the same level as in the current year.
The government expects to collect excise revenue of ` 2,200 crore in 2010-11. New Delhi in an apparent bid to prevent deaths caused by hooch has decided to supply country liquor across the city from next year on its own. Finance Minister, Govt. of Delhi, Dr A K Walia had recently visited a plant in Puduchery, where they have been bottling country liquor for some months. This step is a part of the series of measures taken by the government after last year’s hooch tragedy in which over a dozen people lost their lives in West Delhi.
The move will ensure that Delhi only gets wholesale supply of country liquor which then will be bottled by government and sent to the retail vends. The government will now allow the sale of country liquor only of a specific quality.
At present, country liquor is made out of rectified spirit, and the government will make country liquor based on extra neutral alcohol, a more purified version. The strength of country liquor will be retained at 28.5 per cent, much lower than IMFL which is 42.8 per cent.
As much as 45 lakh litres of country liquor is consumed every month in Delhi. The government has registered around 35 per cent growth in the sale of country liquor over the previous year.
The plan, however, is in a very nascent stage. The government needs to identify several things, like who will set up and manage the bottling unit, should they assign it to one of the corporations or do open new corporations for the purpose. Also, have to see where to set up the plant.
The Delhi government, however, will also need to get approval from the DDA as under the master plan no liquor industry is allowed in the Capital.
- Dr. Mohan Krishna
While the Indian wine industry may be in a crisis, there are hints of strong support from the Ministry of Food Processing. In an interview with Ambrosia, Ashok Sinha, Secretary, Ministry of Food Processing underlines some of the change likely to take place.
Until a year-and-a-half ago the Indian wine industry was growing at CAGR of 25 per cent, but recessionary trends, the Mumbai attacks and government taxes have dampened the market. During the boom time market expectations were high leading to over-production, and little focus on quality A poor monsoon in 2009 added to the woes resulting in unsold stocks lying in tanks, and wineries like Chateau Indage shutting down. Says Ashok Sinha, Secretary, Ministry of Food Processing Industries, Govt. of India, industry is learning its lesson after a bad year with a few bumpy rides and unpleasant experiences. Now he seems to be determined to create a positive image for the industry.
The government is urging the sector to recognise that the industry is going through a business cycle typical of any perishable goods sector. Instead of going under, we can learn from this phase. Such crises ultimately bring balance and correct the production base and market, he points out. The Indian wine industry, represented by 69 wineries at present, has the potential to bounce back and move forward to greater glories, picking up from its 25% CAGR a year-and-a-half ago.
One of the first steps to build Brand India the, food processing industry had initiated the creation of The Grape Processing Board. The decision to form IGPB was a result of that thought process to take complete care of the processing of grape juice. “Rather than calling this ‘wine board’ we choose to call it the ‘Grape Processing Board’ with an intention to have a fine balance between the prohibition laws and the industry needs.”
‘Brand India’ is a collective effort of the ministry and the board to give a new direction to the wine industry. Following the path of other new world wines like Australia, South Africa, Chile and others, India could achieve a position in the world wine map, he adds.
Currently, annual grape production in the country is estimated to be 1.8m metric tonnes from an area under cultivation of about 80,000 hectares. This has increased from around 60,000 hectares in 2006-07. It is also estimated that 1.4 m cases were sold last year, of which around 20 per cent is imported.
The industry that was fighting with quality standard issues, erratic and unfair taxation on wine products that vary from state to state and lack of proper labeling guidelines can now expect to see change.
Many would like to see India grow as a wine producing country and hold its own among the best in the world. According to the grape board, by the year 2020 India has the potential to become a world player in wine. While many Indian wines are of good quality there are many bad ones too. Market sources reckon that pricing and lack of consistent quality have sullied the image of the Indian wine brand. Most wines are priced anywhere from ` 200 per bottle to ` 1,500. Lower prices would help grow the market.
Sinha suggests, anything that discourages people from drinking hard liquor is a healthy alternative. Wine stands a better chance. The Grape processing board is working on a long term policy which also involves the responsibility of popularising wine drinking vis-a-vis hard liquor in the country. Wherever the industry needs government support and intervention, we are there to help, he adds.
The Grape Processing Board is yet to formulate new ideas and present it to the Ministry. Of late, ‘Brand India’ has shown its presence in many international exhibitions. Though the process has been slow, it is definitely working in favour of the industry. More and more international promotions are being worked out by the ministry.
However, some obstructions are bound to come in the growth path. Talking about the glut in the industry, he says, when the industry started producing wines, it had a few good years in the beginning. With lot of enthusiasm and optimism many new players jumped into the business and without proper thinking started expanding.
In any case, the balance between production and consumption has always been tricky. Many a times, production exceeds demand. To my understanding that’s what happened with the wine industry says Sinha.
Expansion beyond capacity without raising proper working capital worked against some players. Many companies have learnt their lessons and now they have to work towards changing the thinking of the bankers. As the banker perceive, it is not an industry where you can see grapes being grown and processed and wine coming out in a year’s time. However, this gap between production and marketing resulting into profit at a later date has to be appreciated by the bankers. It is as important for the banks to offer bigger duration working capitals as for the wine producers to save for a rainy day.
