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“Alcobev industry will recover from current losses much faster”
Monday, 10 August, 2020, 08 : 00 AM [IST]
Surya Phadke is founder and MD, QualeMagni, which was founded in 2012 and became operational in 2013. The company is focussed on bringing in high-quality alcoholic beverages from around the world to India. Some of its clientele are bigwigs of the hotel industry and restaurant groups. In an interview with Kimberley Fernandes, the founder explains how the global pandemic and subsequent lockdown have affected the hotel industry, which in turn has hampered the sales and supply of alcoholic beverages and the way forward. Excerpts:

What is the magnitude of the impact of loss of business due to the circumstances caused by Covid-19 upon your major clients in the hotel industry?
The impact of the pandemic can be broken into two categories. First, the current impact relates to the short-term and medium loss of revenue, loss of RoI on capex on marketing and capacity building. The second relates to the change in SOPs – In the next few quarters the HoReCa market will have to undergo a drastic change in service delivery and client management to provide a holistic safety environment to attract consumers back in to establishments. The magnitude of loss could be catastrophic for most players in the industry.

Are you providing far more favourable terms of credit to your clients (hotels + restaurants) to encourage further business during this pandemic so as to ensure steady income and revenue? What other measures are you considering for the same?
Yes, we are providing favourable terms on our brands to both hotels and restaurants to support the industry players. Our core belief of “customer first” is at the heart of this decision. However, with respect to distributed brands the situation is trickier as the whole supply change is affected by this binary change.  We are in the process of negotiating and pending advise from our legal team we are hopeful we will be able to align everyone to help kickstart the HoReCa sector. We are working with individual clients in tailoring solutions for them.

What steps should the government take to provide adequate protection to mitigate the issues faced by the alcoholic beverage industry during and post the pandemic?
The government must understand the challenges the industry faces with respect to over regulation. If the government allows disruptive methodologies and technologies such as home delivery, app-based sales, loyalty programmes to revolutionise and boost the sector in the coming quarters, the alcoholic beverage industry will recover from the current losses much faster.

What should be unlearned and what can be done differently to keep the momentum going in the post-pandemic period?
I believe the current pandemic has created new challenges for the industry. Indian hospitality is revered around the world so I don’t see the need for unlearning thousands of years of learnings – “Atithi Devo Bhava.” However we must tackle the challenges created such as hygiene, sanitisation, social distancing. These challenges once tackled will hopefully instil in consumers to come back and share a drink at the local pub sooner rather than later.

Do you foresee brands reinventing themselves in the alcoholic beverage industry in order to gain back support and loyalty of patrons? Elaborate.
Definitely, brands will have to re-invent the way they communicate with the consumer in the coming few years. The narrative has to change - As the mental makeup of current consumers has changed and those that are growing up now and will be legal to taste alcoholic beverages in the future will interact differently with brands.

The brands individually have to re-assess the consumer once the pandemic passes using the same metrics such as income, choices, trends et al. I believe the results will point to a different consumer in the post-Covid world- and to attract this consumer – “the brands must evolve”.

How is the lack of input tax credit eating away from the margins of alcoholic beverage providers?
Alcohol is out of the GST umbrella and therefore the lack of input tax credit means the tax cost must be absorbed. The quantum of impact depends on the input goods themselves but overall impact is felt by the end-consumer as some of the costs are passed onto them.

What are the challenges faced by the sector?
At the moment lack of demand is the biggest challenge. But at the same time safety of our end-consumers is the most important for us, like our tagline “High Quality-Uncorked” we must ensure a “High Quality” life for everyone.

Would you recommend peers and newcomers into the industry to move towards contactless delivery applications? Why?
I believe this is a recommendation that can be made post the various state governments allow the use of contactless delivery. The matter is contentious and it will depend on the state legislature to approve this form of operation.

If the legislatures allow this, I will recommend towards the contactless delivery option, which will be disruptive for the industry in India.

Any unique technologies or innovations that you plan to introduce in the market, with regards to preservation, distribution and storage of alcoholic beverages, post-Covid-19?
We are working with our venture fund arm “Somras Ventures” on developing technologies for improving the efficiency of the operations and distribution channels. The aim is to incentivise the loyalty of customers.

What about plans for expansion and collaboration post-Covid-19?
The crisis will drastically change the consumer mental relating to price, consumption patterns and disposable incomes. Our expansion plans include expanding into territories and product segments that have been outside our horizon. With respect to collaborations we intend to expand our partnerships in Europe.
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