The global alcoholic beverages market, valued at USD 2.31 trillion in 2023, is projected to grow to USD 5.72 trillion by 2032, exhibiting a compound annual growth rate (CAGR) of 10.74%. According to the World Health Organization (WHO), alcohol consumption is measured by the consumption of pure alcohol per person per year, which stood at 6.7 litres in 2022. India, with a per capita consumption of 3.1 litres of pure alcohol per year, is the fastest-growing alcohol market globally.
Several key drivers support the growth of the alcohol sector, including premiumization, rapid urbanization, a massive youth population entering the drinking demographic each year, changing demographics, increased participation of women in the workforce, and greater social acceptance of drinking.
The alcohol market is divided into three major categories: spirits, beer, and wine. Spirits, or distilled liquors, account for 44% of total global consumption. India is predominantly a spirits market, with brown spirits comprising nearly 90% of total alcohol sales in the country. The per capita consumption of spirits in India is among the highest in the world's top economies.
The demographic dividend is also influencing the alcoholic beverage market, with approximately 30% of women currently being
drinkers, constituting 37.5% of the drinking population. However, women consume significantly less alcohol than men, with men
consuming twice as much alcohol on average. Although the percentage of regular drinkers in the population has declined over
the past decade, the absolute number of drinkers has not decreased due to the overall population growth.
While the acceptance of wine and beer is increasing in the Indian market, it remains dominated by the spirits category. In the
beer market, strong beer holds the majority share, and fortified wines with high alcohol content control a significant portion of
the wine market. Alcohol is also promoted in trade by state governments as it is a major source of revenue, accounting for
approximately 15%-20%, and hence the sector is highly regulated by the government.
Indian Made Foreign Liquor (IMFL) is the largest segment of the Indian alcoholic beverage market in both volume and value
terms. The IMFL segment recorded sales of 385 million cases in FY 2023, representing an 8% growth in volume compared to
FY 2022 sales of 280 million cases. IMFL sales have surpassed pre-COVID levels and are projected to reach 560 million cases
by FY 2028. During this period, IMFL value sales are expected to grow at a CAGR of 9%.
India is the second-largest spirits market in the world, predominantly featuring brown spirits such as whisky, rum, and brandy.
In contrast, white spirits like vodka and gin hold a smaller market share, which is the opposite of the global trend. The industry
is highly concentrated, with the top three manufacturers serving more than 50% of the market.
A significant boost to the formalized liquor industry would be the ban on country liquor, a trend observed in states like
Karnataka and Andhra Pradesh.
When segmented by category, the industry includes spirits (both brown and white), beer, and wine of all types. Brown spirits
encompass whisky, rum, and brandy, while white spirits include gin, vodka, and tequila. Increasing income levels are directly
correlated with a rise in per capita consumption. Given that whisky is the largest segment within the Indian alcoholic beverage
market, it stands to benefit significantly from favourable demographic trends and rising incomes.
Whisky sales accounted for 68% of the total IMFL (Indian Made Foreign Liquor) sales in FY 2023. The Indian whisky market is
projected to reach INR 2,45,180 crores by FY 2028. The market is set for growth, driven by strong premiumization trends and
rapid urbanization.
Spirits Market in India
India is the largest whisky market in the world, with nearly one out of every two bottles of whisky sold in the country.
Traditionally, India is a distilled spirits market, with approximately 90% of pure alcohol consumption in the form of distilled
spirits. In FY 2023, whisky sales in India accounted for 63% of Indian Made Foreign Liquor (IMFL) sales by volume and 68% by
value. The popular segment, also known as the mass premium segment, constituted about 37% of the total IMFL market by
volume.
Rising incomes, growing urbanization, and increasing awareness of western tastes and trends are driving premiumization. The
industry will leverage this trend to drive value growth. The popular segment will continue to play an important role in the price sensitive category, including rural markets and the Indian Made Indian Liquor (IMIL) market. Segments like prestige and above
(P&A) will lead sector premiumization. The luxury segment is driven by high-end imported whisky, including blended and single
malt whisky, such as the Rampur brand from Radico Khaitan, which is popular in both domestic and global markets.
Prices of alcoholic beverages in India are controlled by respective state governments, leading to significant price variations
across states. The Indian IMFL market is dominated by five southern states, contributing more than 50% of total consumption
by volume. Karnataka and Tamil Nadu are the top two markets, contributing over 30% of overall IMFL consumption by volume.
The prohibition of country liquor has led to the growth of IMFL in southern states, which contribute close to 45% of whisky sales
by value in the country.
The brandy market accounted for approximately 14% of the total IMFL market by value in FY 2023. Brandy is projected to grow
at a CAGR of 7.7%. Brandy consumers in India are price-sensitive, with most brandy brands falling under the popular and
prestige segments priced below INR 800 for 375 ml. However, the IMFL brandy market is showing trends towards
premiumization, with many new launches in the premium and luxury segments. Diageo, Radico Khaitan, and Amrut Distilleries
hold a significant share in the market, followed by Allied Blenders, Tilaknagar Industries, and John Distilleries as top producers
of IMFL brandy in India.
The rum market has seen a slow recovery, reaching pre-COVID levels with a market size of INR 21,074 crore by value in FY
2023. The market is expected to grow at a CAGR of 7.5%. Dark rum is the more popular category, holding a notable share of
approximately 98%, followed by light rum. Dark rum gets its distinctive characteristics from the addition of caramel or
maturation in oak containers. The sales of IMFL rum are driven by the Canteen Stores Department or army canteens. In India,
southern and eastern states prefer brandy more than other regions.
