The journey so far - Desmond Nazareth

You were studying film making and then developing software in the United States - how come you have entered into alcobev industry? 

I’d call it an accident. When I came back to India in 1999, I wanted to do certain projects in India & one of them was a film project based on a book by Salman Rushdie that I soon found I couldn’t do, as the complete rights for the book had already been sold to somebody anonymous.  So I had one slot free for a new project. Around that time, I was stocking my home-bar in Mumbai because my friends were asking me to make cocktails for them - they knew of my great interest in cocktails. I went searching for agave spirits from Mexico, i.e. tequila, and also orange liquors from Europe, like Cointreau. I could not find them in Mumbai easily and when I did, I found them to be very costly. This triggered an interest to explore why the famous tequila was made in only one country and had a moment of realization that I had seen similar blue-green agave plants in India when I was growing up. After much R&D, I decided enter the Indian alcobev industry. I did pure research for 4 years & another 3 years of development, then started the company, Agave India, in 2007 – it turned out to be India’s first ‘craft’ distillery! (More details are available in the ‘FAQ’ section, under ‘About Us’ on our website (www.desmondji.com). 

What were challenges you have faced in order to set up a distillery in India?

One of the biggest challenges was getting people to understand what a ‘microdistillery’ was - the concept did not exist officially in India! Also, to set up a production unit, I had to figure out where blue-green agave would be available in sufficient quantities. I started looking for land near the shared borders of Andhra Pradesh, Karnataka & Tamil Nadu. It took around 6 months to find a site that fitted many environmental & business requirements. Getting all the requisite permissions was another huge challenge. I had to face all levels of bureaucracy, starting from village level, district level, state level and even central level, to get all my clearances. There were numerous other permissions to be obtained, including clearances from the Factories department and the Pollution Control Board.

As per your experience, how popular is the liquor drinking culture amongst the Indian drinking population?

Liquor drinking is treated very hypocritically in India, where there are lots of people who drink around the country - men & women, urban & rural - but drinking is often treated as a ‘social evil’ even by the government, which earns a huge percentage of its revenue via duties, etc. Rural areas have some of the cheaper country liquor & IMFL - villagers are very price-sensitive & generally cannot pay for premium spirits. While all our products are geared to urban areas - for the middle class & richer segment - people who can afford.  Populations in urban areas have considerable exposure to international spirits & liquor, along with exposure to cocktails & imported scotches. Over the next few years, India’s youth population is going to be predominant, so our target audience is drinking-age youth, men & women who are familiar with shots & cocktails. Our focus is currently on cities - tier  I & tier II. In time, we may extend to tier III. 

What’s the current scenario of the liquor business in India and where do you see the liquor industry in the next five years?

In good times or bad times, liquor is in demand and consumed! The liquor industry is growing at a reasonable rate, with the demand for premium spirits & liquor increasing. It should grow significantly with the increasing number of people who are of drinking age in tier I and tier II cities. With more and more foreign companies bringing their alcobev products to India, the range of choices will increase dramatically.

In the present scenario where do you see the importance of e-commerce in the alcobev industry?

E-commerce is currently possible in India in terms of people ordering liquor, but only within certain geographically territories e.g. in Karnataka, where certain vendors offer home delivery for those buying alcohol online. You may find similar scenarios in Delhi & Mumbai. Alcohol is a state subject. Cross-state e-commerce is not likely to happen because alcobev laws, rules & taxes are dramatically different across states. For example from Goa to Maharashtra, there is almost 2.5x increase in price so cross state business is extremely difficult. In the U.S.A you can’t order alcohol online except from within the state, but in England you can order from across the Europe from different countries, to the best of my knowledge. 

Does Packaging of the product plays an important role in selling the brand in the country (If yes then how)?

Typically, packaging is not paid much attention by many of Indian alcobev companies, as most of them are into sub-premium market, but a few players like us, working in premium & above segment and keeping an eye on international market, as well as branding, have to pay great attention to packaging. It has to be eye catching & of international quality. Our brand story is carried by our bottles & packaging. 

On a scale of 1 to 10 with one standing for poor to 10 being excellent, where would you rate our Indian liquors?

There are liquors that start in 1 & others end in 10 – in other words, we have the whole range! There is tremendously varied spectrum, from country liquor, low-end IMFL to higher-end IMFL to premium to super-premium, exportable liquor. There are few companies like us making world-class spirits now in India trying and succeeding to be 9 or 10 on your scale, but we are such a tiny fraction of industry, with the bulk being in the sub-premium area going all the way from 1 to 8. There is basic ENA-based cheap alcohol which cannot be even evaluated. Sometimes people making this do not care about the quality of the ENA & and get involved in adulteration, and the people who consume this and suffer are mainly the poor from villages or slums. 

Do you think rules & regulations should be same for all the states?

Typically, packaging is not paid much attention by many of Indian alcobev companies, as most of them are into sub-premium market, but a few players like us, working in premium & above segment and keeping an eye on international market, as well as branding, have to pay great attention to packaging. It has to be eye catching & of international quality. Our brand story is carried by our bottles & packaging. 

