India’s largest liquor company wants to deliver the bottle full throttle.
United Spirits, the Indian subsidiary of British alcohol major Diageo, announced on June 25 that it will pick up a 26% stake in liquor-delivery startup HipBar for Rs 27 crore ($4 million).
This is Diageo’s first investment in a technology startup in India, which, at $35 billion, is one of the world’s largest alcoholic drinks market.
United Spirits’s move comes amidst shifting consumer habits in the country with urban Indians increasingly meeting their retail purchase-needs online, particularly when it comes to food and beverages. Food delivery startups like Swiggy and Foodpanda have already cashed in on this phenomenon, with the former recently attaining unicorn status.
HipBar, which operates in Chennai and Bengaluru and allows shoppers to browse through a range of alcoholic beverage brands, fits right into this trend.
“E-commerce is making an impact on just about every industry imaginable, and the beverage alcohol industry is set to be the next sector to be disrupted by the continued shift to digital,” Anand Kripalu, CEO and managing director of Diageo India, said in a statement to the BSE. “This investment allows us to discover ideas that anticipate shifts in consumer behaviour and enables us to remain at the forefront of trends.”
But then, selling alcohol in India is not an easy business.
The business
Liquor sale comes under the purview of state governments in India, with each having its own set of laws. In many states, sales happen through government-licensed local vendors, while some even prohibit sales on the internet.
So HipBar’s reach could be limited. “It might work very well in certain markets, say Bengaluru, while being restricted in others,” said Harish HV, a management consultant.
HipBar was launched in 2015 by Chennai-based entrepreneur Prasanna Natarajan. It started out as a tech platform for tipplers, initially tying up with various bars and restaurants in Tamil Nadu’s capital city to let customers order booze through its app and pay on delivery. And even after United Spirits investment, HipBar will remain independent. A company spokesperson declined to comment on its expansion plans.
Now, however, shoppers can check the availability of their preferred brands in a particular area, and the company subsequently provides a delivery or a pick-up option via a local store. But brands do not directly sell on HipBar. In Bengaluru, the service operates in close to 30 localities.
“The business is more about delivery than about alcohol,” said Shubham Anand, an analyst with consulting firm Red Seer. While startups like Dunzo already deliver pretty much everything, including alcohol, HipBar’s alcohol-only model is an outlier. “That’s because the consumption of liquor in bars and pubs in the top metros is definitely growing. So demand for in-home consumption is also likely to gain a lot of traction in future.”
This article first appeared on Quartz.