Re f e r r i n g to the bad year that the industry saw recently, he says, “We were never ready for this. After having 7-10 good years, one bad year should not put us down like this. Whatever margin came either went into increasing production or capacity building rather than saving for bad times. However, I must appreciate that the support from the ministry and NABARD has been tremendous.
They are working on proper suitable policy changes and trying to absorb this loss.”
But the wine makers also have to become astute. It is not the first time that something like this is developing in our country. There are enough examples in front of us. The wine makers as well as the government and financial institutions should learn from other new world wine producing countries. It is a complex structure but not difficult.
Adding to the glut issue was the fall in consumption. When it comes to consumption of wine, incidents like terror attacks on hotels may upset the whole economics of trade; however, we need to prepare ourselves for such unforeseen contingencies. When demand came down, the hotels did not know how to handle the surplus stock.
Though the industry has government support, it needs to fight for itself at times. There has to be an insurance element to this. This sector needs insurance more than anyone else and no one ever thought about it, he adds.
The Grape Processing Board is thinking of various innovative ideas to help the industry. And I am positive that within a year or two we will come out of this glut.
Despite the current setbacks, it is expected that wine production may increase to 4m cases by 2015. As far as the consumption patterns are concerned, per capita annual consumption in India is a paltry 9ml of wine, compared to 9,000ml consumed in the US.
According to Vinexpo statistics, India has become the 10th largest growth nation for wine consumption, in value and volume terms, for the period 2009-13. According to the Vinexpo/IWSR 2010 study, there would be an increase of 1.475m nine-litre cases in Indian wine drinking up to 2013.
There is optimism when Sinha talks about the future of the wine industry. Preservation for a long time to get matured wines, quality control measures and limited number of marketing agencies is going to be the name of the game. And every player is gearing up for it.
A well formulated policy which will involve promotion, working in tandem with the states to create suitable environment for the growth of the wine industry and encouraging wine consumption within the permissible limits of the prohibition laws are the need of the hour.
We are glad that the media, specially a magazine like yours is taking up these issues and effectively conveying the message to the readers in a responsible way.
Besides wine, the Ministry of Food Processing is also responsible for beer and non-molasses based liquor which includes grain based whiskies. Giving a brief background about the Ministry of Food processing, Sinha said, “In the past the agriculture ministry was not able to take complete care of the food products post harvest work and had to concentrate on increasing the productivity as well as production. That’s when the former prime minister, Rajiv Gandhi decided to formulate a separate ministry to cater to the processed food segment.”
Interestingly, when the ministry was formed, some of these items did not figure high on its priorities list. As the ministry grew along, it identified processing of grape juice and India’s potential to become a wine producing country. The idea behind this was to generate additional income for the agriculturists, to enrich their way of looking at agriculture with a market oriented approach. So a decision was taken that the ministry needs to support the industry and help them solve their problems.
It is evident that the board as well as Sinha is quite passionate about wine, however, when it comes to beer, he does not share the same enthusiasm. Though beer falls under the same board, there is no plan to formulate a beer board in the near future, he says. Because it is still not clear to me, how much of barley produced in the country is actually used for beer production. Most of the hop is imported and a very small part is produced in the country.
There is no comparison between wine production and beer production. The cost involved in growing barley vis-a-vis wine is very different. The economics of both the businesses are different. In case of wines, when it comes to table grapes and wine grapes, we know there is a healthy balance. Normally, one is not used for the other. Whereas, barley specifications are not known to me specifically at this point and we are at a very nascent stage when it comes to production of barley in India.
According to the order in government of India, various work areas are being assigned to different departments. And non-molasses based liquors, including beer and wine come in the processed grape foods category. These subjects are controversial and because of the prohibition policy these areas are sensitive to regulations and license. To find a fine balance between these is the biggest challenge at present, he adds. For example, he says, when licensing is concerned it is not the Food Processing Ministry’s job. The ministry deals with many other important works and has to choose its priorities.
Since licensing is a state subject, nothing much can be done about it. However, when the issue becomes larger, it will be addressed at the central level. Until then it’s the states who will be dealing with liquor. With reference to the announcement of a ‘package deal’ worth US $2,25,000 which was mentioned during an event recently, he says, “So far as my ministry is concerned, we are involved in assisting food processing units and setting them up. A project in this field gets 25 per cent subsidy with an upper limit 55 lakh rupees. Wine processing, food processing is one of the activities which falls under this. Whenever any unit approaches us we just look at them as processing unit and we give them the assistance. So today, we are ready for it and almost 60 odd units have been assisted by us. We are happy to offer financial aide to help the industry sail through difficult times.
Another important area that needs to be addressed is creation of a new quality control board.
The food safety and security board of India is setting up norms for all food products and I am sure grape wine will be the priority. They are on labelling requirements, quality control measures among other things, which will be formulated in support of expert oenologists from India and abroad.
- Trilok Desai