Key growth drivers for sector
Rapid urbanization and rising disposable incomes are leading consumers to upgrade their preferences, resulting in a shift from
country liquor to IMFL whisky and up-trading within IMFL whisky categories, including popular, prestige, premium, and luxury
segments.
The trend towards consuming better-quality whisky rather than focusing on quantity is driving customers to choose premium
brands in each segment.
A shift towards a healthier lifestyle is encouraging up-trading within each segment and from one segment to another, as higher priced products are perceived as healthier.
The retailing of alcoholic beverages, including whisky, is undergoing a transition in India. Multiple states, through their excise
policies, have allowed for a better retail experience, including larger stores, stores at high retail destinations, evolved
merchandising, and product tastings.
Beer Market in India
Beer is the second most consumed alcoholic beverage in the world after spirits in terms of recorded pure alcohol consumption.
In Europe and the Americas, beer consumption is higher than that of spirits. In India, beer contributes close to 8% of recorded
pure alcohol consumption. Over the past two decades, beer has become one of the most popular alcoholic beverages in the
country. It has a substantially lower alcohol content compared to other brown and white spirits.
The beer market suffered the most significant decline among all alcoholic beverage categories during COVID-19, as the
complete shutdown wiped out a large part of peak consumption sales for the beer segment in the first quarter of FY 2021,
resulting in an overall decline of 28% by volume.
Wine Market in India
Wine consumption in India is limited, but it is one of the emerging alcoholic beverage categories in the country. Growing
awareness of the perceived health benefits of wine, changing lifestyles, increasing urbanization and disposable incomes, and a
growing interest in wine culture are contributing to the expansion of the wine market in India.
Statistically, women tend to
prefer wine over whiskey or beer. Imported wines have played a key role in the development of the wine market in India;
however, their growth has been muted, and their contribution to the Indian wine market is projected to decrease to 16% by FY
2028. The wine market is leveraging positive factors, including wider acceptance of wine as a social drink and the growing
perception of wine as a healthy alternative to spirits.
Key Risks
Investing in the alcohol beverage industry comes with several risks, including:
Regulatory Risks: The industry is heavily regulated, with varying laws and taxes across different regions. Changes in
regulations, such as increased taxes or stricter advertising laws, can impact profitability. Government tailwinds can
quickly turn into headwinds for the industry, posing a substantial risk.
Health and Social Risks: Alcohol consumption is linked to health risks and social issues. Negative publicity or
heightened awareness of these health risks can lead to reduced consumption and sales, directly impacting the spirits
market.
Economic Risks: Economic downturns can impact consumer spending on discretionary items like alcohol. During
such times, consumers may choose cheaper alternatives or reduce their overall consumption, which can undermine
the premiumization trend that the industry is heavily relying on.
Branding: Branding plays a crucial role in stabilizing sales in the highly volatile whisky market, especially since most
whiskies are not aged. Radico Khaitan appears to have mastered this by leveraging scarcity bias, selling Rampur
whisky for 5 lakhs a bottle by limiting the production to just 400 bottles.
Competitive landscape
The Indian alcoholic beverage market is stagnant and dominated by strong players across different segments, including IMFL,
beer, and wine. The Indian western spirits market, which includes IMFL and imported spirits, is controlled by three major
players: United Spirits, Pernod Ricard India, and Allied Blenders and Distillers, who together hold more than 50% of the market
by volume. The complex nature of market with each state as a unique market gives incumbents with scale across states an
advantage over new and upcoming brands in the market.
Key players have a presence across various categories, as illustrated in the table below:
The market can be broadly divided into two categories: 'Popular' and 'Prestige and Above' (P&A). The P&A category is further
subdivided into Prestige, Premium, and Luxury price segments. While the Popular category continues to play a key role, the
Indian market is steadily moving towards premiumization, with an increasing share of the P&A segments.
Financial Landscape
Financial landscape compares leading companies of Indian Made Foreign Liquor (IMFL) against key financial indicators
including revenue and profitability metrics and key financial ratios to arrive at an overall view of the IMFL companies in India.
Overall Outlook
The alcoholic beverage industry is growing at a rate higher than the overall economy. Some companies are even outpacing
industry growth and are confident in maintaining this momentum in the coming years. The government is targeting 20% ethanol
blending by 2025, which will increase demand for grain-based molasses, helping the industry thrive.
Indian Made Foreign Liquor (IMFL) is evolving from a restricted, quota-based, commoditized market to a consumer-driven,
brand-based industry. Its main appeal lies in its sizeable base. Growth in this segment is expected to be driven by a growing
consumer base, with up to 13 million youngsters joining the drinking population each year, rapid urbanization, an increase in
the Indian GDP which directly boosts consumer spending, changing demographics, increased participation of women in the
workforce, and greater social acceptance of drinking.
Ready-to-drink (RTD) alcoholic beverages represent a new segment poised for growth, with global markets demonstrating
explosive growth in recent years. This surge is driven by consumer demand for convenience, variety, and innovation. Radico
Khaitan is capitalizing on this trend with the launch of "Electra," while Coca-Cola has also introduced "Lemon-Dou" as a pilot
test for the Indian market from its global portfolio.
In today's age, branding is a crucial factor for consumers when choosing alcoholic beverages. The alcoholic beverage industry
is expected to be a wealth creator in the coming decade, provided companies can reduce costs in low-margin segments and
boost sales in the Prestige and above categories. This strategy will drive value and significantly increase margins. If all this
plays out, it will help to keep the industry guidance on an upward trajectory
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