|
 Regretting skipping of the Award at the function during the sit-down dinner for around 300 guests at Pullman Aerocity, Subhash Arora- Editor of delWine and privileged to select the Awardee, announced that he could not find any hotel which met the government criteria of capping mark-up at 250%. Giving Award to a hotel then would have meant that despite the hotel charging heavy prices the Award recognised that hotel. When a consumer went to the Award winning hotel and found the list as prohibitively expensive and outrageous as other, would feel cheated and bitter and perhaps feel the Award was rigged-something that is sacrilegious for the organisers.
Why choose capping of 250% for evaluation
Most hotels would try to justify that they were following the 250% cap by claiming the average Menu Price of the total wines sold, i.e., taking the price of more expensive wines and pricing it at less than 250 or even 200%; in some cases they even cap it at 150% in order to give themselves a chance to sell them. Thus they could afford to have higher mark ups for cheaper wines. Some might have also manipulated the costs to justify their being within the range as prescribed by the ‘Duty Free Entitlement Scheme’ by not taking into consideration several benefits provided by the importer directly in terms of credit notes or indirectly.
‘Served from India Scheme’ (SFIS) earlier known as ‘Duty Free Entitlement Certificate’ (DFEC) became effective in April 2003 when the NDA government with BJP as the majority party, ruled the country. The privilege was purportedly due to a strong hotel lobby through the late Lalit Suri who was the then President of the Hotels Association of India (HAI), which was able to convince the Commerce Ministry that it was imperative to give customs duty incentives to bring the costs of imported wines and spirits down to attract more tourists and help tourism.
I distinctly remember discussing with Abhijeet Mukerjee, the then GM of Taj Mahal Hotel, Delhi soon after the new policy of duty-free wines was announced in 2003. He said he would see to it that wine became more accessible and it was in his wish list to make a glass of wine cheaper than orange juice at the hotel. Despite his good intentions, it never happened and the prices at the Taj have also gone beyond 250% mark up today.
The undertaking given by the hotel industry was that the cost savings due to zero duties would be passed to the clients. Profit margins on wine were to be capped at 250% while the spirits had a higher cap of 400%. There was a feeble attempt to enforce the undertaking, at least on paper. But gradually, it was totally by-passed; today most 5-star hotels have high prices with mark-ups ranging from 400- 600% in some cases for the low end wines, with a few exceptions.
To be fair to the hotels, they have high, ever-increasing overheads. The license fee payable to serve liquor on premises alone is extremely high and going up all the times thanks to the tax-hungry excise department. For instance Pullman Aerocity which hosted the event, received the liquor license in April this year and has got a limited license for which Rs. 9 million are payable annually. The mark ups might not even cover direct overheads and license costs for the first few years. But the hotels which get the duty benefits ought to pass them, at least for low and mid-ranged wines. This would not only help them sell more of these wines but the high-end sales would not be affected at the current high levels.
The duty free license has now been slashed from 10% to 3% since last year. I shudder to think what would happen if the government who might well be aware that the benefits are not being passed on, decides to remove them from the incentive list as mentioned in the above article in delWine. Of course, hotels would be correct to assume that the Export Policy has been announced for 2015-2020 and is not likely to change before then.
Pricing of Indian wines is not in the purview of the government since it does not come under SFIS (of course, if the Indian wine is paid for by a credit card in foreign currency, that goes into the credit of the foreign exchange earnings which helps decide the amount of duty-free license). Therefore, one cannot complain if an Indian wine is charged at 4 to 6 times the cost price. The prices are transparent-one may choose to order wine or not. One would only hope that the prices are decent enough to make it a value-for-money wine list.
A bizarre thing came to our notice while talking to some of the representatives of various hotels who had come for a chat with the Jury for some of the Awards for which physical present was compulsory. A couple of beverage/restaurant managers claimed that when they decrease prices on wines, customers stop ordering since they feel those wines are cheap. No doubt they are paying through their nose because of their ignorance prices but they are not typical wine lovers who are more knowledgeable and prefer the prices to be reasonable.
Forgotten Directive from FHRAI
It is interesting how an Article I wrote over 8 years ago in April 2008, which was reported in delWine, is so relevant even today. The Directive from the office of FHRAI has been since
thrown in the dustbin but it has not lost its meaning and someone dusting the old government files can come across it any day.
What can and should be done
While trying to solve the puzzle, not finding one case of a hotel meeting my criteria, I started looking for hotels that had the usual high prices to keep the fire burning but had a few wines listed at affordable prices. I could not find such lists where this was done regularly.
I would have liked to see, at least 5-10 wines of the whole list priced reasonably –certainly within the criteria set by the government but primarily to tempt the consumer want to order a bottle or a couple of glasses with food (like the loss leaders in the supermarket parlance!) .
I feel unhappy that I still could not find any hotel worthy of the Award (this could be making a Statement too on behalf of the consumer). But I am already watching the hotel lists which meet both or at least the second criterion for the next year’s edition, the comments by my hotelier friend that people don’t order wine if priced low, notwithstanding. Hopefully, ignorance is not considered a virtue but if the customer wants to pay higher price due to his fat wallet and stupidity, sock it to him by all means.
But let the ordinary middle class person who eats out regularly but does not order wine in a hotel enjoy a glass or two. I hope I can get up on stage during the next year’s delWine Excellence Award, and announce happily, ‘Winner of the Hotel in Delhi- NCR for Best Value for Money Wine List Category is < ...... >.’!
Subhash Arora
FHRAI Directive |