Sugar barons push into the country liquor business, strike gold

Sugar barons push into the country liquor business, strike gold

Bunty Babli, Miss Rangeeli, Dabang Gold, Shahenshah, Tarang, Sada Bahaar and Joshila – not exactly Bollywood film titles but popular all the same. These are some of the fastest-selling affordable liquor brands in the country spawned by conservative business houses.

A serendipitous mix of regulation and business opportunity resulted in some of India’s largest sugar and chemical manufacturers, including Triveni Engineering, DCM Shriram, Dhampur Sugar Mills and India Glycols Ltd (IGL) trying their hands at the alcohol business, an adjacency to their core segments.

They are on a high and they want to go higher by expanding their liquor portfolio. Some want to climb up the value chain and enter the high-margin Indian-made foreign liquor (IMFL) segment.

“IMFL is the golden goose,” said Tarun Sawhney, managing director of Triveni Engineering & Industries. “That’s where the real margins are, frankly speaking. That’s where the real brands are.”

Triveni entered the country liquor space last year through four brands including Miss Rangeeli and Shahenshah. “Yes, slightly filmy names, I must admit. But they do very well,” Sawhney told ET. The company is selling 125,000-130,000 cases a month, he said.

The company has entered into a non-exclusive agreement with a leading alcoholic beverage company to bottle its brands for sale in Uttar Pradesh. The experience, Sawhney said, will come handy when it makes its IMFL foray.

So how come a bunch of established sugar manufacturers such as Triveni, DCM Shriram and Dhampur Sugar Mills all of a sudden started distilling country liquor?

The credit goes to the Uttar Pradesh government. To fight the menace of illicit hooch and alcohol poisoning, the Yogi Adityanath government recently twice increased the mandatory quota of molasses sugar mills in the state must sell to country liquor manufacturers to maintain a steady supply of quality liquor.

At present, sugar mills must sell 18% of the molasses they produce to country liquor makers.


Serious business
Now, this mandated sale fetches just a quarter of the price they get in the open market. The companies quickly realised that it would be more profitable for them to start making their own liquor to meet this obligation.

What started as a means to aid their margins has become serious business for many sugar manufacturers.

Now their top management doesn’t shy away from taking a sip to ensure that what they sell meets quality and flavour standards.

“We have all tried it,” said Vikram Shriram, vice chairman of DCM Shriram. “It is equivalent to whiskey or vodka or gin or whatever, but with a santra (orange) or lime or some other flavour.”

DCM Shriram commissioned a country liquor bottling line of 200,000 cases a month in March. But it has no plans of entering the IMFL space in the near future, Shriram said.

Triveni’s Sawhney, too, likes what its master blender creates.

“My guidance to him was that it doesn’t matter if this is sold in 200 ml bottles through country liquor stores, the taste of what we’re making has to be unparalleled,” he said. “I’ve personally tried it, it’s pretty good.”

India Glycols Ltd (IGL) entered the liquor business as a value-added opportunity for its alcohol manufacturing business a few years ago. Now, it is one of the largest country liquor makers in Uttar Pradesh and Uttarakhand, generating Rs 3,718 of revenue from potable spirits in FY21.

“We have traditionally been a good-quality alcohol manufacturer and we have been supplying ENA (extra-neutral alcohol) to other portable alcohol manufacturers,” Rupark Sarswat, chief executive officer of IGL, told ET in a recent interaction. “So, there is an inherent synergy for us.”

The company has a rather unique way of climbing up the value chain – it is selling IMFL made from molasses. Spirits like whiskey and brandy are usually made from grain.

“We’ve introduced a few brands and obviously there is a conscious effort to get into the more premium segments,” Sarswat said.

IGL has also launched tetra packs of rum, whiskey and vodka under its Bunty brand and also launched a line of grain-based spirits under the Dabang Gold brand.

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