Brand rigging at Delhi's liquor vends: One excise doesn’t fit all

Updated on Feb 26, 2021 07:23 AM IST

Customers say they almost never find the brand of their preference at their local liquor store, where owners try and push unknown makers manufacturing unheard-of labels

According to the latest rules, revised in light of the pandemic, liquor shops in the district can remain open only from 10am to 9pm.(Reuters file photo. Representative image)
According to the latest rules, revised in light of the pandemic, liquor shops in the district can remain open only from 10am to 9pm.(Reuters file photo. Representative image)
ByAbhishek Dey

It is late afternoon and a few men are unloading cartons from a truck outside a government liquor shop in north Delhi’s GTB Nagar. Afternoons are lean in terms of footfall. Two middle-aged men approach the person in charge of the shop and ask for a particular brand of whisky.

The shopkeeper offers an alternative brand claiming it is new and will “taste the same”. It is also slightly cheaper than the brand the customers asked for. The two men insist on their choice. The manager claims the particular brand is out of stock.

The next shop is 2km away. The two men exchange looks and agree to buy the alternative brand. In three minutes, they walk out. In the peak evening hours, when crowd outside the shop swells, one would get less than 30 seconds to take the same call.

“This is a common occurrence in the two shops near my residence. At times, I check out the other shop only to realise the shop owner there too is offering the same alternative brand,” said Sourav Poddar, an insurance executive.

Anirban Ghosh, a lawyer, has similar concerns. “At times I doubt if they are really out of stock. But what can one do? there is seldom any way to check.”

Their grievance is echoed by customers across the Capital who say they almost never find the brand of their preference at their neighbourhood liquor store, or theka, where owners try and push unknown makers manufacturing previously unheard-of labels. Many of these brands – ostensibly out of stock – are renowned and top-selling labels globally, but don’t seem to find a space in the shelves of Delhi’s shops.

The problem mitigates at some of the bigger retail outlets, especially in malls, but it is difficult for many customers to make that trek.

“If customers are very specific about the brand, they can choose to travel to other shops and check. But that option is not always available because – there is time constraint or one can be too tired. A lot of customers end up taking the suggested alternative. It is one of the most common things and definitely affects the liquor buying experience in the city in a negative way,” said Himangshu Sharma, who works with an audit firm.

Experts and government excise officials say this practice – termed as brand pushing or brand suppression – is widespread and afflicts both government and private shops. They add that this strategy used by shop owners to promote certain brands as an alternative to a more popular brand – often for a commission or share of profits.

“The alternative is often slightly cheaper. It is often a new brand. If a shopkeeper lies about the brand which the customer had actually asked for going out of stock, it is a malpractice and violates excise rules. Repeated violation can lead to cancellation of license,” said senior official in the excise department, asking to not be named.

He cited a 2018 study commissioned by the excise department that found an unusual drop in sales of some prominent brands and a sharp increase in the sale of some new brands of whisky, especially in the price range of 360-440 a bottle. Official analysis of six prominent national brands showed that private shops far outstripped government shops in generating excise duty revenues, often threefold, suggesting that in many government shops, local, unregistered brands were being sold.

In 2019, a survey by Local Circles found 68% of 12,000 respondents in Delhi rarely found their preferred brand in government liquor stores. Of this, 49% respondents ended up buying the alternative brand and 19% shopped from neighbouring states.

Current government regulation doesn’t help either. The rules of classifying liquor club 80% of Indian Made Foreign Liquor (IMFL) under one slab, and the process of registering foreign liquor is complex and four tier. In addition, the rules facilitate the registration of unlimited varieties cheap liquor with a minimum-sale criteria, meaning that shopkeepers and manufacturers have an incentive to push a particular brand to meet the threshold. There are at least 30 brands of just whisky alone that are sold only in Delhi, said a person with knowledge of developments.

This also leads to possible loss of revenue. For example, premium brands of whisky command a licence fee of 25 lakh in Delhi; if an off-the-books brand is sold instead, this revenue is foregone. Plus, per bottle, the government levies roughly 40%-50% excise duty. This means that if the price of a premium brand is 400, the government stands to lose about 160 to 200 per bottle if an off-the-books local brand is pushed by retailers.

The Delhi government earned 5,028.17 crore as excise duty in 2018-19, and officials believe the actual income should be much more. Officials also pointed out that globally known brands like McDowells, Royal Challenge or Royal Stag were suppressed at many government shops while some lesser-known brands were pushed.

Why does this happen, and where?

The excise department official, quoted above, said that instances of brand pushing and brand suppression are found in both government and private shops. “But the incentives are different,” he said. Delhi has 720 registered liquor stores, 460 of which are government run and the rest by private firms or individuals.

