When COVID-19 first took hold last March, most F&B establishments had to either close temporarily or switch to delivery business entirely. Though the lockdown has been eased across various states, many bars and restaurants are still struggling to make ends meet.
While players in the food industry were battling hard, things were better for those in the beverage industry. The data shows that pandemic or not, Indians like their tipple. Alcohol consumption in India reached 6.5 billion liters in 2020.
Coherent Market Insights valued the Indian market for alcoholic beverages at INR 28,07,237 billion in 2018 and expects it to reach INR 54,82,851 billion by the end of 2027, growing at 7.8% CAGR during this period. Ajay Shetty, Founder-Director of Salud Beverages stated that the industry found wings in the past couple of years, as India emerged as one of the world’s largest consumers. This growth was propelled by rising disposable income amongst urban consumers and a shifting preference towards the beverages with lower alcohol content like craft beer and wine.
Shetty believes that these dynamics will continue to drive consumption, especially now that people can visit restaurants and bars, though their spending patterns might change. “In rural areas, alcohol is more a means to pass the time and alleviate stress. While these are also factors in urban drinking, a bigger driving force is social and leisure drinking. It is no longer taboo to drink simply because you enjoy it,” he pointed out.
COMFORT AT HOME
When lockdown curbs were lifted in Delhi, several restaurant and bar stakeholders witnessed growing footfalls at their outlets. However, the restricted timings and restriction on liqour sale proved to be a business dampener.
Rupesh Kumar, Manager of Gastronomica recalled how patrons would visit the Greater Kailash I restaurant to inquire whether it served alcohol. “When we said no, they chose to buy liquor from local shops and go home rather than eat at the restaurant,” he added.
At-home drinking rose from 73% to 88% during the pandemic. However, this is expected to dip as the world opens up. “As bars and restaurants open their doors, and parties become possible again, more people will go out to enjoy a drink, and the drinking at home trend is likely to see a dip,” Shetty opined.
Another interesting trend is the price consciousness that has seeped in. While a pocket of urban consumers with high disposable incomes could shift to higher end drinks, most Indian consumers are likely to stick to the more affordable offerings. This is either because they cannot afford the higher-priced ones, or because they don’t see them as being worth the premium.
KNOCKING ONE BACK
Caught off-guard by the sudden imposition of the lockdown last year, many bars and restaurants were stuck with large stocks of alcohol, especially beer, which were near their expiry dates. Since home delivery was not permitted in most states, these players suffered significant losses.
The F&B industry’s loss was the liquor shop’s gain. As soon as the latter opened up, there were endless queues, and many stores found themselves out of stock in an instant. This once again proved that people loved their beverages and were willing to line up, and pay up, for it.
“Not having access was absolutely the biggest factor. So, people were absolutely willing to spend. The fact that they had no access is what led to the major revenue dips since March 2020,” Shetty explained.
When bars and restaurants initially started tentative operations, several state governments delayed permissions for online sales and limited limiting for dining services. Mohan Pujari, owner of a Mumbai-based restaurant said, “Earlier, civic authorities used to impose regulations like prohibiting us from serving in open spaces. We never understood the reasoning behind these decisions. Now, they are insisting that we follow these very practices! While, we still don’t see the sense in it, we hope these policies will help the industry recover after the pandemic.”
LET’S DRINK IT OVER
Alcohol is the major revenue stream for most players in the F&B industry; which is one reason they invest in alcohol permits in the first place. Of course, the pandemic was a huge blow. Just like a majority of them pivoted to home delivery of food since COVID-19 struck, can delivery of alcohol also help them recoup some business? Shetty sure thinks so.
“When the government permitted wine shops across the country to deliver home, we saw the positive impact it had on their recovery. Allowing restaurants and bars to do the same will definitely provide a huge boost in revenues, and may even be the difference between staying afloat and shutting shop for some,” he emphasised.
Of course, there are logistics and regulatory challenges that F&B establishments are likely to encounter if this move takes place. This includes showcasing their liquor licenses and avoiding liability issues or managing any unexpected reputational damage as well as dealing with societal mindsets.
According to Shetty, the latter has changed notably in India, especially in young urban pockets, though reputational damage is still likely. “However, being stringent about following all existing regulations, and any new ones that might be put into place if this happens, is vital. It will go a long way in maintaining a good image both publicly, and with the authorities,” he suggested.
That brings up another interesting question – can alcohol sales only be allowed as part of a food order, or should state governments also permit restaurants and bars to permit sale of alcoholic beverages alone? After all, when you think about it, a guest might visit an F&B outlet to order just a drink. Hence, ideally, shouldn’t they be allowed to order beverages for home delivery?
According to Shetty, it is time consumers are given the liberty to choose how they would like to enjoy their beverage. “They may enjoy the food of one establishment, but the drinks from another. So allowing alcohol-only deliveries will allow more flexibility for consumers, as well as restaurants and bars,” he pointed out.
For restaurants and bars, the road to recovery is undoubtedly going to be a long one. Fortunately, some state governments are willing to back them, if only to buffer their excise revenues. And their consumers are all but hoping for a radicalisation in this space, with freedom to choose what and how they imbibe.
