Memoirs.....Musings of a sales guy at heart.....
Episode 40...
UT of Pondy and DeeKay...
I had mentioned in my earlier blog the issues we faced with Gemini...when we started bottling with Gemini, their IMFL bottling line was unused and they were just doing some qty of Breezer. After we started off and almost after 2 years, they allowed Kyndal to bottle and followed by Bacardi Carta Blanca....It was just one bottling line, limited storage space to accomodate storage, blending n holding tanks and FG storage....meanwhile, Breezer also picked up volumes...the breezer production was in a different bottling line which is fully automatic and state of the art line....and this line was in full swing... When we started bottling, Saju was the manager there with Sunil and Arundekar managing finance and bottling hall..Saju is a good guy with very good understanding of the plant and also good equations with the state excise department....Gemini management brought in another person in place of Saju and our problem started....we also had some constraints as we had invested in Gemini with scanner for bottling Chattisgarh stocks and hence kept Gemini only for Chattisgarh and moved our other brands to Pondy....
I had mentioned that we started bottling 90ml in DeeKay in Pondy to start with, and as it didnt create any perceived quality issues, I spoke to the owner of DeeKay, Ravi (in short) and made it very clear to him that we are shifting our entire production to his unit and will bottle not only for the UT of Pondy but also for other markets....My request to him was that he should spend money to improve the quality of the bottling hall, lab, warehouse and also office for our guys and rest room facilities (the rest room was constructed after 4 years and that also one has to walk for 10 minutes to reach there) I also told him that we are taking a big risk bottling Hobsons in his unit as consumers perception of bottled in Pondy is not that positive. He was very happy to bottle such premium brands in his unit and he signed off with us....wherever we start bottling, we ensure we have a joint account to deposit our receivables from our distributors. This was also agreed upon....and we started Hobsons, Clovis and Le Roi' there. He agreed for all the above, and assured us he would work on the working conditions in the factory.
If you are wondering why we went to DeeKay inspite of his not so good reputation and why not other units...the answer is...1) in 2013/14, Balaji was USL's bottler and USL was averse to bottle any other brands other than their own...2) Other units were Premiere, Vinbros and RK Distilleries.....Vinbros is very professional and yes, I should have gone to him but my distributor in Mahe vehemently opposed that as he said Vinbros has a very negative image there and since I considered DeeKay, owned by Ravi, a good friend of mine and decided to go with him....the condition of the unit was pathetic as they were only doing cheap liquor there when we tied up and they felt for bottling cheap liquor the unit was more than sufficient....they did some work due to pressure from us on the unit but not sufficient....we somehow managed to get our products without any compromise on quality, using our relationship with their manager and work force....my unit manager was not happy working from there as he didnt get his due respect. I took up many of these issues with Ravi but he never bothered to address them. Also he was very dependent on his deputy Sivanandam, who, somehow didnt bother to improve the infra at the unit. The advantage of bottling in a local unit was always there as the service of orders were very quick and most of the time it was delivered on the same day if it was local. Also my distributors didnt have to invest huge amount on duties and take full loads. We could supply small quantities too....The turn around time for KKL was couple of days and only for Mahe, as it has to cross KTK and Kerala borders it took some time. Ravi also has 3 retail outlets and a bar and two WS. We started supplying him directly for his own outlets which helped us to improve our volumes...as said earlier we opened up the market in Pondy and Mahe and this strategy really helped our brands to grow. But our problems were not over with DeeKay. When we were developing our GPL XO our master blender visited DeeKay and told me in no uncertain terms that we should change the unit. We had lots of internal discussions and decided to change the bottling source in Pondy and I approached my dear friend Shivkumar who was managing Balaji Distilleries at Pondy....and when I started the discussions in mid 2019. Balaji got few brands of Diageo USL on a royalty basis and hence Shiv took the bold decision of tying up with us for bottling. The bottling plant of Balaji is world class and managed by a very professional team. And Shivkumar is one of the finest humans to deal with. Just before the start of our bottling, Balaji went for a major renovation and improved everything in the unit.....
Now the challenge was to come out of DeeKay with little bruises. It is not like FMCG where you can come out of an unit with out much hassle. In this industry, you cant use labels, gift cartons and shippers of one unit in the other one. So the planning has to be fool proof to avoid any major write offs....I broke this news to Ravi and told him we are shifting because of some internal things and it has nothing to do with him or his unit....Also requested him to allow us to bottle till the RM/PMs last....Also another 'to be done away with' thing with many of the state excise is that you have to get an NOC from the existing bottler while applying for label registration of another unit....and the existing bottler, more often, delays this....just sadistic pleasure....As mentioned earlier we started bottling our XO with Balaji just before Diwali 2019 and XO was an instant hit....
