Build business, bureaucracy partnerships

Of all the concerns with bureaucratic departments, the lack of domain knowledge seems most easy to fix and can have long-term results.

Updated - November 17, 2021 06:18 am IST

Published - February 23, 2016 06:41 pm IST - Mumbai

In discussing my journey to launch The Barking Deer Brewpub, Mumbai’s first microbrewery, I’m often asked what was the most difficult hurdle. As any entrepreneur in a start-up business, I had to find investors, raise money, gain expertise, hire employees, and build a facility. But I always explain that these challenges were easy compared to the licensing process and ongoing bureaucratic demands.

Despite the fact that there was already a policy in place that allowed microbreweries in Maharashtra, it took me two years to get my licence. During that two-year period, I had the brewpub constructed and fully functional, with eight months to spare. During those agonising months, I was left to operate a microbrewery without the “brew,” leaving a massive gap in my business plan. My business suffered greater losses than I could have imagined, and almost failed.

To be fair to the state Excise Department, ours was the first microbrewery licence in Mumbai and the policy had yet to be tested in a city with multiple other conflicting policies and plans. I could understand why it took some time to “construct” this licence in a manner that would withstand scrutiny.

And yet, my experience was that the regulatory system seemed to be set up in the most opaque and adversarial manner that only served to discourage any sane businessman. Luckily, I didn’t suffer from that affliction.What I’d like to see fixed is this adversarial relationship between business and bureaucrats, replacing it with a genuine and constructive partnership. I don’t mean a partnership in a financial sense, of course. I mean a shared vision of what is good for the long-term health of the regulated industry.

In this case, I refer to the microbrewery business, which is one part hospitality and one part alcohol manufacturing business. I realise some in India would rather have such a business regulated right out of business. However, given that drinking and the manufacturing of beer is legal (in most states), it makes sense for everyone involved, including the manufacturers, regulators and consumers, to support sensible regulations that encourage high quality products and teach moderation and self-control.

Obtaining our licence meant getting approval not just from the State Excise Department, but also consents from an assortment of other ministries, including the Directorate of Industries. We had obtained the consent early on from a deputy in the directorate, but for some unexplained reason, that consent was suddenly thrown into doubt when a higher-level officer gave a negative opinion. That left us stuck and at a loss of what to do. There was no explanation given as to why the consent was revoked nor any advice provided as to how to fix the problem. There seemed to be no understanding of the consequence to an entrepreneur of being suddenly left in bureaucratic limbo. Luckily, the approval was ultimately granted at a higher level, but the experience of being left stranded for months after an unexplained negative opinion created the distinct impression that the system was uncaring and opaque and certainly not a partnership.

How do we obtain such a partnership and shared vision? For one thing, we need regulators who understand the business that they are regulating and not just the policies that they are implementing. We need a bureaucracy that not only understands the letter of the law but also the spirit of the law. Currently, it seems to me, the system does not encourage the sort of domain knowledge to make this happen. Officers are shifted from one bureau to another with little thought about specific knowledge about the industry that they are regulating. This practice means officers rarely have the time in any one posting to learn industry processes and business dynamics. Yes, management executives do get broad training in marketing, finance and human resource management, but they are much less likely to get the sector-level knowledge that all of the players on the business side are conversant with.

This idea first struck me early in the licensing process during a meeting with an excise officer. He suddenly became distracted with other matters and told me to turn my chair and address a dozen new inspector recruits who had shuffled in behind me without my detection. He asked me to explain the science of brewing to them, which I was more than happy to do. They were attentive and asked many questions. I told them about raw materials, brewing and fermentation. They were hungry to know more. However, judging from their questions, they didn’t know the first thing about beer. It was completely a new subject for them and they would soon be in the field regulating businesses like mine.

I was a bit shocked, but also energised that I might play a helpful educational role in the department. I volunteered to do more such talks once the brewery was up and running, but the offer has not yet been taken up. And to be honest, I haven’t pushed the idea very hard once I got the initial cold response and had my brewery licence in hand.

Sure, there are other concerns with bureaucratic departments that you could cite – corruption, poor technology, and the plodding pace. All of these are require reform. But of them, the lack of domain knowledge seems most easy to fix and could have long-term positive results. With better understanding of processes and business norms, officers would be more effective in implementing policies and less likely to do harm. They would have a better idea of when a business is making a good faith effort to follow the rules and when a business is completely shirking its responsibilities.

Ultimately, domain knowledge will aid in India’s bigger goal of improving “ease of doing business.” With knowledge and understanding of the industries they regulate, officers will feel more empowered to recommend streamlined procedures and licensing processes. They might also gain some understanding of the complexities of running a business in their sector and be more sensitive to the challenges of entrepreneurs. Currently, departments rely on outside consultants for such knowledge, which can be expensive and time consuming.

I can point to one such success in working with the BMC during the change of user building permission process. My application was stalled due to lack of understanding of what a brewpub was all about. I needed to make the building department officials understand that our brewpub was really no different than a restaurant, but instead of just preparing food we also prepared beer for our patrons. After appeals to one senior BMC official, he agreed to allow several officers on a tour of brewpubs already operating in Pune. As a result of these visits and the on-site discussions with the brewpub owners, these BMC officials obtained an understanding of how the business worked and they were able to write a positive report regarding my project based on facts and first-hand experience.

I’d welcome a chance to play a role in increasing knowledge of our industry. The Barking Deer is committed to educating the public on how we brew our beer and the quality ingredients we use. We give weekly brewery tours every Sunday and host graduate students for off-term internships. We are open to such an educational partnership with regulators as well, and I’m sure other breweries would be open to this same idea.

I believe such efforts will go a long way in breaking down an adversarial business regulatory culture and foster greater “ease of doing business.” This would not just be positive for a small business like mine but also beneficial to healthy growth of the overall economy.

Points to ponder

• The adversarial relationship between business and bureaucrats can be replaced with a shared vision of what is good for the long-term health of the regulated industry

• Regulators need to understand the business they are regulating and not just policies. The bureaucracy needs to understand the letter as well as the spirit of the law

• Domain knowledge will aid in India’s bigger goal of improving ‘ease of doing business’

• With knowledge and understanding of the industries they regulate, officers will feel more empowered to recommend streamlined procedures and licensing processes. They might also be more sensitive to entrepreneurs’ challenges

About the author

Gregory Kroitzsh is the Founder & Managing Director, The Barking Deer Brewpub & Restaurant. Kroitzsh grew up in a country inn nestled in the mountains of Vermont, USA. His craft beer passion was inspired by his father’s home brewing experiments over 25 years ago and fostered by visits to dozens of microbreweries across the US. Over five years ago, Kroitzsh started a project to bring fresh craft beer in an American-style brewpub to Mumbai. The result was The Barking Deer, which in February 2013, became Mumbai’s first microbrewery. Before this, Kroitzsh was a corporate banker at Citibank in NYC.

For the complete list of stories in the Fixing Mumbai series, > click here
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