With the entry of private shops into hitherto only government controlled markets like Delhi, proliferation of liquor chain stores and boutiques, super-/hypermarkets being allowed to retail alcoholic beverages, explosion in availability of alcoholic beverage brands, and the evolving Indian customer, more and more Food and Grocery retailers are boosting their store(s) revenue through wine and liquor sales, finds Namita Bhagat
Liquor retailing at food and grocery stores
Liquor in India is usually retailed at liquor stores, hotels, bistros, bars, pubs, clubs, lounges and discotheques. But in recent years, the organised liquor trade scenario in India has transformed significantly. One noteworthy development has been that states like Delhi, Chandigarh, Goa, Maharashtra, West Bengal and Karnataka have allowed liquor/wine retailing in hypermarkets, supermarkets and even food and grocery stores.
Comments Vikram Achanta, co-founder and CEO of Tulleeho, “Over the last 5 years liquor retailing in India has gone through a sea change: whether we talk about the entry of private shops into hitherto only government controlled markets like Delhi, the growth of liquor chain stores like Bangalore’s Madhuloka and Drops, or of supermarkets being allowed to retail a selection of alcoholic beverages (the exact nature varying from state to state). The changes in the retail environment have also partly been forced by the explosion in availability of alcoholic beverage brands (and vice versa) as well as the evolution of the Indian customer.”
Achanta observes that consumers, having become more inquisitive and open to experimentation, are likely to benefit the most from such changes. At the same time, with a plethora of new categories and brands in the offing, making a choice becomes increasingly difficult.
Agrees Subhash Arora, President, Indian Wine Academy (IWA), “Nowadays, more and more states are permitting sale of wines in supermarkets. Although tasting at the venue is not expected to be allowed in the near future, the stores’ sales staff have enough knowledge about wines to convince customers.” According to him, supermarkets and food stores are also convenient locations for women shoppers, who feel more at ease buying wine or liquor at supermarkets.”
According to him, due to overcharging in hotels and bars, the retail sector is expected to grow fast, especially when FDI in organised retail falls in place, as entry of foreign chains in liquor retail will also ensure lowering of prices, hence benefiting the customers.
Mohit Khattar, Managing Director, Godrej Nature’s Basket, comments, “We have observed a significant shift in preferences for liquor among Indians in the last few years. From being limited to brown spirits till a couple of years ago, to developing an affinity to white spirits and cocktails, to now appreciating wines, we have witnessed a tremendous change in drinking habits.”
Grocery stores on a ‘high’
With the entry of big box retailers like Spencer’s, Auchan, Star Bazaar, HyperCity, Reliance Fresh, gourmet stores Godrej Nature’s Basket, and Foodhall in the alcohol business, the Indian liquor and wine industry is expected to see a major boost. Supermarkets like Haiko in Mumbai, Magsons, Delfinos and Orchard in Goa, Total Supermarket in Bangalore, Le Marche in Gurgaon, along with standalone food and grocery retailers like Chandigarh’s Empire stores, M G supermarket, Ludhiana’s Kipps Market, Delhi’s Morning Store and Modern Bazaar are also giving a fillip to the industry.
Auchan Hypermarkets operates 14 stores in key cities, of which 7 house a liquor section: 5 in Karnataka and one each in Gurgaon and Delhi. Ponnu Subramanian SVP- B&M (Foods) & SCM, Max Hypermarket, comments, “Due to evolving lifestyles of Indian consumers, wine and liquor has become a more liberalised commodity today as compared to a few years ago. It has also impacted their preference for shopping in hypermarkets. At Auchan, we offer a wide assortment of spirits, beers and wines for customers with varied tastes and preferences.” The stores serve over 210 to 250 customers a day, with an average ticket size of over Rs 500.
Quality wine and/or liquor are a key product category for gourmet stores like Godrej Nature’s Basket. Says Khattar, “We are a premium gourmet store and wine and beer is a must have category for us. As part of our objective to facilitate appreciation for finer tastes, we stock and retail the finest wines and beer from across the world. Importantly, the presence of a wine section in the store also sub-consciously conveys ‘easy indulgence’ to the consumer.” Currently there are 32 stores in Mumbai, Delhi, Gurgaon, Pune, Bangalore and Hyderabad. The retailer does not stock hard drinks but deals only in wine and beer in select stores.
