Online food delivery companies Zomato and Swiggy have launched delivery of alcohol in Jharkhand and Odisha. Both companies are serious about this opportunity and are discussing with other state governments to start operations across different cities. On June 4, Swiggy launched alcohol delivery in West Bengal.
At first glance, the decision to branch out is a no-brainer thanks to the huge demand for alcohol in India. Booze demand has spiked sharply during the coronavirus lockdown.
But unlike food, alcohol delivery is a highly regulated market. Suppliers, in this case, are not fancy restaurants but mostly ‘thekas’, a common Hindi term for liquor stores. Add to these the multiple restrictions and rules that these platforms need to follow to deliver liquor legally to consumers. And lastly, customers themselves need to be above the legal drinking age.
Also Read: Mumbaikars may soon get to order alcohol on Zomato, Swiggy
Moneycontrol spoke to a clutch of players in this space to piece together the back story of alcohol delivery in India. How does one e-deliver alcohol legally in a country that has prohibition as a tenet in the Directive Principles of State Policy? Read on:
First up, who regulates the liquor business in India?
Liquor is a state subject and its business is tightly regulated through the Excise Departments in each state. It is most the government that regulates the supply of liquor in a state. In some states, retail sales are done through government-owned shops. In others, the government is just the bulk supplier and retail is done by licensed private entities. Some states also divvy up booze sales between its own and private outlets.
Interesting. Can you tell me which states have allowed home delivery of liquor?
Sure. Several states have allowed home delivery of liquor. Zomato and Swiggy have launched online deliveries in Jharkhand and Odisha. Swiggy has rolled out services in West Bengal. Expect Zomato to follow suit. Delhi is in the radar too.
Any idea how these companies managed to secure approvals?
Well, while there was a growing clamour for allowing liquor sales to go online because of concerns over social distancing due to COVID-19. But state governments took time to decide due to the legal formalities involved. Things changed on May 8 when the Supreme Court observed that states should find out ways for online delivery of liquor. You could say states swung into action.
State governments have offered multiple reasons to grant permission for online alcohol delivery. Take the Odisha government. In its notification, it cited long queues in front of liquor shops and the Supreme Court observation as reasons for allowing liquor deliveries. It also said there was a very high demand for liquor among consumers. You bet!
Interesting. So what is the arrangement with online aggregators for booze delivery?
While the Odisha government has allowed wine shops to have their own delivery systems, it nudged them to tie up with an aggregator platform like Zomato or Swiggy for these deliveries and accepting payments. West Bengal released an expression of interest on May 28 to allow food aggregator platforms to start home deliveries.
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 to ensure retailers’ catalogues show the latest available inventory,” said Rakesh Ranjan, vice-president at Zomato.
Let’s talk about alcohol pricing on these platforms now.
With regards to the supply and the pricing, the Odisha government is maintaining a list of retailers on its website and listed out the maximum retail price of different brands of alcohol to prevent overcharging. Delivery charges have also been fixed at Rs 100 for orders worth Rs 1,000. Beyond that for every Rs 500, charges could go up by Rs 25 with a ceiling of Rs 300 on delivery charges.
The process is somewhat similar for other states as well. The delivery persons will have to carry an identity card on them for validation and all their details need to be submitted with the state government. At the time of delivery also there is a need for validating the age of the customer.
How are Zomato and Swiggy, despite their tech prowess, working with offline retailers?
Good question. The regulatory nod with all rules and regulations is just one part of the business. The major challenge is around inventory management. Imagine a consumer order a specific variety of beer on the app and something else gets delivered. That is not desirable.
Unlike food, which gets prepared real-time, and the deep integration of restaurants with these delivery platforms, liquor needed a fresh integration process between the likes of Swiggy and Zomato and the retail outlets.
Swiggy has the capability to integrate with any POS (Point of sale) software that retail outlets may have in place to process orders,” said a Swiggy spokesperson. “Most of our current retail partners are independent stores and utilize the Swiggy partner app directly.”
So liquor shops mostly use the partner app of these platforms. They manually update stock every day and mark ‘In Stock’ or ‘Out of Stock’ for consumers to order accordingly.
That seems an extremely challenging business proposition.
Yes. The biggest challenge for liquor distribution continues to be the difference in rules between different states. Not only are retailing rules different, there is also a difference in taxes, prices and even age limits. For players such as Zomato and Swiggy, it has still been manageable. New players though might face difficulties in taking liquor delivery national.
“Every state has a different business model to follow according to their respective excise policies, this is a challenge in this business,” said Aryan Solanki, cofounder of Liqhub, which is a knowledge-sharing platform dedicated to liquor.
The aggregators have used extensive video-based training modules to train their partners on the functioning of the delivery business.
COVID-19 might have sounded the death knell for multiple small businesses but it has also opened new avenues. Delivery of liquor is one such opportunity and industry insiders believe that it will open a whole new dimension in the delivery space and can be a massive revenue generator.