High re high
With restaurants, hotels and pubs locked, alcohol stocks face penalty interest at ports, fear of quality dip and passing of expiry date
Two thousand cases with 24 pint-beers in each, 500 cases of Breezers each and 700 cases holding 12 wine bottles each. This is the alcohol stock currently housed at Bar Stock Exchange, Mumbai's modest priced bar. The beer will cross its expiry date first, followed by wine and then the Breezers.
While some of the city's restaurants function at between five and 10 per cent capacity, exclusively through deliveries, their alcohol stocks lie unused. Additional stocks are stuck at Mumbai's port, and the clock is only ticking. "Imported beer stocks will expire in six months, for which we have already paid excise duty," says Mihir Desai, co-owner Bar Stock Exchange and Bar Bank. Key players like him hope that the government considers liquidating perishable stocks given that the opening of F&B establishments is nowhere on the horizon. "Restaurants in Maharashtra have more than half a million litre of beer for which the duties and taxes have been paid. It will have to be drained if it can't be consumed before expiry. Why not allow us to retail the stock directly to consumers, taking care of our problem while also addressing the issue of queues outside wine shops by reducing the wait time for customers," Desai suggests.
Mihir Desai, co-owner, Bar Stock Exchange and Bar Bank
This model is already under implementation in Karnataka where the industry was facing the dilemma of expiry. Desai thinks the revenue earned can be used to fund staff salaries.
Hospitality entrepreneur Priyank Sukhija runs close to 30 properties in Delhi, and Tamasha, Lord of the Drinks and Plum by Bent Chair pubs in Mumbai. He admits that he's going to have to drain all his beer stock. "The wines are thankfully in a temperature-controlled environment inside the restaurants but who knows when we can begin to sell them. In Mumbai, the annual excise duty payment date has been deferred from March for six months. But we are still expected to pay between 10 and 15 per cent fee on it, which I find ridiculous. We are fighting to get it waived," he says.
The irony isn't lost on sommelier Magandeep Singh who spends his time between Mumbai and Delhi. All restaurants and hotels get their liquor licences renewed annually in April. Even if they don't sell alcohol till July due to the lockdown, they are expected to pay the yearly fee which can be as high as 15 lakh.
Storage is another challenge since these are the hottest months of the year. Air conditions have to be left on within the bars to ensure stocks can be protected as long as possible.
And the problem will not end with the lifting of the lockdown. Months of restriction on movements will mean backlog, and the implementation of safety measures is expected to cause delays, especially in the case of Indian made wines. "Once bars open and retailers start ordering stock, we can expect delays at every level. For example, if a truck is coming from Himachal Pradesh, it might be parked for the quarantine period at the first state border it crosses. This will be repeated at every crossing, with the time lapse further affecting the quality of stocks," Singh explains.
Bar Stock Exchanges’ stocks include two thousand cases with 24 pint-beers in each
And yet, he sees the lockdown and pandemic as an opportunity for Indian wines to shine and push through sales at a time when imports could face multiple challenges for a while. The vineyards across India are operational with on-site staff functioning while ensuring social distancing measures. The grape crop is already fermenting in the tanks, he says.
According to Singh, financing the vintage will be a problem as last year's stock would not have moved, so there will be limited liquidity to buy new material. "The consumer is unlikely to spend too much, and for those who continue buying, the pattern will change. Channels of sale will also evolve. Instead of buying at a hotel or a standalone bar, customers may prefer to order from retail and drink at home. The introduction of home delivery of alcohol will only give this trend a boost."
To understand the challenges foreign liquor will face, Aashish Kasbekar, director of FEC Clearing, explains the movement of goods once they arrive at a port. "Apart from Customs, the food and beverage products have to pass through FSSAI, as well as Animal quarantine and Plant quarantine as applicable. After clearance, in case of alcoholic beverages, the goods come to the Customs' bonded warehouses where they are stored for 90 days without interest. Interest on Customs import duty becomes applicable for each additional day of storage thereafter."
Since the lockdown on March 24, movement of goods at the port has come to a standstill. Though it was announced on March 25 that the Customs department would function 24/7 until June 30, initial requests for essential service passes were rejected. "If we applied for 10 passes, we got one," says Kasbekar. "With extremely limited staff and severe challenges, gradually, by the end of April, we cleared 90 per cent of our backlog but the new stock hasn't been moving smoothly to the markets yet. The main concern for importers, distributors or restaurateurs is to avoid or minimise the container detention [levied after free period] and custodian demurrage charges."
Magandeep Singh, Keshav Prakash, Ashish Kasbekar
According to Keshav Prakash, Director, Vault Fines Spirits and founder of The Vault, beverage imports that are in process will suffer. They have a shelf life, and no one is quite sure when the lockdown will lift. "There is a shortage of labour and loaders at the ports. The stocks that are in the bonded warehouses can be salvaged since they have been kept in optimum storage conditions. But if the lockdown lasts longer, the interest meter will continue ticking. Spirit duty is at 150 per cent in India and we pay 15 per cent interest after 90 days post-import," Prakash explains.
But there is a silver lining to the lockdown. Several positive resolutions have been put into action by the Customs department including digital paperwork. Hard hard copies for the bill of entry at various process pitstops are no longer mandatory.
Prakash says that off-trade (retail) is higher in India than other countries, whereas on-trade (consumption at bars and restaurants) is higher overseas. For now, 20 districts in Maharashtra have been permitted to sell liquor via home delivery barring Mumbai. "Indians are culturally inclined to invite guests over. We don't have a system of e-commerce of alcohol yet but it makes up for significant numbers in almost every major country outside India. We need to evolve with time. With proper checks and balances, the industry can work with the state administration to maintain the ethos of social responsibility. Underage drinking and other regulatory musts can well be controlled using a foolproof KYC/OTP process using technology," he says.
Prakash, who has initiated an open forum called the Indian AlcoBev Collective, believes that it's time for the industry to self-impose stricter social responsibilities and work inclusively with the governments to eventually convince them about alcohol e-commerce, like it has been successfully done in the USA where liquor is a state subject. "It's also time that the government acknowledges responsible drinking and propagates ease of business."
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