Magsons Supermarket in Goa stocks all major imported and Indian liquor brands (including wines and beers) in three of its 10 stores. Another store is scheduled to open by September. Says Managing Director Kirit Maganlal, “Goa, as a popular tourist destination, has vast scope for liquor retailing. We deal only in upmarket wine and liquor, and the category certainly adds to the USP of our stores.”
Prakash Pereira, Managing Director, Armacar Holdings, affirms, “Goa, being a key vacation spot gets tourists from India as well as abroad. So, vacationers are our primary customers, and are contributing significantly to our overall sales volumes. Our store Delfinos is located at Goa’s northern coastal belt, which attracts maximum tourist traffic.” A part of Armacar Holdings Pvt Ltd, Delfinos stocks a wide variety of Indian and imported spirits. The store receives daily footfalls of 1,714 on an average.
“Young buyers prefer hard liquor while the middle aged consumers, especially foreign tourists, prefer wines, notes Caridade DeSouza, Proprietor of Orchard Supermarket, and adds, “Our liquor/wine sales don’t differ much on a daily basis, but are definitely subject to seasonal variations. During the tourist season, there is a dramatic upswing in sales. Most importantly, demand tends to skyrocket during festivals like Christmas and New Year, besides which, weekends also do well.” Operating out of a single store currently, Orchard garners about 30 percent of its entire sales from the liquor section.
Haiko supermarket stocks wine, beer and champagne – all of which are among the fastest growing categories in the store, informs its spokesperson, who also shares that, generally, the 18 to 30 year-old clientele prefer beer, while customers above 30 years, including women, with a good knowledge of wine and gourmet foods, prefer wine. He also observes that the wine and beer category also helps Haiko attract customers who are not regulars at the supermarket.
Premium department store Empire Stores is among the few in Chandigarh with the license to sell alcohol. “Demand for imported foods and alcoholic beverages is quite significant in the city and adjoining areas. We stock the best of wines and liquors, which are sourced from around the globe, and these surely add to our store’s USP,” says owner Subhash Gulati.
Liquor shop-in-shops (SIS)
Liquor store chains such as Madhuloka, Not Just Cheese & Wine, Drops Total, and Living Liquidz are leveraging the emergence of hyper/supermarkets as points of sale for their products, and alongside their own stores, a tie-up with hyper chains via SIS provides them an additional retailing avenue.
Bagalore-based Maduloka currently has 15 outlets in Bangalore, of which, it operates one wine store at HyperCity in Orbit Mall and two wine only SIS at Star Bazaar (one in Kormangala and the other in Orion Mall, Rajajinagar). Lokesh K S, Managing Director, states, “The majority of population in India is of young people who prefer shopping at modern stores. Moreover, fondness for alcoholic beverages is also growing among them, and so is the spending power to splurge on quality spirits and wines. The present Indian liquor market is on a growth curve, particularly in the metros.” He informs that with rising living standards in Bangalore, the company’s liquor sales are on a high. According to him, for new entrants wanting to operate liquor shop-in-shop in association with a hyper or supermarket, the best strategy is to start with wine only, and later expand to other products.
Classic Group owned liquor chain Not Just Cheese & Wine has 6 stores in Bangalore and Mysore, of which two are operated as SIS in hypermarkets, one each at Carrefour in Bangalore and More megastore in Mysore.
HyperCity follows the SIS business model in partnership with known wine stores. Through the SIS liquor outlets, the chain strives to offer a complete shopping experience to its customers. Presently, the chain has a pan India presence with 15 stores. Barring, Amritsar, Jaipur, Bhopal and one store in Hyderabad, the retailer has wine SIS at all other locations. Depending upon market potential in the particular city, and its own store size, an SIS ranges from 800 to 1,200 sqft.
Sourcing and legal hiccups
Retailers usually have sourcing agreements with wine and liquor importers. They also procure from distributors of home-grown brands. Delhi’s Brindco Ltd, Mohan Brothers, Hema Connoisseur Collections, and Sonarys (Mumbai) are known liquor and wine marketers. Many retailers directly sign up with producers in India and abroad. Some of the leading wine producers in India are Moet Hennessy, Sula and Grover, while Diageo, Radico Khaitan and Pernod Ricard are known liquor manufacturers. Mohit Kattar points out that in some states, procurement is mandatory from government operated state corporation depots, and in other states it is privatised.
