Only two states, West Bengal and Odisha, allow alcohol home delivery, but media sources say six states may launch a pilot project after assessing it.
According to reports, Swiggy, BigBasket, Blinkit, and Zomato may soon deliver beer, wine, and liqueurs. Industry executives informed the media that New Delhi, Karnataka, Haryana, Punjab, Tamil Nadu, Kerela, and Goa are considering experimental projects. The media reported that executives indicated authorities are weighing the move’s merits and downsides.
Maharashtra, Jharkhand, Chhattisgarh, and Assam allowed liquor delivery during Covid-19 lockdowns with limits. Retail executives in West Bengal and Odisha reported a 20-30% sales rise from online delivery.
Expansion’s Driver: Consumer Interest and State Evaluations in Alcohol Home Delivery
With the help of the social media network LocalCircles, ISAWI surveyed 33,000 people in eight different cities in May 2021 about spirits delivery. Customers in Hyderabad, Bengaluru, Delhi, and Chennai expressed an interest in home delivery services, with 81% citing safety, brand availability, and convenience as reasons to back up their response.
In order to weigh the pros and cons of online alcohol delivery, state officials are currently surveying e-commerce platforms and spirits producers.
Industry Support: Upside of Alcohol Home Delivery
Breweries and the industry as a whole have been quite supportive. Beverage and wine producers have indicated a lot of interest in home delivery of their products, according to industry experts. This includes United Breweries’ Kingfisher brand and Budweiser owner AB InBev. Because beer consumption is very consistent with food purchasing patterns, this trend is very attractive, especially to city dwellers.
Industry Challenges: Obstacles of Online Alcohol Delivery
Due to various political backlashes, perception issues, and pressure from physical retail bodies, delivery platforms continue to face obstacles when trying to execute online alcohol delivery plans.
According to HipBar creator Prasanna Natarajan, who spoke to a media house, the company’s services were halted due to “certain local lobby pressures” after they had begun operations in Karnataka in 2021. A complaint had even been launched at the Supreme Court by the company.
He went on to say that the regulations governing business in various areas vary substantially, making it difficult to establish businesses throughout large portions of the country. There’s concern about the potential consequences of underage buyers or instances of domestic violence resulting from careless drinking. Natarajan had informed the media that there is a fear that duties will be avoided and that the government will lose the three rupees in levies it receives for every rupee a manufacturer generates. This is because the government stands to lose this revenue.
There are, without a doubt, challenges to face. Businesses and consumers alike are excited about this pilot initiative that is taking place across multiple states in India. If this initiative is fruitful, it may serve as a model for similar endeavours in other sectors.
The estimated value of the alcohol market in India is projected to reach approximately US$ 54,740.0 million in 2023, with an anticipated increase to US$ 111,238.9 million by 2033. During the forecast period, a noteworthy Compound Annual Growth Rate (CAGR) of 7.0% is expected in alcohol sales.
The growth of the alcohol market in India has been remarkable, driven by evolving lifestyles, urbanization, and the expanding middle class. The country’s rich cultural diversity has historically associated alcohol consumption with social gatherings, celebrations, and religious festivals.
The Indian alcohol market encompasses various segments, including spirits, beer, and wine, and benefits from a substantial consumer base exceeding 1.3 billion people. Consumption patterns vary across regions and demographics, traditionally favoring spirits such as whisky, rum, and vodka. However, there is a discernible shift towards premium and craft spirits, as well as an increased demand for wine and craft beer, particularly among urban millennials and the emerging middle class.
India’s drinking culture has evolved to a sophisticated level, deviating from global trends where developed markets have experienced a decline in alcohol consumption. Factors contributing to this shift include health concerns, changing lifestyles, and generational differences in alcohol consumption.
The Indian market stands out as one of the fastest-growing for various alcoholic beverage categories, in contrast to global trends where developed markets are witnessing a decline in alcohol consumption. The resilient Indian economy, marked by rising consumer incomes and post-pandemic recovery, plays a significant role in shaping alcohol consumption patterns. According to IWSR 2022, India has become the global leader in whisky, rum, and brandy consumption.
