Who is India's 2nd largest retailer?

First, let's address the elephant in the room. India's largest retailer is Reliance Retail. At a revenue of ₹1,30,566cr ($17.9B) and 10,900 stores, it is definitely an elephant.

But who comes in second? Is it D-Mart? BigBazaar maybe? No.

India's second-largest retailer is TASMAC. At a revenue of ₹31,157cr ($4.3B) and 7000+ outlets, it comes a distant second to Reliance Retail. And ahead of D-Mart which is at ₹24,930cr ($3.5B).

What's interesting though is it retails in only one state in India - Tamil Nadu. In fact, TASMAC stands for Tamil Nadu State Marketing Corporation. And you can guess by the name, it is a government-operated company.

What's more interesting though is it sells only one product - alcohol.

How is it that a company which sells only one product in only one state the second-largest retailer in the entire country? The answer is more 'politics-driven' than 'business-insight-driven'.

Source: Company Website

The birth of TASMAC - the wholesaler

Prohibition of alcohol is an age-old topic in Tamil Nadu. It was first introduced pre-independence in 1937 and stayed that way for the most part till 2001. Many elections were fought on this topic, with promises oscillating between lifting or resuming the ban. This resulted in the ban being lifted thrice during this 60 year period - between 1971-74, 1981–87 and 1990-91.

One of the reasons often cited for lifting the ban was the consumption of spurious liquor in absence of legal alcohol sale. So in 1983, when the ban was lifted for the second time, two corporations were set-up - Tamil Nadu Spirit Corporation to manufacture liquor and Tamil Nadu Marketing Corporation (TASMAC) to sell liquor.

Tamil Nadu Spirit Corporation would be shut down a few years later when prohibition was brought back in 1987 but TASMAC would go on to survive the prohibition years.

In 2001, at least 100 people died in three separate incidents involving methanol consumption. Methanol was a dangerous liquid being used in place of alcohol to create spurious liquor.

The government came out all guns blazing after this spate of tragedies. Prohibition was lifted across the entire state. TASMAC was made the only entity (monopoly) for wholesale of Indian made foreign liquor (IMFL), ie, buy liquor from the manufacturer and sell to retailers, the shops and bars from where you bought liquor.

IMFL refers to all types of liquor other than indigenous ones. So beer, whisky, scotch, etc come under IMFL while toddy, fenu and arrack come under indigenous liquor.

The birth of TASMAC - the retailer

The prohibition lift of 2001 was here to stay. The state government would auction licenses to run liquor shops and bars. Those who won & set shop would buy liquor from TASMAC.

But another problem cropped up. The retailers apparently were ganging up (also called 'cartels') and under-reporting revenue numbers. The state was losing significant revenue since tax on alcohol was a major contributor to the government's coffers.

So in October 2003, the government made TASMAC sole retailer of alcohol in the state. By 2004, all private outlets selling alcohol were either shut down or taken over by the company. TASMAC became a monopoly with no other player left, controlling entire wholesale & retail.

It's because of this monopoly that TASMAC, despite selling in only one state, is in the league of Reliance Retail & D-Mart's revenues which sell across India. There are other Indian states that sell equal or larger amounts of alcohol but they are split among many retailers.

TASMAC - the organization

In typical public-sector fashion, TASMAC is governed by a board comprising of IAS officers which is chaired by the Minister of Prohibition and Excise. To ease management, they have divided the state into 5 regions: Chennai, Coimbatore, Madurai, Trichy and Salem. Each region is governed by a regional manager. The regions are further subdivided into 33 districts run by individual district managers.

TASMAC has over 30,000 employees and manages 7000+ retail outlets across the state. Retail shops don't have any names. Instead, they have a unique number called the "TASMAC Shop Number".

TASMAC's Scale & Growth

TASMAC revenues have grown at a rapid pace since it's inception rising close to 20% year-on-year. In the fiscal year 2018-19, TASMAC clocked ₹31,157cr in revenue ($4.3B). Hard liquor like whiskey, rum, brandy and vodka account for about 80% of sales. Beer accounts for the remaining 20%.

As you can see from the table above, sales have tripled in the last decade (good or bad thing??). TASMAC has come under criticism in recent years with discussion centering around few of the shops being situated close to educational institutions and children under the age of 18 being found in an inebriated state.

While calls for prohibition cropped up again around 2015-16, it is difficult to imagine the state government relenting to the demand. TASMAC sells close to 19.2 lakh bottles of hard liquor and 9.6 lakh cans of beer daily which translates to almost ₹90cr ($12.3M) of daily revenue for the state.

This was one of the reasons the government rushed to re-open TASMAC shops post-Covid lockdown creating a mad rush among the citizens (facepalm!).

Rush outside a TASMAC shop after the lockdown was lifted. Source: The Hindu

TASMAC is an example of the role government (or regulation) can play in the growth of a company. Despite not having any other business advantage (better product or price or distribution), they have grown tremendously over the last two decades.

That's it for today. See you again next fortnight! Till then, let us know what's the size of alcohol revenue in your state.

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SNAP #7: Who is India's 2nd largest retailer?