Bangalore: First it was fruit juice and milk, now cheap alcohol.
Tetra Pak, a popular packaging material for non-alcoholic beverages around the world, is emerging as a preferred medium of packaging cheap liquor sold in the 180 ml measure in Karnataka, as distillers look to control costs and reduce adulteration and breakage.
More than 35% of all hard liquor in Karnataka, one of India’s biggest liquor markets, is being sold in Tetra Pak packaging, from less than 14% in April 2010, according to estimates by industry executives. Such liquor costs between Rs.40 and Rs.70 per pack.
“Adulteration is almost impossible in Tetra Paks, distribution is easier, there’s no breakage (compared with glass). So if you take the advantages over disadvantages, Tetra definitely scores over glass bottles,” said Paul John, chairman of John Distilleries Pvt. Ltd, maker of India’s fifth-largest whiskey brand Original Choice.
“If a bottle of liquor breaks in the godown at KSBCL (Karnataka State Beverages Corp. Ltd) they charge me the whole amount, including the excise duty which wipes out my profit for two-three cases,” he said. “So it’s very important for us that we can get the entire dispatched quantity safely.”
Karnataka, like most other states, is an intensely competitive market and, despite rising input costs, liquor companies have either held prices or raised them only marginally over the past few years to boost sales volumes and grab market share. In a high-volume market—Karnataka and other southern states account for over 50% of all liquor sold in India—Tetra Pak packaging is enabling distillers to keep prices low.
It costs about Rs.2.35 to package liquor in Tetra Paks and Rs.4 for a glass bottle, said Sridhar Pongur, managing director of John Distilleries. Although glass bottles can be re-used, accounting for breakage, Tetra Paks are more reliable, he said.
Pongur added that the industry was moving rapidly towards the new packaging, and John Distilleries plans to sell 80% of its liquor in the 180 ml size in Tetra Paks in Karnataka within the next year or so.
India’s biggest liquor company United Spirits Ltd (USL), which along with John Distilleries controls more than 50% of Karnataka’s liquor market, was the first to introduce Tetra Pak packaging in 2006. Its cheaper brands such as Bagpiper and Director’s Special are sold in that medium, apart from glass and plastic.
Tetra Pak is easy to use and handle and tamper-proof, said USL managing director Ashok Capoor. “Usage of Tetra Paks is in line with USL’s overall packaging innovation as well as sustainability goals, as it is completely recyclable. In volume terms, (Tetra Paks) are growing 20% in (Karnataka and Maharashtra for USL),” Capoor said in an email.
Tetra Pak is a technology owned and named after the Switzerland-headquartered company of the same name. The company, one of the biggest food package makers in the world, declined to comment.
Apart from Karnataka, Maharashtra and Andhra Pradesh allow liquor companies to sell liquor in Tetra Paks. The liquor market in India is regulated by state governments, so laws vary from one market to another. Tetra Pak packaging has seen limited success in Maharashtra and even less so in Andhra Pradesh, according to industry executives.
In most of India, over 95% of liquor continues to be sold in glass and plastic bottles, industry executives said. However, many believe that considering the advantages, it is likely that other states will allow packaging of alcohol in Tetra Pak.
“If you look at all the benefits of Tetra Paks—the cost and quality advantages for the manufacturers and the convenience for consumers—it’s a matter of time before they start picking up in other states,” John Distilleries’ Pongur said.
The move towards Tetra Paks will benefit consumers in other states as well, as it ensures quality and acts as an anti-counterfeiting measure, USL’s Capoor said.
Glass manufacturers are not too worried right now about the increasing popularity of Tetra Paks in Karnataka and the possibility that it may be adopted as a packaging material for alcohol in other states.
“Tetra is being tried in few states but with limited success. In my view, glass is the preferred medium for packaging of alcoholic products and will continue to be so in the years to come,” said Vinay Saran, marketing head at India’s largest glass manufacturer Hindusthan National Glass and Industries Ltd (HNGIL). “Tetra is more suitable for milk and juice-based industry rather than alcoholic products primarily because of loss of appeal of the product,” he said.
Some distillers said Tetra Paks would crimp profit by hurting brand image.
“My view is that over the longer term although you get that volume surge, you are damaging your brand. People buying something out of a Tetra Pak, just like buying wine out a box, will believe it is not of the same quality,” said Deepak Roy, chief executive of Allied Blenders and Distillers Pvt. Ltd (ABD), which makes the world’s largest whiskey brand by volume, Officer’s Choice. “They are appealing to masses who were originally not intended to be the target audience for brands like Bagpiper, 8PM. The whole idea was to attract people who used to drink country liquor. So you’re severely damaging the reputation of the brands. When you’re marketing liquor, image is extremely important,” he said.
Roy added that ABD has avoided selling in Tetra Paks despite the risk of potentially losing out on customers. “I would not like to have people commenting on my brands’ quality and image. I am not in the business to just get market share; profitability should drive our business,’ he said.
Gaurav Gupta, director at Deloitte Touche Tohmatsu India Pvt. Ltd, disagrees. “From a brand perspective, it’s not an insurmountable challenge to get people to accept Tetra Paks. Yes, you will need to spend marketing money on educating consumers about Tetra Paks but if you build your campaign around say, the anti-adulteration advantages of Tetra Paks, I don’t see why people won’t take to it,” he said.
For regulators, the safety of the packaging equipment is paramount, said Sandeep Dave, managing director at KSBCL, the government agency which controls the distribution and sale of liquor in Karnataka. “Tetra Pak is tamper-proof and the quality, taste and safety of liquor is preserved so there’s no issue from those aspects,” Dave said.