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When Mint profiled the young company Nao Spirits & Beverages and its founders in July 2018, the story referred to its first product, Greater Than gin, launched in 2017, as “India’s first and still the only craft gin brand”. That was just two-and-a-half years ago, but things have changed quite a bit since. Not only does Nao Spirits itself have another brand, Hapusa, India’s craft gin sector has seen new gins being announced at an unprecedented rate.
On the heels of Greater Than and Hapusa came Stranger & Sons, from the Goa-based Third Eye Distillery, in 2018, followed by Jaisalmer Gin, manufactured by Radico Khaitan in Rampur, Uttar Pradesh, in 2019, and then, at a quick trot, others like Samsāra (made in Goa), Terai (made in Rajasthan), Tickle Gin (made in Goa), Pumori (made in Goa) and GinGin (Goa again). Artisanal tonic water has got a similar boost, and from Svami to Sepoy & Co. and Bengal Bay, home-grown tonic waters are giving mass-market brands like Schweppes a run for their money.
To be sure, many of the new-age gins are only available in select markets. Several brands had to put expansion plans on hold because of covid-19, and some are not as widely available as customers would like them to be, if fan complaints on their Instagram pages are anything to go by. But there is a ton of excitement around gin, and it is clear that with the launch of its first brand, Nao Spirits started something that was, well, greater than itself.
Five-year plan
It has been a pretty interesting year for CEO and co-founder Anand Virmani. Earlier this year, he moved from Delhi to Goa with his wife Aparajita Ninan, an artist/graphic designer and partner at Nao Spirits, and their two-and-a-half-year-old son. The decision was prompted by a wish to be closer to the heart of the action, since their distillery is in the small village of Sao Jose de Areal in Salcete, in the state that has now become the first-choice location for Indian craft gin makers. Like most small business owners, he led the company through the challenges set by covid-19, and is now in the middle of a fund-raise, looking to raise $2 million (around ₹14.6 crore) from existing and new investors.
This year also saw Nao Spirits & Beverages, set up by Virmani in 2015 with long-time business partner and F&B entrepreneur Vaibhav Singh, complete five years. Singh is no longer part of Nao Spirits (though he remains an investor and mentor) but their joint venture, Perch, Delhi’s first wine bar, played a big role in the Nao Spirits journey.
“I'd always liked experimenting with alcohol,” says Virmani, quickly adding “that sounds wrong!” with a laugh. We are talking over Zoom, and the bright yellow background of Virmani’s home in Goa and the sunlight streaming through the window behind him puts the dismal, rainy Bengaluru day at my end to shame. Virmani has an investor call right after and sounds nervous and excited, though once he starts talking about how the company came to be, he’s on a roll. “I was always the guy who would be like ‘let me try and brew beer at home’, using my friends as guinea pigs, and every once in 10 times, I would get it right. I was very interested in wine too, which is how we ended up starting Perch in the first place,” he says.
His interest in wine and the global wine market came from a course during his undergraduate years at Babson College, a private business school in Massachusetts, US. At that point, Virmani wanted to get into investment banking—he was “good with numbers and finance”, and attracted to the glamorous idea of being a Wall Street banker. But Babson has a strong entrepreneurship programme and in his first year, Virmani got a taste of actually running a company. “I was the CFO of this student business, which was an actual business we had to run for six months, and it taught me that I didn’t want to be surrounded by numbers,” says Virmani. Then he took a class on old world vs new world wines, and was hooked. “I graduated from college thinking I wanted to do something in the wine industry. I sent 200 applications to winemakers around the world, and heard back from around six of them, all of them rejection letters. No one wanted to hire a rookie with no experience in the wine industry,” says Virmani.
He returned to India and took up a consulting job with Deloitte but “kept hounding people to get me a job in the wines” till he got an offer from William Grant & Sons, the Scottish distillers and distributors, where he handled the premium single malt brand Glenfiddich between 2010-13. “It was not wine, but at least it was close to what I wanted to do,” says Virmani. However, he didn’t give up on his dream—in 2013, he joined the Burgundy School of Business in France to study for a master’s degree in the wine business.
When he returned to India the following year, a stint at French spirits group Rémy Cointreau followed. His years working in the alcobev industry in India had given him a good understanding of how it worked, the state and Union laws that govern excise, and the challenges of running an alcohol manufacturing business in the country, which is still dominated by a few large companies like United Spirits Ltd. A year later, Virmani and Singh started Perch.
