Online food delivery companies Zomato and Swiggy have started liquor delivery in Jharkhand and Odisha. Both companies are serious about this opportunity and are in discussions with other state governments to start operations in different cities. On 4 June, Swiggy started liquor distribution in West Bengal.
At first glance, the decision to branch out due to the high demand for liquor in India is a no-brainer. During the coronovirus lockdown, the demand for boozes increased rapidly.
But unlike food, alcohol distribution is a highly regulated market. Suppliers, in this case, are not fancy restaurants, but mostly as eka ‘, a common Hindi word for liquor shops. Add to these platforms the many restrictions and regulations that consumers need to follow to legally deliver alcohol. And finally, customers themselves need to be above the legal drinking age.
Moneycontrol spoke to a group of players from the venue, who tie together the back story of liquor distribution in India. How is e-delivery of alcohol legally in a country that has prohibition as a principle in the Directive Principles of State Policy? read on:
First of all, who controls the liquor business in India?
Alcohol is a state subject and its business is tightly regulated through excise departments in each state. It is the majority of the government that regulates the supply of alcohol in a state. In some states, retailing is done through state-owned shops. In others, the government is just a wholesale supplier and retail is done by licensed private entities. Some states also divide booze sales between their own and private outlets.
Interesting. Can you tell which states allow home delivery of alcohol?
Sure. Many states allow home delivery of alcohol. Zomato and Swiggy have started online delivery in Jharkhand and Odisha. Swiggy has started services in West Bengal. Expect Zomato to follow suit. Delhi is also on the radar.
Any idea how these companies managed to secure approval?
Well, while concerns over social disturbances caused by COVID-19 there was an increasing number to allow alcohol sales online. But the state governments took time to decide due to the legal formalities involved in it. Things changed on May 8 when the Supreme Court said that states should find out how to make online delivery of alcohol. You can say that the states took action.
State governments have offered several reasons for allowing online alcohol distribution. Take the Government of Odisha. In its notification, it cited lengthy queues in front of liquor shops and the Supreme Court made observations as to the reasons for allowing the delivery of liquor. It also stated that there was a high demand for alcohol among consumers. Absolutely!
Interesting. So are there online aggregators for boost delivery?
While the Odisha government has allowed liquor shops to have their own distribution systems, they have asked them to pay and accept payments to tie in with aggregator platforms such as Zomato or Swiggy for these deliveries. West Bengal issued an expression on 28 May to allow food aggregator platforms to start home delivery.
Zomato and Swiggy have partnered with retailers in the back end to process these orders.
“We provide web and app-based solutions to help our retailers manage their inventory … Our systems facilitate real-time inventory management,” said Rakesh Ranjan, vice president of Zomato.
Let us now talk about alcohol pricing on these platforms.
Regarding supply and pricing, the Odisha government is maintaining a list of retailers on its website and has listed the maximum retail price of various brands of liquor to prevent overcharging. The delivery fee for orders of Rs 1,000 has also been fixed at Rs 100. Also that for every 500 rupees the delivery charge can be increased by 25 rupees with a limit of 300 rupees.
The process is somewhat similar for other states as well. The distribution persons will have to carry an identity card on them for verification and submit all their details to the state government. The age of the customer also needs to be validated at the time of delivery.
Despite working with offline retailers, how are Zomato and Swiggy?
Good question The regulatory node is just one part of the business with all the rules and regulations. There is a big challenge around inventory management. Imagine a consumer order that there is a specific variety of beer on the app and something else is given. This is not desirable.
Unlike food, which is prepared in real-time, and the restaurant’s intensive integration with these delivery platforms, wine requires a new integration process between the likes of Swiggy and Zomato and retail outlets.
Swiggy has the ability to integrate with any POS (point of sale) software that retail outlets can have to process orders, ”said a Swiggy spokesperson. “Most of our current retail partners are independent stores and use the Swiggy Partner App directly.”
So liquor shops mostly use the partner apps on these platforms. They manually update the stock daily and mark the update in stock ‘or stock out of stock’ as per the consumers.
This is a very challenging business proposal.
Yes. The biggest challenge for liquor distribution is the difference in rules between different states. Not only are the retailing rules different, there are differences in taxes, prices and even age limits. For players like Zomato and Swiggy, it has still been manageable. New players, however, may face difficulties in taking liquor distribution to national.
Aryan Solanki, cofounder of Liqhub, a knowledge-sharing platform dedicated to alcohol, said, “Each state has a different business model to run according to their respective excise policies, a challenge in this business.”
Aggregators have used extensive video-based training modules to train their partners in the functioning of the distribution business.
COVID-19 may have heard the sound of death for many small businesses, but has also opened up new avenues. Alcohol delivery is one such opportunity and industry insiders believe that it will open a new dimension in the delivery space and can be a massive revenue generator.