It seems in India, when booze is involved, trails of money and opportunity eventually follow.
And it is the liquor delivery sector, which has led to companies, services, startups and entrepreneurs alike eyeing a huge windfall.
All liquor shops and distributions in the country were closed following the lockdown imposed in the country from the 25th of March, with production, services and delivery all but suspended. While people got the support of eCommerce and app-based delivery startups to have an uninterrupted supply of food and essential products at their doorsteps, alcohol consumers were left in the lurch.
However, Indian grown food aggregator Zomato seems to have heard the anxious prayers of alcohol lovers. In a major announcement, the company confirmed to be making its foray into delivering alcohol to the consumers at their doorstep. Having already diversified its interests into groceries and home essentials delivery, the company may be on the path to setting a precedent for the entire industry.
The news has certainly grabbed the eyeballs all over, with businesses of all scales, especially those who are up and coming, looking to aggressively and actively expanding its horizons, vertically or horizontally. Within no time the internet got abuzz with the news of many other existing entrepreneurs and investors set their eyes on this untapped market in India.
And this has let us to mind-boggling questions:
- Can Liquor delivery in India be the next multi-billion startup idea for entrepreneurs?
- Is it a high-risk high-gain business model for entrepreneurs as well as investors?
- What has prompted the government to explore the idea of liquor delivery through startups?
- is it the new cash cow for the economy as well?
Liquor Delivery: The Trigger
Comprising such a thriving consumer base, it should come as no surprise that the demand for liquor has skyrocketed during the lockdown. As the government eased out restrictions on the movement of essential and non-essential goods from May 4th, it also took the decision of permitting the reopening of a fraction of liquor outlets across the country. This prompted throngs of customers in all states across the country to flout social distancing norms with nary a care in the world and seek their quota.
Such desperate actions of the citizenry have also forced the government to mull better options to curb the spread of the coronavirus and given a huge incentive to the interested parties intent on capitalizing on such a mammoth demand. Whether or not liquor delivery was in the plans of any organization initially, the race to diversify their operations have been accelerated by the onset of the pandemic.
This actually has a multi-faceted impact all across. Startups like HipBar, HipCask, sites like WineBazar.in and LetsBuyDrink.com etc. have already been doing business in the space, by facilitating home-delivery of alcoholic beverages. Within that time, they have also been met varied levels of success, sometimes owing to the operating grey area and sometimes due to the changing laws of the state government.
It is precisely these issues that have made this lockdown the perfect opportunity for these businesses to rake in the moolah. The total revenue dependent on alcohol sales comes up to as much as 25% in some states. The nation’s capital Delhi, a Union Territory with higher than national per capita income, earns over Rs 5,000 crore every year. Karnataka earned Rs 21,400 crore last year from liquor sales. States like Kerala and Meghalaya, who have the highest per capita consumption rates of alcoholic beverages, along with Goa, which is also a tourism-driven industry, have been severely impacted in this time of crisis. The central government has declared being hit big, and the states’ GST reserves and revenue streams have dried up.
In wake of such staggering data, states are lobbying for a controlled regulation and allowance for distribution, to make up for lost revenue-generating streams. This has also prompted app and web services to further their work and steady their businesses by extending their services to various platforms and state governments. States such as Chhattisgarh, Punjab and West Bengal have all launched web portals and software applications which will provide door to door delivery of alcoholic beverages (9am-7pm) based on age verification through Aadhar numbers.
On the other hand, several companies have also requested the state governments to permit them to move ahead with the delivery services in conjunction with Zomato, with its close rivals Swiggy seemingly keen to enter the space. ISWAI, the Indian Spirits and Wines Association of India, a representative body, has also pushed for more clarity regarding the norms and regulation of the delivery of alcoholic beverages over the states.
A Multi-Billion Dollar Opportunity For Entrepreneurs
Such technological measures will not only provide effective ways to the government to combat the spread of COVID-19 while maintaining regulations but allow the potential entrepreneurs to use the clientele to their advantage.
The app-based delivery model has garnered huge success in India. While Zomato, Swiggy, Bigbasket have already riding high with their unicorn status, there are more than 1,0007 logistics startups, likes of Dunzo and JhutPut, that are trying to grab a sizeable market share.
India’s alcohol industry is the third-largest in the world with an estimated size of $35 billion, only behind from two major countries, China and Russia. According to Euromonitor International, a well-known research firm, India’s spirit sector – which includes whiskey, brandy, rum and vodka is estimated to grow 25% to 2.92 trillion rupees ($41 billion) by 2022. Combine it with beer market in India, the total market is estimated as big as $56 billion to $60 billion (4.4 trillion rupees) by 2022.
Owning to the exploded adoption of smartphone, unprecedented usage of digital payment systems and improving consumer confidence in technology-driven delivery companies, the app-based liquor delivery startups, collectively, could easily account for less than 1% of the total market in the next 2 years, which amount to whopping $600 million (3,800 crore rupees).
Now factoring the growth of delivery startups in India so far, it’s would be safe to assume that the online liquor delivery market in India would be nearly $3 billion – $4 billion business in the next 4-5 years. Just to put things in context, the online food delivery industry in India is estimated to become $8 billion market by 2022, clocking CAGR of 25% – 30%.
Liquor Delivery: The Challenges
It is just the dawn of a liquor delivery market in India. And like every new industry, it also comes with a set of its own challenges for the government as well as aspiring entreprenrus.
The government needs to revisit its liquor policy to gain the confidence of entrepreneurs. The ambiguity in the liquor delivery business model is a huge concern and startups like HipBar already faced the heat of it.
The permissions, however, can also be given in exchange for an operating charge to be paid by the organizations.
The governments of almost all states have slapped a hefty ‘special corona fee’ on the beverages to leverage revenue, thereby helping the cause of the delivery operating services. Brewery workers have also called for an affirmation to this model, as it will help in thousands of workers getting paid. Restaurants and roadside dhabas, which have been dry throughout this period, also stand to benefit from this arrangement.
What seems like a controversial issue on the surface could be the one providing a huge cash flow to the economy and its related businesses. For entrepreneurs, it’s indeed an opportunity worth exploring.
How far the liquor delivery companies milk the money is, in large part, also dependent on the policies that the government chooses to adopt. However, from the current scenario, it sure looks like the juice will be well worth the squeeze. Stay tuned to this space for more updates.