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Regulatory challenges for alcoholic beverage industry
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Thursday, 01 December, 2022, 12 : 00 PM [IST]
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Ashwin Bhadri
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The alcoholic beverage industry in India is rapidly growing. With the penetration of foreign brands in local markets, increased spending capacity of the population, change in lifestyles, and new trends keeps alcohol beverage industry in the country on its toes. Be it a small celebration or a grand party, alcohol beverages never go out of demand.
However, it is not easy for the alcoholic beverage companies to operate smoothly. There is no doubt that the alcoholic beverage industry in India faces many regulatory challenges. This is in part due to the country's relatively young history as an alcoholic beverage producer, and also because of its varied topography. These factors make it difficult for Government and industry alike to create a regulatory framework that is consistent across all areas of the country.
The distribution and sale of alcoholic beverages is regulated inconsistently across the length and breadth of India. At the state level, the states set up their own regulatory bodies to oversee alcohol sales in their jurisdictions. These agencies generally have the power to regulate both the production and distribution of alcohol within their jurisdictions.
They are also responsible for enforcing the licensing regulations in place at their states. In general, these state agencies are responsible for issuing licenses to producers and wholesalers of alcohol within the state. They can also impose restrictions on how alcohol is distributed and sold in the state. For example, many states have strict regulations on the sale of alcohol during certain hours of the day or week. They also place restrictions on the sale and distribution of alcohol near schools, playgrounds and other areas where children are likely to congregate.
In addition to the regulatory requirements imposed on the industry by the state authorities, there are a number of legal restrictions that apply throughout the country. These restrictions are designed to protect the interests of underage drinkers and those not legally permitted to consume alcohol.
The penalties for violating these restrictions can be quite severe. Anyone convicted of supplying alcohol to an underage person can be fined heavily and/or be imprisoned for up to five years. Similarly, anyone who provides alcohol to a person without a valid license may be fined a colossal amount of money and/or be imprisoned for up to three years.
To start operations for manufacture and distribution of alcoholic beverages, businesses need to acquire all the necessary permits from the regulatory authorities. They also need to conduct safety tests to ensure that the products you produce are safe for consumption. Not only the products, companies also need to ensure that the bottles used to package their products are safe.
Apart from that, regular vendor audits must be performed to check if different vendors are implementing the guidelines and standards set by the companies to ensure finest quality of raw material procurement, manufacture, packaging and distribution. Additionally, businesses will also need to adhere to the strict health and safety regulations enforced by the Indian government.
Given the complexities involved in operating in this industry, it is advisable for companies to hire a consulting firm that has extensive experience in managing businesses in the food and beverage sector. This will allow businesses to focus on core business activities while leaving the regulatory matters to the experts. Further, businesses will need to get a Registration Certificate from the Food Safety and Standards Authority of India (FSSAI).
This will ensure that the products comply with India's food safety regulations. In order to run a winery or brewery, companies need to get a Winery/Brewery registration certificate from FSSAI. After obtaining all the required permits, only then can companies start manufacturing and distributing alcoholic beverages to the target audience.
Regulatory challenges for the alcoholic beverage industry in India include liquor taxes, licensing requirements, trade barriers and other market-related obstacles. Compared to other developed markets, however, these issues are less prominent in India. The primary challenge faced by the beverage industry in India is the high degree of Government intervention.
The Indian Government also keeps introducing new norms and guidelines for raising the safety standards for the food and beverage industry in order to ensure safe consumption for the consumers.
Despite these challenges, there are several successful companies that have managed to penetrate the market and make a name for themselves. These companies are innovative and have adapted their business models to meet the challenges of conducting business in India.
Navigating the way through the regulatory challenges can be difficult for foreign players operating in the market. However, there are several opportunities that are available that can help companies enter the market successfully. These include joint ventures with local partners, setting up distribution agreements with Indian players and entering into partnerships with local distributors.
Liquor production is largely concentrated in the southern part of the country due to the presence of large number of distilleries there. India is also considered to be one of the largest consumers of alcoholic beverages in the world.
(The author is founder and CEO at Equinox Labs)
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