As regards regulatory prerequisites, Khattar outlines, “Every state has different regulations pertaining to the alcohol business as defined by each state’s excise department. For selling liquor, FLBR license is required. Also, liquor/wine is required to be stored and retailed in a clearly demarcated area inside the store premises. The size of such sections must conform to the laws of respective states.” He informs that in some states, the wine license is clubbed with beer, while in others, wine license is given separately but beer is clubbed with hard liquor. Similarly, taxation slabs also vary from state to state.
“Sourcing can only be done via registered distributors,” informs Maganlal, and adds, “Transportation to stores is only allowed through TPs (Transport Permits) issued by the Excise Office. It is mandatory for all products to have a printed MRP on them. The track record of purchase, sales and damages should be kept at all times.” He also cautions that selling liquor obtained from non-registered vendors is a criminal offence as per Goa’s laws.
Affirms Subramanian, “The rules and regulations in wine and liquor retailing are not uniform across India; they vary from state to state. Relevant licenses from state excise department are compulsory for selling alcohol. Liquor trade licenses are predominantly given for two categories: low alcoholic beverages and high alcoholic beverages.” Most importantly, retailers need to renew their liquor and/or wine sales license at the beginning of each financial year.
The conventional forms of advertising and publicity are severely curtailed in the liquor category. Comments Subramanian, “Liquor cannot be advertised, neither can it be a walk-in generator for F&G stores or hypermarkets.”
“Thus, emphasis is required to convert on-floor customers through attractive shopfittings, ease of access to products, attractive displays and visual merchandising, which include dedicated wooden units for wines, chillers for beers and RTDs, ambient lights, etc,” he suggests.
As per DSouza of Orchard Supermarket, advertising is done by companies to promote their labels. “So, when it comes to advertising, it’s zero cost from retailers. For us, organising labels is important so that customers get a feel of the variety and can make informed purchase decisions. Also, at the store level, liquor and wines require storage at a constant ambient temperature that has to be maintained at all times,” he says.
Maganal at Magsons rues that come of the stringent conditions levied on liquor retail business are limiting its expansion in Goa. “In Goa, liquor stores cannot be located within 100 meters of a school or religious place (the state has a high density of places of religious significance). The location should not have any residences within the complex, which should be fully commercial.” He informs that under the new dispensation rules, timings for sale of liquor in sealed bottles are now restricted to 9 pm. Also, as per the state government directives, certain days in the year are observed as ‘Dry Days’ during which all liquor stores are closed, including at supermarkets and malls.
Growing the liquor space at grocery stores
Advises Achanta, “If the retailer wants to maximise his revenue and profitability, and ensure that he has minimum dead stock, he needs to ensure that his salesmen are equipped to handle basic customer queries. This does not mean hiring expensive highly trained staff, but their knowledge of category/brand basics is essential. It could be as simple a query as a customer wanting to know what 12 years on a bottle of The Glenlivet Single Malt signifies, or seeking suggestions on the food pairing with a particular wine, pronunciation of a brand, major differences between gold and silver tequila, and how the customer should drink tequila (ice cold).
He adds, “Please note the importance of basic brand knowledge also, as we are talking about a category of goods, which is increasingly aspirational in nature as the consumer climbs the brand pyramid in each category. If you’re able to give him a compelling reason to buy that brand, then you’re one step closer to making a sale.
Achanta also suggests co-location/cross merchandising of food and beverage items such as wine and cheese, or pasta/meat items and wines, etc. This, supplemented by dissemination of information through visual merchandising, can be an effective way for suggestive selling as well as to overcome disadvantages of staff who lack the requisite knowledge and/or communication skills. “At the end of the day, given the plethora of liquor shopping choices, the store that enhances the customer’s quality of experience via suggesting the right selection of products on a consistent basis, is guaranteed a repeat customer,” he concludes.
As per Khattar, the wine segment is a continuously evolving section of gourmet retail catering to a high-end clientele. “Wine consumption in India has been growing rapidly over the last couple of years, and, therefore, there is an opportunity for other retailers too. However, managing licences, getting the assortment right, avoiding suppliers who break the cold chain, etc, are factors that can make or break the business.Added to this is the fact that the business cannot be advertised, hence needs to be managed frugally,” he sums up.