National Rum Day offers the perfect opportunity to explore this newly-crowned ‘Drink of Lockdown.’ With sales of rum increasing by a staggering 38 percent from April to June of last year, we focus in this blog on the global best-selling rum brand, McDowell’s No1.
India rum exports
McDowell’s No1 Celebration is a clear forerunner in rum sales, having overtaken household favourite, Bacardi, in the race for top spot. Founded in India almost two centuries ago by Scottish distiller, Angus McDowell, the company originally focused on importing liquor, tobacco and groceries to British people stationed in the Chennai region. McDowell’s was later bought up by a brewery, which established a distillery to create IMFL (Indian-made Foreign Liquor) — meaning any hard liquor made in India that is not indigenous to it. McDowell’s No1 Celebration is currently manufactured and exported by United Spirits.
The benefits of exporting from India
McDowell’s No1 is an umbrella brand, manufacturing numerous beverages including McDowell’s No. 1 Scotch Whisky. The company has faced a number of exporting challenges over the years, not least when banned by the Scotch Whisky Association from using the word ‘Scotch’ on its labelling.
However, the benefits of running a successful export business from India far outweigh the obstacles. The Indian economy is growing at an exponential rate with exports worth over £3.5 trillion annually. Alcohol exports alone account for over £350m, demonstrating an impressive upturn in growth over the past decade.
India is a fast-growing nation, which is increasingly attractive to foreign investors due to higher disposable incomes and investment-friendly policies and reforms. In fact, India has earned a place as a top ten improver, according to a study conducted by the World Bank. Junaid Ahmad, World Bank Country Director in India, praised this accolade, saying, “India’s impressive progression in the Doing Business rankings over the past few years is a tremendous achievement, especially for an economy that is as large and as complex as India’s. Special focus given by the country’s top leadership and the persistent efforts made to drive the business reform agenda, not only at central level but also at state level, have helped India make significant improvements.”
The challenges in exporting from India
Exporting alcohol, particularly from a warm climate, involves a unique set of problems:
- evaporation waste, which is 3-4 times higher due to the heat
- fixed fees, such as distillery licence fees
- label and brand registration costs
- bottling fees and local taxes
All of these increase the cost of manufacture, making India one of the most expensive countries in which to manufacture alcohol. India exports just 0.2% of its alcoholic beverages to the United Kingdom, whereas UK alcohol makes up for almost a quarter of India’s alcohol imports.
Restrictive policies also complicate matters. Rum (and whisky) have to be matured for at least three years, but this policy ought to be irrelevant in India as maturation occurs at a much faster rate due to environmental conditions. This seems to be an unreasonable practice and so it should come as no surprise that the Confederation of Indian Alcoholic Beverage Companies (CIABC) is calling for a reform of this particular trade policy.
Researching the Indian market
You’d be right in thinking that these multiple challenges result in a potentially problematic business model. However, with proper research and a strong team on board, India can be a valuable market in which to build a successful export business. To navigate the inevitable challenges, you will need to implement strategic planning and undertake due diligence. It will also be necessary to commit to the process by conducting in-depth market research and constructing watertight strategies for every aspect of your business, from marketing to navigating trade tariffs.
The first steps are unarguably the most important, as these are the processes that will provide the cornerstone for your business. Without a solid understanding of any issues you may face, you will immediately be placed at a disadvantage.
Knowledge is key, so we would recommend assembling a strong team of specialists. Seek legal advice to make sure you aren’t exposing your business to any tax penalties by inadvertently breaching regulations. Ensure your support team understands your global needs, which will differ greatly from your requirements when trading domestically.
Transcreation and localisation
Perhaps a lesson could be learned from the banned ‘Scotch’ label issue. Language is absolutely paramount when considering the fine details of an export business. With fourteen major, and over a thousand minor, languages and dialects spoken in India, translation and transcreation are key to ensuring that your messaging remains relevant and appropriate.
United Spirits currently export to thirty-seven countries, so language poses a substantial challenge, from labelling and marketing to handling complex trade tariff paperwork. Preparation is key; research the challenges faced by other companies within your sector and preempt them, implementing strategies before coming face-to-face with the language barriers.
Confidently yet sensitively projecting a brand to a vast and diverse audience is a monumental challenge, and a missed, or poorly translated, message can be hugely detrimental to your business.
Give consideration to:
Starting a business in India can take a long time; in fact, just registering the business can take over two months. Commercial disputes, should any arise, can take up to four years to be resolved.
- Domestic protection
Unsurprisingly, India wants to protect its domestic producers and stringent requirements apply for investors, with limits imposed on the foreign ownership of businesses.
- Huge market
The benefits of a huge market are countless, but there are also drawbacks. The fragmented nature of the Indian market means that each state can be considered a nation in itself, creating variances you will need to navigate.
How Albion can help
Operating in India can be a rewarding process, but it is critical to have a partner on board that understands your global needs. Albion offers more than translation. We work to guide your business through what is a complicated and fraught process, offering tailored support to help you better understand the culture and behaviour of the market you are entering. To find out more, please contact our experts.