Ecommerce an opportunity for alcohol industry: Anand Kripalu, MD, United Spirits
With the physical retail space in India’s liquor market shrinking, United Spirits, the country’s largest alcoholic beverages maker, is seeking to harness ecommerce to reach out to customers. “We are talking to state governments and other ecommerce partners to see how we can unlock this potential. So, I think ecommerce is definitely an opportunity. It’s also about keeping up with the times as this is exactly what’s happening across the world,” USL’s managing director Anand Kripalu told Sagar Malviya in an interview. The maker of Johnnie Walker Scotch and Smirnoff Vodka said it is seeing a consumer demand revival now compared with slow sales in FY18, which was one of the toughest years due to demonetisation and ban on liquor vends near highways. Edited excerpts:
How bad was FY18 for USL?
The first quarter (April-June 2017) was soft because it was the peak of the highway ban and it took about six months for the Supreme Court to clarify its position after which the state governments began the process of relicensing stores. This was followed by GST implementation, which was a complicated piece for the alcohol industry because many of our input costs were under GST with no set off. The good news is that ENA (extra neutral alcohol), for now, is out of GST. And along with other cost saving efforts the negative impact of GST has been largely mitigated.
Have you seen consumer demand revival now?
I am seeing some recovery in consumer demand. The big thing in our industry is that the long-term demand is unquestionable. Low per-capita consumption, combined with rising income, make people want to drink better. Attitudinal barriers to alcohol are also breaking down. But the regulatory changes and shocks, including the route-to-market (RTM) changes, have been fairly challenging. The moment changes stabilise, we will start to see consumer demand coming back.
You have been focussing on premium brands. Does that mean mass or popular brands are non-core?
Our prestige and above segment is about two-thirds of our revenue. And I am seeing this segment grow much faster than popular. We absolutely intend to grow our popular business as well, and whatever strategy we have taken on our popular brands is to grow that business. There are many states in India where we have retained our popular business —the large states like Karnataka, Maharashtra and West Bengal as well as a few others. In many of these states, we even have a separate dedicated sales force because we believe that selling capabilities for popular is very different from prestige and above. Popular is a push-based volume game whereas prestige and above is more about how brands show up in the stores. We have created different partnerships for our popular business where we believe there were opportunities for making one plus one equal to three, along with the right partners. We have been very clear with them that while they will be paying us a franchise fee, these brands need to grow in terms of volume and share.
Can you sell your products online?
We are looking at ecommerce as an opportunity. It is restricted in many states today but I do believe that in the fullness of time, ecommerce will actually give you better control on who you are selling to.One of the bigger concerns of the government is about underage purchase of alcohol. So, one can do age gating much more effectively through ecommerce and make sure that the product goes directly to the right consumers. It’s possible for consumers to order online while the fulfilment can still be done from a licensed store.
You launched new variants such as Silk but didn’t scale it up. How has been your innovation funnel?
With Silk, the response has been modest. We will decide how we can improve it further and continue to drive demand for the brand. We have an innovation funnel that aims to bring out products for the next three years, which includes renovation, innovation and variants, thereby continuing to keep our innovation funnel healthy.