But our friend Ravi of DeeKay started acting funny. Balaji did not have an import permission and hence could not start with Hobsons immediately as to get the impex license would take around 3 months. So we were forced to continue with DeeKay for some more time and I requested Ravi and he agreed but with a smirk in his face....Also DeeKay started some new brands and we were supplying them FGS....it was a smooth operation and not connected with our bottling. But sometime in February 2020, one evening I got a call from my unit manager that the FGS (raw material for our Hobsons -French Grape Spirit-FGS) of ours which was stored in a specific area-around 6 barrels-were found missing....this is a shock.....I called Ravi and as he didnt pick up called Sivanandam. He first feigned total ignorance and later accepted that they wanted the FGS and his guys have hence moved those barrels to their side of the warehouse...I got so infuriated, I blasted this guy....I told him by next morning I want all the 6 barrels back in to our custody....I knew it was all done with Ravi's knowledge. Had I spoken to Ravi that day it would have ended up our termination immediately....the barrels were returned next day...but thats not all.....this is the beginning of all the hostilities.....We have to beg for our bottling line....unlike the earlier times.....delayed giving us the NOC.....packing materials transfer was delayed everyntime a request was given.... Anyway, my constant talks and push was required every time as my team faced total resistance from Ravi, his factory manager and Sivanandam. As DeeKay owned couple of retails and a bar and these outlets had good potential we were also supplying them directly and that was a decent business especially for our Hobsons and Clovis.....and this also got strained because we started bottling from Balaji. As explained earlier nothing is easy when it comes to severing ties and going to another unit.....one has to take cognisance of the materials the unit is holding and the time it would take to clear these materials to bring down the write offs....while some of the PM can be transferred and snickered to salvage write offs, it is very difficult to transfer the raw materials like ENA and special spirits.....
Ravi told me while signing up few years ago, about the issues with the local sales tax department on some levies they had slapped on his unit. Ravi bought this DeeKay bottling unit which was almost defunct and during that time Pondy had some tax holidays (those days there was local sales tax on alcohol too but later the government abolished the tax and instead introduced additional duty on alcohol-the idea being to collect the entire revenue in one shot....just to elaborate...when the wholesaler wants to lift stocks from a bottling plant, he has to apply for a permit by paying no of cases x the duty amount.....they get the permit. When there was sales tax, the supplying unit has to invoice the basic amount plus the excise duty and on that they charge the applicable local sales tax....while the duty amount is realised even before the dispatch is made, the sales tax which is charged by the unit would be realised by the department anytime between 30 to 45 days....after abolishing the sales tax the government introduced the additional duty thus the money on applying for a permit would be no of cases x basic duty + additional duty....so money realised without any sweat....when Ravi bought the unit the government had some tax holiday on the sales tax and Ravi enjoyed this till the ST was abolished....but the ST authorities slapped a notice on him stating that he was not eligible for the tax holiday citing some legal issues in his license....do not know much about it and hence not elaborating on the nuances...but Ravi said very clearly to all of us that it has gone to the tribunal and he would win the case....since we were in no way connected with this, I didnt bother much. When I say we, Geoscope, in no way connected with Ravi's issue what I mean is that when we started bottling with his unit, there was no sales tax...the government had already abolished it....
Some time in 2019, one of their bank account, where the customers used to transfer the duty amount and also payments, got frozen by the ST department, citing the failure of DeeKay to pay the disputed amount, and the customers were asked to transfer the duty amount to the SBI account and the Geoscope's dues to our Axis bank account in Chennai, which we did but we continued with our joint account as we all felt that the ST department has no right over the joint account..also the dues from the corporations were coming to our joint account....we started moving all our brands to Balaji and gave those labels, with DeeKays NOC to the excise and were waiting for starting up in Balaji....we even started our Maker's Delight (more about this later) for supplies to Andhra from Balaji....this started sometime in Jan 2020....
