Lessons From India’s Spirit Industry

Good morning. Indian spirits like gin and whiskey are having their moment at the bar. Be it whiskeys like Amrut or Indri, or gins like Hapusa, you’ll see Indian spirits finding more space at parties previously only dominated by foreign brands. The Indian spirits business is thriving. Read on to know why this needs more acknowledgement. 

Meanwhile, as we all know India’s initial public offerings (IPO) have ranged from exciting to bizarre. A reformation of the pricing structure could bring some discipline, and we could learn a thing or two from the French and the Dutch. 

THE TAKE

Success Of Indian Spirits Holds A Larger Lesson For ‘Make In India’ 

Surinder Kumar looks and sounds like he works with an IT major in Bengaluru, possibly in a senior position. He hails from Kashmir but speaks English with a slightly clipped south Indian accent, presumably because he studied and lived in and around Bengaluru and Mysuru for several decades. Except that he works for a different kind of export powerhouse: alcohol, more specifically whiskey.

He is a master distiller and the man behind two major global Indian brands Amrut and Indri, both single malt brands that have won a bevy of global awards, taking Indian spirits on the global stage. 

It is often said that India’s IT industry grew not because of the government but in spite of it.  Writing software code did not require the litany of permissions or factory inspections as you would in setting up a manufacturing plant. Or the hurdles of transporting goods through challenging roads and a notoriously slow shipment process. Before you knew it, the Indian IT industry was turning in billions of dollars of revenue and then the Y2K moment arrived in 2000. And the rest is history and is still playing out.

Something similar has happened with India’s spirits industry, though with many more physical restrictions. Go to a party in India and people would rather sip Indian or more specifically Goan gins than the classic British brands. When it comes to whiskey, people ask for Amrut, Paul John or Indri, both in India and overseas. NRIs seem to like Indri and Amrut because it is Indian and it is good. While this is a strong ‘Make in India’ story, the government did not play much of a role in it. 

Entrepreneurs have figured out that conditions in India are actually good for making world-class spirits. Surinder Kumar says in the northern plains of India, where Indri is matured, temperatures oscillate between 0 degrees Celsius in winter and 50 degrees Celsius in summer, with just two months of rain and 10 months of dry weather. This extreme temperature difference makes the pores of the wood open up and contract exponentially, making the interaction between wood and the whisky much more pronounced, thereby imparting far more flavour to the liquid in a short period. “In maturation, you have to apply the rule of three, that is one year in India is equal to three years in Scotland,” he told Forbes India. 

It's a similar story with gin. Stranger & Sons from Goa was ranked in the top eight gins in the world with a Gold Outstanding Medal at the International Wine & Spirit Competition 2020. Hapusa won the Gold at the International Wines & Spirits Competition 2021 and Jaisalmer won a Gold Medal at the San Francisco World Spirits Competition 2023. Tamras Gin won gold at San Francisco World Spirits Competition 2022.

Understandably, you are not likely to see gin or whiskey entrepreneurs sharing the stage with the kind of entrepreneurs (mostly tech) feted at various media house award ceremonies, except for maybe a beer company or two. Nor will you see ministers in any government consorting with them, again understandably. 

However, the success of Indian spirits holds a larger lesson. First, in our quest to be a product nation, we must remember that these are equally globally recognised and awarded products made in India. Moreover, not only are exports booming but overseas spirits majors are trying to replicate the Indian style.

The International Spirits and Wines Association of India said exports have seen a big surge, with a 16% increase in volume and a 20% increase in value in the past year. The industry, which is overall worth close to $52 billion, employs almost 8 million individuals, directly or indirectly. Moreover, the success of these brands also reflects the strength of R&D in India’s spirits industry. You can’t be creating strong brands like these unless you have good R&D here, in Haryana or Goa. Remember R&D is a holy grail of sorts for India’s manufacturing industry.

