Liquor brand Devans weathers Covid storm, looks for new opportunities

While the alcobev industry and Devans were impacted by the virus, the industry and Devans are looking to seek new opportunities. Prem Dewan, Managing Director, Devans Modern Breweries Ltd, in an exclusive interview with Bizz Buzz, outlines the strategies that will take the company fast forward in the next couple of years

We are now up against the multinationals with all major brewers of the world having set up production facilities in India. The UB group, now taken over by Heineken, Carlsberg, AB-InBev with their Kingfisher, Tuborg, Haywards 5000 and Budweiser, etc., are our major competitors. It is tough as the international players have deep pockets

We are always willing to experiment. We have this year launched our Godfather Super 8, which till date is the only beer in the country with eight per cent alcohol. We have also this year launched our six fields cult with seven per cent alcohol which again is the only white strong beer in the country. Both the products have met with good response in the States where they have been launched despite the second wave. We plan to come out with a couple of new products in April 22, again in segments which are not there at the moment. In liquor we plan to introduce our single malt shortly followed by products in the super premium range across all segments

It has been a difficult period. How has the company coped with the situation?

Yes, it has been a difficult period, especially 2020 as Covid struck and the lockdown happened right at the start of the beer season. The summer season is the only time when breweries, especially those in the North, make some money and have positive cash flows and we invest heavily in stocks keeping in view the impending sales. All that went for a toss. Most breweries suffered huge expiries though we were lucky here that we did not have much expiries. The season of 2020 was a complete wash out. The second wave stuck again in May 21 and June 21 although the impact was not as bad as that of the previous year, but sales again were badly affected during the summer season. Our main purpose during 2020 was to weather the storm and look forward to the next year which unfortunately again suffered due to the second wave of Covid. However, sales since then have been robust and we are keeping our fingers crossed with respect to the impact of the third wave on revenues.

What has been the impact on the financials of the company?

The liquor sector has been the most impacted by the lockdowns after the hospitality industry as there was complete shutdown of the liquor shops during the first lockdown which last about two months. Hotels and bars were shut down for indefinite periods and as such financials of the whole industry suffered and we were no exceptions. Our top line went down by about 40 per cent severely impacting our operations. However, we could come out of 2020 due to extra borrowings from our bankers. 2021 has seen good sales after the initial hiccup in May and June and we hope to recover lost ground during this financial year and match our 2019-20 revenues unless the third wave extends its wings into February this year.

Which are the major markets for your Godfather brands in India?

Our major markets are mainly the North and East. I would start with Ladakh, Jammu &Kashmir, Himachal Pradesh, Delhi, Uttar Pradesh, Uttarakhand, Rajasthan, Jharkhand and Arunachal. We are also available in Pondicherry in the South. We have exited some markets purposes due to issues created by the excise policies of those States.

How important is the contribution from your liquor division?

We are very small in liquor. In fact, most people do not know that we have a liquor division though our company started its operation with a liquor unit in 1961. Our main product in the liquor division is malt spirit i.e. alcohol made from Barley Malt. We are one of the major sellers of the product in the country and sell both fresh and matured malt spirits. However, our main revenues occur from sale of beers.

Are your brands available pan India?

Our bottled liquor is presently available only in Jammu &Kashmir and Ladakh though we have a small presence in Uttar Pradesh also.

Which are major competitors in your key markets?

We are now up against the multinationals with all major brewers of the world having set up production facilities in India. The UB Group, now taken over by Heineken, Carlsberg, AB-InBev with their Kingfisher, Tuborg, Haywards 5000 and Budweiser, etc., are our major competitors. It is tough as the international players have deep pockets.

Do you plan to introduce new brands in the new future?

We are always willing to experiment. We have this year launched our Godfather Super 8 which till date is the only beer in the Country with eight per cent alcohol. We have also this year launched our six fields cult with seven per cent alcohol which again is the only white strong beer in the country. Both the products have met with good response in the States where they have been launched despite the second wave. We plan to come out with a couple of new products in April 22, again in segments which are not there at the moment. In liquor we plan to introduce our single malt shortly followed by products in the super premium range across all segments.

Is there a good market for beer and liquor in Jammu & Kashmir?

Jammu and Kashmir is probably the smallest market in the country for beer and liquors and we suffer because of that. It is not remunerative to sell beers outside your home State due to levy of import duties by the importing States. As such we focus on States which have no local breweries where we can compete as equals.

Given your location, how do you manage the distribution for your brands?

We export to over 15 States from our Jammu brewery and to such far off places as Tripura, Arunachal, Puducherry! Most of our exports during the apple season happen at a loss as freight rates rise manifold during this period but we have no option but to do so in order to take the benefit of economy of scale. All in all it's a very tough proposition; but our main focus has been quality and the results are beginning to show. Our Kotsberg Pils, a premium lager beer recently won the Silver Medal at the Brussels Beer Challenge. Our brands have regularly been winning gold medals in domestic blind competitions.

Do you have contract manufacturing arrangements across the country and in which states?

We have dabbled in contract manufacturing a couple of times with not very good results. The main issue with contract manufacturing is quality control which is our main area of focus. However, we now have two very good contract manufacturing contracts in place in Arunachal Pradesh and in Jharkhand. We are starting production in Arunachal this month and hope to start production in Jharkhand in February. Both are new breweries and we have a very good market in both the States. If all goes well we should end FY 23 with a sale of over 7 million cases from the four production facilities.

What are your plans post Covid?

We are very optimistic about post-Covid sales. We believe there is a huge pent-up demand waiting to be tapped and as such our two big production tie ups are maturing at the right time. We are also in the process of shortly commissioning our new liquor unit on the outskirts of Jammu where we are in talks with a couple of international players for production tie ups.

Do you have plans for any strategic tie-ups in the near future?

It's too early to talk about that at the moment. Let us first cross the 10 million mark in beer and introduce our super premium products in the liquor market. We would review our options after that.