On a scale of 1 to 10, with 1 being the poorest and 10 being excellent, how would you rate Indian liquors?

There are liquors that start in 1 & others end in 10 – in other words, we have the whole range! There is tremendously varied spectrum, from country liquor, low-end IMFL to higher-end IMFL to premium to super-premium, exportable liquor.  There are few companies like us making world-class spirits now in India trying and succeeding to be 9 or 10 on your scale, but we are such a tiny fraction of industry, with the bulk being in the sub-premium area going all the way from 1 to 8.  There is basic ENA-based cheap alcohol which cannot be even evaluated. Sometimes people making this do not care about the quality of the ENA & and get involved in adulteration,  and the people who consume this and suffer are mainly the poor from villages or slums. 

Do FSSAI and excise have to change some of their rules that will help the Industry to grow in a better way (if yes then in what ways?)

For starters, FSSAI have to fully understand the specific needs of the distilleries & agro processing plants.  They are interested in eventually protecting the consumer. They ensure that companies like us put our ingredients on the label. But they could also do random testing of alcobev products & see if we are meeting the requirements for potability. Instead, they are concerned if a truck transporting raw material or sealed and bottled finished product from one state to another is FSSAI certified (!), which is not right. They should be testing the ENA or the finished product based on ENA. They must learn about distillation before looking at consumer oriented safety issues. FSSAI and Excise must also drastically reduce paperwork. Excise must keep the excise duty down to the minimum - they must also encourage fair competition ensuring that more entrepreneurs make new products more easily, by virtue of pro-rata smaller fees for small producers, who are currently treated more or less the same as the very large producers.

Where do you think our Indian liquors are lagging in competing with international brands?

Since we are very price conscious consumers in India, so we currently have an overall low exposure to international quality spirits & liquor. Indian consumers are quite used to lower quality products that use flavored ENA. There is an opportunity for companies to make pot-still based alcohol - this process actually captures the fermented flavor of the natural substance it is made from, like we are doing. Indian companies could make pot-still alcohol like it is made abroad to upgrade the profile of their brands with respect to international brands, instead of taking the easy route of flavoring ENA. 

Can you elaborate on the issues which hinder the growth of the alcohol industry in the Indian market?

I think the main issues are the very painful rules & regulations for starting a distillery or a bottling plant, followed by any number of requirements that vary dramatically from state to state. States can at least agree that they should have a common label - that would make a huge difference, e.g. if I have 8 products in 5 states, so I have to print 8 x 5 = 40 variations of labels! Why not let all manufacturers make one label per product, with the only variation being a line printed ‘for sale in this state, and not for sale in that state.’

Can you elaborate some issues which hinder the growth of alcobev industry in the Indian market?

I think the main issues are the very painful rules & regulations for starting a distillery or a bottling plant, followed by any number of requirements that vary dramatically from state to state. States can at least agree that they should have a common label - that would make a huge difference, e.g. if I have 8 products in 5 states, so I have to print 8 x 5 = 40 variations of labels! Why not let all manufacturers make one label per product, with the only variation being a line printed ‘for sale in this state, and not for sale in that state.’ 

What is your take on the retail price variation in different states of the country - does the central government have a role to make the common retail price in all states?

State governments, when falling short on revenue, often arbitrarily raise the duties on alcohol & collect all the additional revenue. It happened in Karnataka about a year ago when the retail prices suddenly went up 30% to 40% on all alcohol, because government felt that it would need more revenue. But there is a point at which raising duties becomes counterproductive. Most companies think ten times before entering Maharashtra because it takes a huge chunk of the retail price as tax. When a state keeps raising the taxes, ultimately there will a saturation point where overall revenue will decrease, because fewer companies will come to do business in that state. 

How do you see the impact of alcohol awareness website such as ‘All About Daru’ on social stigmas & misconceptions related to alcohol in India?

It’s a very positive thing that you folks are doing creating a website which provides both information to consumers and a platform for people who interact with the alcohol industry. You are informing people about all things ‘alcohol’ – e.g. what varieties of alcohol are available, how they are made, what people actually drink & what are the better ways to drink.  I presume you will be also providing various cocktail recipes & insights to make the drinking experience more interesting. There is also a social responsibility that you are fulfilling by discussing the impact of excess drinking of alcohol & dealing with alcohol addiction. Hopefully all this, and more to come, from ‘All about Daru’ will reduce social stigmas and misconceptions slowly but steadily.

 

DESMOND NAZARETH

FOUNDER | AGAVE INDIA


Specialization

Craft Distiller
 

IITian Desmond Nazareth's love for cocktails set him on a unique journey. It led him, in 2011, to launch ‘DesmondJi’, an Indian premium brand, producing international quality spirits, liqueurs and alcoholic cocktail blends. He has been Managing Director of the brand owning company, Agave India, since 2007. 

 

 
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