Meanwhile, the ST department of UT of Pondy wrote a letter to BOB to freeze our joint account...this was in March 20 just before the lock down. And when BOB informed us we gave a letter to BOB with cc to ST department that they have no right to freeze a joint account as this money is Geoscope's and this tie up with DeeKay was only 4 to 5 years old and from day 1 there was no sales tax in Pondy as the tax was done away with much earlier. ST department didnt respond and BOB raised their hands. We moved the court and got a stay on this. The money was not sent to the ST department and neither we realised the money. We made it very clear to DeeKay that this is their issue and we should get back our money and this should be paid by DeeKay to us....We also got a letter from DeeKay that they would pay us 2 lakhs per week as around 10 lakhs got stuck with our bank due to this ST freeze in March 2020...they even paid for 2 weeks....and sometime in Feb/March 2020 DeeKay placed an order with us for FGS and as per our understanding they have to pay us in advance...they were a bit apprehensive about it as the money stuck in our joint account was close to 10 lakhs and they thought, rightfully so, that this money would be adjusted against the amount frozen in our joint account. I called Ravi and told him that he should pay us the 10 lakhs and we will release the stocks. He personally assured me that he needs the spirit and he would release our money after receiving the stocks. I had my own apprehension on this but since we are a very professional organisation, we decided to service their order....am writing this as I want you to know that we behaved like a true professional company but did Ravi fulfil his promise? He didnt......we gave a representation to APBCL (AP distribution company) and TBCL (Telangana distribution company) to send their payments to Geoscope account instead of the joint account. While APBCL agreed Telangana didnt....despite our pleas, Telangana corporation transferred the payments to the frozen joint account and the money still lying in that account is 50 lakhs....
And the lock down happened......after the first lock down things have started moving slowly...LG of Pondy Mrs Bedi took charge of excise and changed the entire team, who had absolutely no clue about this department and how it generates revenue for the government..also they suspected their own staff. And they went hammer and tongs after the trade and closed many wholesale and retail and also closed RK Distilleries and Premier bottling units and kept DeeKay, Balaji and Vinbros under tight leash....when the lock down was lifted in the first week of May, Pondy excise levied covid tax...this was started by Delhi but with in 3 months Delhi done away with that......and Pondy went a step further.....they increased the prices of all the brands to the level of the neighboring states....for example Mansion house brandy's MRP was raised to that of TN MRP in Pondy and KKL, to that of Kerala in Mahe and that of AP in Yenam....they released brand wise prices too .....The WS were asked to pay the increased amount along with that duty amount thus the credit given to the retail trade went up for the wholesalers...ideally they should have collected the covid tax-the extra levy-at the last point which is retail.....Fortunately this was a major boost for our LR brandy, VSOP and XO.....as these brands were not sold in TN, AP and Kerala and the demand started skyrocketing for these brands....but the excise has put in lots of restrictions in releasing import permits for the wholesalers and also import of raw materials including the basic spirit.....this has resulted in orders not getting serviced on time....meanwhile, we realised DeeKay forgot to renew our brands for 2020-21 before the lock down and this created major delay in bottling and dispatching some brands from this unit...DeeKay need to register some brands to clear the finished goods lying with them. With the restrictions imposed by the excise department on every single thing business almost came to a standstill....those who are running the business, the WS and retail were clamouring for stocks....and with 2 units shut and the remaining on low output due to non availability of raw materials.....after the 1st lock down the availability of basic raw material-neutral alcohol-which has to be imported from outside the UT of Pondy, became scarce and hence a major hit on the business. DeeKay was running helter skelter to get things going and finally with great difficulty they got the permission. Balaji and Vinbros started early after a proper inspection by the excise. Some WS which got shut reopened. But even after paying the label registration fees, (lock down was announced on 23rd of March and hence there was delay) it took quite some time for us to get the labels registered and till then one could do nothing. I was, from Chennai, trying to speak to the deputy commissioner and never could get him on the line and my whatsapp messages were never answered. Sent e mails to the LG but no response....our brands were high on demand especially the XO, VSOP and Le Roi' across Pondy, Karaikkal and Mahe. But the outstandings till March from my direct distributors were also coming in trickle as they were not realising their money from the market due to lock down....and my team with the limited access and covid fear worked hard to make things happen.....We got an overseas export order during that time and it took almost 4 months for us to get the permission of the excise department.....those people had absolutely no clue.....it was the worst period for the liquor business.......not only this....but in general it was tough time for the industry as a whole....finally when we got the approval of label we wanted to bottle our VSOP with DeeKay to exhaust the materials, we figured out our ENA which was lying with them--over 12000 litres for 3000 cases were utilised by them without getting our consent...this was the ENA which was paid by us and lying with them un-utilised due to shut down and other issues and unabashedly Ravi of DeeKay decided to go ahead and use it without even informing us..even his unit manager or Sivanandam didnt bother to inform our guy who was based at DeeKay....This is the problem of tying up with a bottling unit as everything there is in their name and in crisis situations we were just left helpless....I took the phone and spoke to Ravi and his response was very casual....he told me 'yes I used it as I needed it....we will pay you'.....that moment he lost whatever respect I had for him and the 35 years of relationship and more than that a great friendship and family tie up-the twine got cut....I shot out a WhatsApp message and he immediately responded by saying sorry for what happened....and when we followed up for the money which got stuck in the bank he refused to entertain us...he was to pay and clear it every week....nothing happened. We moved most of our materials and decided to clear the materials of VSOP and worked towards that facing huge delays....since DeeKay was not paying us the money, we approached our advocate and filed a case against Sales Tax department of UT of Puducherry, in June 20, and brought DeeKay also in to that case as a co respondent. I informed Ravi that we will have no options but to file a case and he didnt even bother to respond...We learnt from ST department that the amount they slapped on DeeKay was, hold your breath, 18 crores.....in our affidavit we accused the ST department of not taking any action by freezing other bank accounts of DeeKay, taking control of their bottling unit, their retail stores and bars and also his new unit of secondary distillation coming up in Pondy....we cited all these in our affidavits and the case was filed in June 2020.....this case is still going on and yet to see the light of the day......