“It was during that time that we started toying with the idea of gin. Back then, gin in India meant Blue Riband or bottles of Bombay Sapphire and Tanqueray from duty-free, and it’s ironic that though these seemed fancy to us, in other markets they are treated like we would treat Blue Riband. So there was definitely a huge gap to fill when it came to consumers having a choice,” says Virmani. This gap felt even more ironic given the fact that the most iconic gin drink, the gin and tonic, was practically invented by the British in India. “Gin is the only spirit made with botanicals and spices and you are sitting in the spice capital of the world!” says Virmani. “As we talked, it made more and more sense, so we said let’s experiment with some flavours because that’s the part you want to dive into immediately.”
Looking for juniper berries (the strongest botanical in any gin) in India, they discovered a Himalayan juniper called hapusa. “Then the experiments started—in my second bedroom—and it was quite an adventure. I sourced a small lab-scaled still (a still boiler is essential for infusing any liquor with botanicals and aromatics) from Scotland, they sent it down, it broke on the way. Got it again and started all over, trying to flavour vodka—literally just walking into the kitchen and saying ‘let’s see what we have here’. It was so much fun,” says Virmani with a grin.
Market realities
Yet, despite their belief that gin was, as Virmani puts it, “a fantastic choice upon which you can build consumer preference, by giving people accessibility to something craft, something unique”, the challenge was to make a business case for it. “The main question was, ‘why is no one else doing it? Are we geniuses or idiots?’ I had been with Rémy Cointreau and seen them crash and burn with a project they were trying to get off the ground in India, which was making brandy.... So it was definitely nerve-wracking. I think until the time we actually got the first bottle out into the market, we didn’t believe we could actually get it done,” says Virmani.
It helped that gin—for long saddled with a fuddy-duddy image as a drink for old ladies in crumbling colonial clubs—was suddenly cool and hipster and taking off in a big way, from the UK to Spain and even the US, traditionally not a big gin market. Virmani and Singh also got some initial seed funding from the people who had funded Perch, and after looking at distilleries and bottling plants across northern India and Maharashtra, and being laughed out of some for the minuscule quantities they were looking at (3,000-4,000 cases a year, or between 36,000 and 48,000 bottles), they found the right distillery, Blue Ocean Beverages in Goa.
The artisanal beverages sector is pretty tightly knit, and when Stranger & Sons came up in Goa a year later, it followed almost the same model as Nao, all of which finally led to Goa becoming a hub for artisanal gin brands.
Distribution challenges remain, however. Alcohol is governed by state laws, and every state has its own licencing systems and excise duty structures. “Every state is a completely different market. For example, to sell in Delhi, we need to get a licence for each brand and pay an annual amount, which happens to be around ₹12 lakh. In Maharashtra, we need to pay close to ₹8-10 lakh to register for one year, and then within that framework, we can bring in as many brands as we want for a minimal annual fee,” explains Virmani.
This is why more craft gin brands are available in Mumbai than in other metros. “It’s far more conducive for us to bring in more of our brands once we set up a company in Maharashtra; in fact, we are incentivised to do so,” says Virmani.
The gap between demand and supply is most apparent in Bengaluru. Its craft beer culture represents a great opportunity for craft gin but most brands, apart from Greater Than, remain elusive. “In Karnataka, it’s not that difficult to enter the state—pay about a lakh, lakh and a half per brand—but it’s almost like HP...they sell the printer cheap and the cartridges are expensive,” says Virmani. To pay the 300% excise duty upfront to the state pre-retail, companies need deep pockets to sustain the pipeline.
Still, for a company with fewer than 30 employees, Nao Spirits has not done badly. It has a presence in eight cities in India and 14 countries, including a subsidiary office in the UK. It is also a member of The Gin Guild, a prestigious industry body based in London. It sold 72,000 bottles in 2019 and 240,000 in 2020, with projected sales of 500,000 in 2021. Revenue has climbed around 250% year on year, with a projected revenue of $3 million in 2021 based on the run rate till 25 November.
Over the next few years, Virmani plans to expand the company to newer markets and build a wider gin-drinking culture in India through education, contests and innovative marketing strategies. “Most alcobev companies focus on bartenders but in India, unlike in the West, people don’t make a beeline for the bar—they ask their server for recommendations. Our campaigns and contests will focus on educating servers about craft gin so that they can, in turn, sell it to customers.”
The next five years should be interesting. “It seems incredible to me that we are here, five years later, which is probably five years longer than most people thought we would survive,” says Virmani.