Surinder Kumar studied food technology at the Central Food Technological Research Institute (CFTRI) in Mysuru which is widely recognised as a premier institution for food technology in Southeast Asia. In another interview, he talked of how he joined a company called Central Distilleries, now part of United Spirits, as part of a campus interview. He also said the CFTRI gave him an extensive knowledge base and a range of skills in beverage production.

It struck me, with 23 IITs and 21 IIMs, surely we could set up another CFTRI which produces and nurtures world class R&D in food and beverages, areas where Indians are clearly excelling.

JANUS VIEW

India Needs Pricing Structure Reforms To Discipline IPO Frenzy

India has seen IPOs being snapped up indiscriminately, in the expectation of a significant listing premium. This is a fallout of a flawed pricing model for public issues. There is no regulatory input to the pricing of an issue, and it is left to investors to decide whether they should pick up the offering at the price specified, as a band. Merchant banks that advise the issue set the price band, and investors have the option of subscribing at the cut-off price, which, these days, tends to fall at the upper end of the price band.

The sensible thing to do would be to reform the pricing structure. One method is the French auction. In this, the company making the IPO sets a minimum price and invites bids. Depending on the response, the company negotiates a minimum price and a maximum price. Bids above or below these limits are excluded. Shares are then allotted pro-rata among the bidders at the minimum price. The Dutch auction is even better. 

FROM THE PERIPHERY

—🔌 India may have warmed up to electric vehicles (EV), but one has to jump through hoops to charge them. And also download multiple apps. Mercedes-Benz India chief Santosh Iyer pointed to this problem and called for a common platform for real-time information on charging stations. “Today, if you buy an electric car, you need three-four different apps on your phone. What we are requesting the government is to come up with something like a UPI-based system," Iyer told PTI. Earlier this year, The Core had reported about how users had to download over a hundred apps to keep their EVs charged. Not only is there no financial incentive for companies to solve this problem, but charging point operators are reluctant to be on a master app because they don’t want to share user data. 

—🔍 Indian officials are reportedly investigating visa violations and racial discrimination at streaming giant Netflix, Reuters said in an exclusive report. The Foreigners Regional Registration Office, which is under the home ministry, said in an email to Netflix — which Reuters has reviewed — that it was probing tax and visa violation concerns in its business in India. Nandini Mehta, a former director of business and legal affairs at Netflix India, was sent this email. Mehta, meanwhile, is reportedly pursuing a lawsuit against the OTT platform over wrongful termination and racial discrimination, the Reuters report said. 

—📶 Debt-ridden telecom company Vodafone Idea (Vi) said on Sunday that it has signed a $3.6 billion deal with Nokia, Ericsson and Samsung for the supply of 4G and 5G network equipment for three years. Vi plans to expand 4G population coverage from 1.03 billion to 1.2 billion. This comes days after the Supreme Court of India rejected its plea for the re-computation of dues it owes to the government. A joint venture between the UK’s Vodafone Plc and India’s Aditya Birla Group, Vi owes the government Rs 2.03 lakh crore as of March this year. 

—🛒 India's retail space per capita lags behind other South Asian countries, a report by American real estate services firm Cushman & Wakefield has found. The report said India lags behind countries like Vietnam, Thailand, Indonesia and Philippines. Currently the retail space in India’s top eight cities — Delhi-NCR, Mumbai, Chennai, Kolkata, Pune, Bengaluru, Hyderabad and Ahmedabad — is around 60 million sq ft. It is expected to grow 18 million sq ft in the next three years. This will meet only one-third of the projected requirement for demand. The first half of this year saw no new malls in India becoming operational. 

😕 UGHH

British rock band Coldplay is coming to India, and fans are unable to contain their excitement. However, the ticketing site Bookmyshow could not keep up with the excitement. Their servers crashed early on Sunday as lakhs of people logged in to buy these tickets. Bookmyshow had to pause bookings till later in the day. Such was the rush, that people had to wait in online queues for hours to get their tickets. Upset fans took to X to share memes as they waited patiently to buy their concert tickets. The good thing that came out of the chaos was that the band added a third show in Mumbai. Now they will perform at the DY Patil Sports Stadium on January 18, 19 and 21.

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