Geoscope completely severed its links with DeeKay in all formats...Ravi got upset and stopped talking to me...our guys go there and meet Sivanandam to sort out any issues which are old....they still not cleared or paid us money for the raw materials still lying with them. He is doing roaring business with in UT and his biggest market today is Karaikkal with the same Ding Dong....this Ding Dong was brought to him by me.......When Ravi started this unit, whenever he needed some inputs, he used to call and I had never hesitated to provide him inputs/advice....when I was in Dubai, I asked him to come down and introduced him to some traders who were looking for tetra pack of IMFL.....Whenever I visited Pondy one meal would be always with him.....our families know each other well and he has attended our family functions and vice versa....such a close relationship got spoiled because he felt that the tie up partners can be dumped and they would not retaliate....I told him once that we are a very small n loss making company unlike his and requested him to clear all our dues including the frozen amount of 50 lakhs....as always no response....After Mrs Bedi and those who were appointed by her, got transferred, a new team of DC and commissioner took charge...Mr Kumar was appointed as the commissioner of excise and ST.... I met him a couple of times and requested him that they should unfreeze our account explaining the logic behind and also questioned him on why his department-since he was holding incharge of both excise and sales tax-was not going after DeeKay by freezing his shops, units and other bank accounts?
The removal of covid taxes helped to increase our business but that was very short lived....Pondy introduced a tax of 20% on the MRP on 19th of July 2021 and that changed the whole market dynamics....the retail prices almost equalled that of TN and AP barring the cheap liquor...due to this down trading started happening.....but this benefited a very few and one of them Tilak Nagar Distilleries.....The USP of Pondy is lost permanently.....it lost its charm of being 'consumer friendly with low prices'......The moment I got the wind of this impending 20% on MRP, I met up with the commissioner and the DC and pleaded them not to implement this as it would affect the premium brands but they didnt want to listen.
From my experience, it is very difficult to rescind any decision of excise once it is implemented....the first we faced was in Maharashtra when the then excise commissioner introduced the new excise tariff....it was, I think, in 1997 or 98.....the tariff still continues.......So the industry has to come together and protect the interest of not only the manufacturer but also the WS (these guys are the worst sufferers as it is their money which is invested in the market) the retailers and also the state where revenue is prime......and the state should be very open to discuss the pros and cons of any new policy, take the feed back, weigh the options and decide....today most of the markets are turning out to be cheap liquor markets due to heavy local tariffs....example is TN....80% of TN's spirits business is cheap liquor.
Before I close this episode of UT of Pondy....let me also say here some of the best things here.....its open market, mostly consumer driven, some very good distributors in Kalathil, Wine Center, Sastha, Thirumal all at Mahe, Ding Dong KKL, Vasantharaja Pondy and Balaji distilleries.....and you need to micro manage in these kind of markets to ensure smooth running.......
I wrote this blog and reviewed it few times as I normally take good and bad in my stride and never get stuck....but there are three whom i feel deserve to be known for their wrong doings to fellow professionals/partners in the business...one is Samsudeen, second one is Natrajan of MBDL and the 3rd one is Ravi of DeeKay....the first two I never had any major personal relationships but with Ravi it was friendship.......and it still hurts......
More of AP, Chattisgarh, overseas and Geoscope in the next one....