The global alcoholic beverage market is projected to grow at a CAGR of 1%-2% by volume and value, while the Indian market is expected to experience a higher growth rate of 6.8%, especially in premium segments like whisky, with an impressive 61% growth. The influx of new drinkers, projected to be around 100 million in the next five years, is attributed to the maturing young population in India.
The International Spirits and Wines Association of India (ISWAI) forecasts that the Indian alcoholic beverage industry will reach $64 billion over the next five years. This growth is fueled by rising incomes, urbanization, increased accessibility, premiumization, and a younger consumer demographic. The industry already contributes to employment for over 80 lakh people, both directly and indirectly, accounting for 1.5% of the total manpower in the country, according to ISWAI. The ICRIER report for 2021 states that the alcohol industry currently supports approximately 15 lakh jobs nationally.
Despite the optimistic revenue projections, the sector confronts obstacles related to operating profit margins (OPM). In the fiscal year 2024, it is anticipated that OPM will contract by approximately 90-140 basis points, following a significant decline of 300 basis points in FY2023. The primary cause behind this margin reduction is the escalating prices of key inputs during the current fiscal year. Taxation and pricing policies wield a significant influence on consumer behavior and brand profitability. Navigating the intricate tax landscape necessitates a strategic approach to maintain competitiveness.
Notably, the costs of non-basmati rice and other grains, such as maize, utilized in the production of extra-neutral alcohol (ENA), a crucial component for manufacturing spirits, have experienced a substantial increase. The impact of sub-optimal monsoon conditions and El Nino, along with government interventions affecting grain prices, plays a pivotal role in shaping the industry’s cost structure.
The costs of packaging materials, especially glass, have also exerted pressure on margins due to a surge in soda ash prices. On a positive note, barley prices, a crucial raw material for beer production, have undergone corrections in recent quarters and are expected to remain stable in the near to medium term. Nevertheless, the diversion of grains toward ethanol production, driven by government blending norms, poses an additional challenge that industry stakeholders need to closely monitor.
Moreover, the alcohol and beverage industry in India is subject to stringent regulations, making operations challenging and expensive. Most states have policies that diverge from practical realities, making the ease of doing business a mere term, particularly for the alcohol industry, except in a few states. Remaining compliant with evolving regulations stands as a top priority for alcoholic beverage brands. Navigating the legal intricacies of the region requires a proactive approach and a commitment to ethical business practices. To address these issues, additional costs are incurred in each state to establish local teams for follow-ups and to facilitate necessary procedures.
As health consciousness rises, consumers are becoming more selective about their alcohol choices. Brands that prioritize transparency and provide clear nutritional information are likely to align with this evolving mindset.
The Industry Forecast
Nevertheless, as the year approaches its conclusion, the sales of alcoholic beverages in the nation appear to have experienced a downturn in 2023. The Confederation of Indian Alcoholic Beverage Companies (CIABC) estimates that the sales of alcoholic beverages have decelerated from a robust 14% growth in 2022 to approximately 7%-8% in 2023. However, a notable aspect contributing to this growth is the demand for products priced above ₹500 per bottle. Looking ahead to 2024, the sector aims to maintain a similar growth trajectory as observed in 2023.
Revenue of the Alcoholic Drinks Market Worldwide From 2017 to 2027
Vinod Giri, Director General of the Confederation of Indian Alcoholic Beverage Companies (CIABC), stated, “The previous year was exceptionally positive for the industry, with a growth rate of about 14% over the preceding year. Therefore, a slowdown in growth was anticipated this year, as sustaining such high levels is challenging. On the demand side, we did not encounter significant issues this year. Challenges were more prevalent on the supply side, especially with the elections in five states disrupting supply chains. Karnataka faced issues due to a steep price increase after the new government took office. Despite these challenges, growth remained relatively consistent across markets. Our estimate is around 7 to 8% growth, contingent on the outcome of the ongoing festive season.”
Giri also highlighted, “In addition to volume considerations, the market’s value has been on the rise. We anticipate a 2% increase in premiumization, referring to products priced above ₹500 per bottle. This segment is expected to contribute positively to the market value.”
Furthermore, the industry is experiencing remarkable growth in Indian single malts, indicating a healthy trend. Giri emphasized, “This underscores the exceptional quality of products originating from India, gaining acceptance globally. It reflects that we are not merely a large-volume consuming country but are also evolving into a production and export hub for alcoholic beverages.”
