July 18, 2011

"The Entrepreneurial Journey from Goan Feni to Scotch Whisky" - Article by Sanjay Anandaram

India is the world’s largest whisky (in all its variants) market and it’s fast growing market for alcoholic products is worth in excess of $22billion. About 40 million bottles of Scotch whisky was imported into India from Scotland last year, up by 40% from 2009. Recently, India granted geographical indication of origin (GI) status to Scotch whisky, a legal protection that will help reinforce the authenticity of the product and enhance the market potential. This recognition is “good news for Scotland and great news for one of its most important exports” according to the Scotland Office Minister. Scotland’s whisky producers naturally see India as a priority market and the granting of the GI will ensure that Indian whiskies (99% of the consumption today) will not be able to use the term Scotch whisky on their products.

What was once an unorganized and illegal family activity of distilling is now a global recognized branded product. The Scotch whisky industry is over $6 billion in size (with 80% being exported internationally), employs around 10,000 across around 140 distilleries and generates a gross value-add per employee of over $400K with employment costs of $72K.

Huge investments in marketing, visitor-centres, processes, education and training, research, technology and production facilities has generated this. Mythology and legend have been created around this product has been created and subsequently consumed around the world.

Now compare this with say, the state of Goan Feni or Fenny which too has a GI tag - obtained in 2009. Most people are unaware of the GI tag (including producers). The industry is unorganized, small and family owned, home run, with low levels of education. The processes and technology are traditional with little or no investment in research and training. Businesses are self-financed. The branded segment is tiny with most of the produce geared for consumption in bars. About 40,000 people are employed across 4000 mini-distilleries/stills and about 1million bottled litres of cashew feni were made in 2005.

In other words, the Goan Feni industry is largely like what the Scotch whisky industry was a century ago. And worst of all, because Goan Feni is classified as a country liquor, it cannot be sold outside Goa! Goan Feni is losing market share rapidly as well.

This scenario isn’t unique to Goan Feni but is hugely illustrative of the state of affairs across a range of industries in India. So what’s to be done? How does one convert commodity, fragmented & unorganized, inefficient, self-financed businesses into brands that deliver a value to customers, partners and suppliers who have a choice and who will therefore pay for that value? The lack of an entrepreneurial mindset (one that sees opportunity and solves problems where others don’t) across the value chain – regulators to producers to distributors – is painfully visible.

Investments in technology to deliver products and services efficiently, in a scalable and transparent manner; Investments in marketing understand customers, market segments, define products and create brands; Investments in processes to ensure that consistency, predictability and reduce human dependency; Investments in partnerships and relationships to grow the entire industry; Investments in training, research and development; Accessing and harnessing capital and top quality people to deliver on the vision of the entrepreneurial mindset. It is the aggregation of all of these that create scalable organizations that last rather than small cottage business.

The good news is that a new breed of entrepreneurs are emerging to convert the Goan Feni metaphor to that of the Scotch whisky one. Companies like MakeMyTrip in holiday packages, Via World for travel, Flipkart in retailing, Vaatsalya in healthcare, redBus in bus ticketing, Bharat Matrimony in matrimonials, Bill Junction in bill payments, Naukri in jobs are some examples. The bad news – there’s a need for many more such entrepreneurs in many more areas!

The word Whisky comes from ancient Gaelic that means “Water of Life”. There’s a need for more passionate people with the entrepreneurial mindset to deliver the water of life to the India story and to convert Goan Feni to Scotch whisky!

Sanjay Anandaram is a passionate advocate of entrepreneurship in India; He brings close to two decades of experience as an entrepreneur, corporate executive, venture investor, faculty member, advisor and mentor. He’s involved with Nasscom, TiE, IIM-Bangalore, and INSEAD business school in driving entrepreneurship. He can be reached at sanjay@jumpstartup.net. The views expressed here are his own.