In government shops, a salesman – who is a government employee -- is usually offered a commission by a new unestablished brand, either as money or a percentage on units sold. “He is likely to look at it like an additional income. It definitely violates excise rules. The department acts on complaints. Repeated violations can lead to license cancellation,” the official added.

The process is more complex in private stores – where several shop owners double up as small-scale liquor manufacturers.

“For private shops, it can be a case of some license holders turning manufacturer and then trying to endorse their own brand as an alternative to existing brands. This possibility exists because in Delhi several license holders are manufacturers too… shops may also choose to give more prominent display to one brand over another,” said the official. The government doesn’t have any concrete figure on how many licence holders are also manufacturers.

Worse, in the case of private stores, lopsided display to some brands is not considered a malpractice — unless a shop owner is lying to customers about non-availability of a particular brands. “This is unethical and a contract violation between buyer and seller. If found guilty, one’s license can be suspended for the fiscal year concerneds,” said the excise official.

Vinod Giri, director-general of the Confederation of Indian Alcoholic Beverage Companies (CIABC), confirmed that brand pushing and suppression happens in Delhi. “We have to understand what enables brand pushing in the first place. It is a shortage of liquor stores in Delhi which gives disproportionate power to the shop owners and managers. They can use the power for such malpractices. Brand pushing can be tackled with facilities such as walk-in, enabling the customers to pick up the brands from shelves and proper display of stocks with electronic boards,” he said.

Delhi has 720 liquor shops, against 1,190 in Mumbai and 1,794 in Bangalore, showed records of the excise department. The government in Delhi is working on a plan to increase the number from 720 to 916 – for which fresh licenses have to be issued.

Sunil Saxena, a member of the Delhi Alcobev Retailers Association, a group of 107 prominent retailers based in the city, differed in his assessment of the situation. “I see it as a marketing strategy. If the shop owner is lying about the non-availability of certain brands, it is a malpractice. But other than that, there is nothing wrong in suggesting new brands to clients as options. If the brand is of poor quality, the customer will not buy it the next time. Also, brands sold in Delhi have to pass numerous quality tests. Too much government crackdown in this regard can lead to the government indirectly favouring big players.”

But several customers has the view that brand pushing was a problem and malpractice, not only a marketing strategy.

“The best thing would be to let customers decide on their own without any intervention. People know their brands well. The new ones should instead invest in advertisement and other forms of marketing,” said Kamal Borthakur, a software engineer. Anuj Shah, a restaurant manager, agreed. “How come so many prominent brands go out of stock at the same time from so many shops and there is no news about it? It is clearly a malpractice that is affecting customer experience,” he said.

The government has tried in the past to rectify the problem, but to indifferent results. In 2019, the city administration made it mandatory for government shops to have display boards showing real-time availability of stocks of different brands. “But there have been numerous complaints about boards found non-functional and not being updated real-time even though that is totally manageable because electronic record-keeping is must for liquor trade in Delhi both at wholesale and retail sectors. All bottles have to be scanned when they are packed or sold,” said the excise official quoted above.

The problem of brand pushing is a reason used by the Delhi government to justify its presence in the business of selling liquor. But the chain of ownership is layered and confusing – the 460 shops are owned by four different agencies: Delhi Tourism and Transportation Development Corporation (DTTDC), Delhi State Industrial and Infrastructure Development Corporation (DSIIDC), Delhi State Civil Supplies Corporation Ltd (DSCSC) and Delhi Consumer’s Cooperative Wholesale Store Ltd. (DCCWS).

With lax monitoring and uneven enforcement of norms, many wonder if the government should quit the liquor retail business and instead focus on rationalising the excise and licence regimes and better implement rules. “It makes sense for the government to reduce its presence the retail sector. The government shops in Delhi are anyway not contributing to improving the customer experience. They are too crowded, there is hardly any space for approaching the counters, forget shelves and self-service,” said Vivek Makhija, a Delhi-based businessman.

The government said it is aware of the problem and, in its new proposed excise policy, focused on quality and “taste” of the liquor sold in Delhi by making registration difficult for less-known varieties often pushed as alternative options. The government also plans to do away with whiskey and rum brands that are priced below 140 for a bottle, irrespective of quantity sold in other states and all over India in the previous year.

A Delhi government official also pointed out that several states – such as Kerala, Tamil Nadu and Andhra Pradesh --- were in the business of selling liquor. “In Delhi, government and private shops have to scan each bottle before they are sold. The government can access the data. We usually keep an eye on unusual decrease in sales of prominent brands and unusual increase in sales of new brands over a period of time. But we do not have the resources to do it area-wise or shop-wise round the year. Through the proposed records we are trying to address the problem at its origin,” said the official.

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