The Confederation of Indian Alcoholic Beverage Companies (CIABC) expresses confidence that the industry will be able to sustain growth levels of 7-8% in the coming year.
India holds a dominant position in the global whisky market, representing nearly half of its share. Surpassing France, India has emerged as the largest consumer of Scotch whisky globally. Noteworthy is the fact that seven out of the top ten whisky brands globally, in terms of volume, originate from India, including well-known names like Officer’s Choice, Royal Stag, and McDowell’s, enjoying substantial popularity domestically. Alongside these, established international labels such as Glenlivet and Talisker compete for shelf space with local contenders like Indri, Amrut, and Radico Khaitan’s Rampur.
Despite the prevalence of affordable molasses-based spirits referred to as “whisky” locally, the focus shifts to the remarkable growth and recognition of Indian single malts. These premium offerings, produced with local barley, distilled, and matured within the country, have made significant strides in the global market, garnering praise from a widening circle of whisky connoisseurs.
Vinod Giri, Director General of the Confederation of Indian Alcoholic Beverage Companies, notes a significant shift wherein Indian malt whiskies now command nearly half of the market share for premium single malt whiskies in the country, poised to surpass competitors in the coming year. Globally renowned, Indian whiskies consistently receive acclaim as some of the world’s finest spirits, with malt whiskies being exported to over 60 countries within a relatively short timeframe.
The evolution of Indian whiskies, often overlooked globally, has been noteworthy in recent decades. Initially overshadowed by Western counterparts, Indian whiskies have gained international recognition for their innovative approaches and exceptional craftsmanship. The roots of Indian whisky production trace back to the colonial era when British distillation techniques were introduced to the Indian subcontinent. Distilleries established in the mid-19th century, such as Mohan Meakin founded in 1855, played a pivotal role in shaping the trajectory of Indian whiskey.
Indian six-rowed barley, offering a distinct flavor compared to Scottish two-rowed barley, and an accelerated maturation process in India’s warm climate, up to five times faster than in Scotland, contribute to the uniqueness of Indian whiskies. This results in a three-year-old whisky in India achieving a maturation effect equivalent to a Scotch whisky aged 9–15 years.
India’s demand for hard liquor, with spirits and ready-to-drink beverages constituting 40% of the country’s alcoholic beverage market by volume, is driven by a growing economy. India, already the fifth-largest alcohol market globally, accounted for a third of the industry’s global growth in 2021-22. Premium drink consumption, including Scottish single malts, doubled between 2020 and 2022, and India has become the largest export market for Scotch, despite a hefty 150% import duty.
Size of Whiskey Market in India From Financial Year 2015 to 2021, With an Estimate for 2025
This rising demand, coupled with import costs, has led to the emergence of Indian premium products. Pioneering distilleries, through experimentation with grains, aging techniques, and flavor profiles, are at the forefront, with the global whiskey community eagerly anticipating the next innovations from India. The surge in Indian premium whiskies spans all price categories, outpacing Scotch whiskies in growth rates.
Data from the International Wine & Spirit Research indicate that 93% of all whisky traded in India falls into the “value” segment, leaving room for the development of higher-end segments. Jason Holway, a market analyst at IWSR, attributes this growth to strong consumption and growing premiumization in India, driven by higher middle-class disposable incomes, the lifting of pandemic restrictions, and improved quality, variety, and availability in retail.
The introduction of the first Indian single malt, Amrut, in 2004 marked a significant turning point. Competitors like Paul John from Goa and Indri from Haryana have entered the scene, gaining international recognition and awards. Indian single malts, often priced higher than imported Scotch, are gaining traction globally.
Three key factors propel this boom: India’s overall economic growth, the prosperity of the educated middle class, and the increasing social acceptance of alcohol. Additionally, a growing confidence in homegrown products aligns with India’s “self-reliance” policy, restricting imported liquor sales in certain outlets. Responding to escalating demand, distilleries like Paul John plan to expand production capacity, while global giants like Diageo have entered the Indian single malt market with Godawan. As the industry gears up for heightened competition, the future of Indian whiskies appears promising. Recognizing the significance of the Indian whisky market, Holway emphasizes its crucial role in the global well-being of the whisky category.
Nadeesh Kareemdathil
