Liquor industry in high spirits as holiday season is around the corner, premium brands to boost sales

As the year 2023 is coming to a close and people are getting ready to say cheers to the holiday season, the domestic alcoholic beverages industry is expecting a surge in sales driven by in-home parties and festive celebrations. Industry experts are optimistic about 7-8 per cent growth for the collective liquor industry.

Additionally, experts told Mint that the quarter of October to December is the peak season for the Indian industry, driven by increased demand for premium alcohol.

“Premiumisation trends continue to stay strong. Indian consumers are appreciating quality over quantity, as can be seen in an increasing desire for refined experiences and finest offerings, whether it is at home or celebrating outside,” said Shweta Jain, Chief Business Officer - luxury, reserve, and craft portfolio, Diageo India. 

In-house celebrations indicates a significant cultural shift in how individuals choose to commemorate special occasions, according to Amit Ghatak, CMO, Khemani Group. “As consumers seek to create memorable experiences within the confines of their homes, the demand for a diverse range of alcoholic beverages is expected to witness a proportional increase.”

The Manipur government's decision to legalise liquor in the state is also expected to drive up sales. The state government withdrew the prohibition from district headquarters, greater Imphal areas, tourist locations and registered hotel establishments, according to media reports.

“The idea of prohibition seems to have lost steam, and most governments have begun to look at the industry as a vital source of tax revenues and a partner in the economic wellbeing of the state,” said Vinod Giri, Director-General, Confederation of Indian Alcoholic Beverage Companies (CIABC).

What is the trend this holiday season?

“We have a positive outlook for the Indian alcohol market during this season. As the demand for premium alcohol is on a substantial rise, we can expect Rum and Whiskey to do well during this season,” said Tushar Bhandari, Whole Time Director, Associated Alcohols Breweries Ltd (AABL).

Giri echoed Bhandari's views. “The quarter of October to December is the peak season for the industry. The uptake in the early days before Diwali was quite good in most markets even though the steep rise in prices in Karnataka due to an increase in taxes did have some sobering impact on growth,” he observed.

Nita Kapoor, CEO of the International Spirits and Wines Association of India (ISWAI), told Mint that the Indian alcobev market is dominated by brown spirits (whiskies, brandy, rum, etc.) and is expected to grow around 4 per cent during the year 2023-24. “The second half of the year is an important period for most consumer-facing industries and alcobev too is looking at a 10-12 per cent growth during the second half of the current year.”

Which cities cheer the most?

If one were to summarise on a macro level, then peninsular India holds the key to the Indian alcoholic beverages market, accounting for over 50 per cent of the sales of liquor and beer, Giri opined.

Giri said that every state has different kinds of liquor. Karnataka is the largest-selling state for liquor, with sales of 6.87 crore cases (9 litres each) in the year 2022-23 though a majority of it is in the value segment. Delhi NCR and Mumbai metropolitan region remained the largest market, accounting for two-thirds of the liquor business, according to Giri. “On a per capita basis, smaller states / UTs like Goa and Daman are amongst the highest, but that’s also because of a large number of tourists or visitors,” the CIABC Director-General noted.

Sharing an outlook on the highest liquor consumption around holiday season, Devender Gulia, Director - Sales and Marketing, Jagatjit Industries Limited said, “Metros such as Delhi, Mumbai, Bengaluru, Hyderabad along with cities such as Pune, Ludhiana, Jaipur, Lucknow, Guwahati, Vijayawada, Raipur and the likes have seen an upward trend in alcohol consumption during the festive season starting from Dusshera leading up to New Year.”

“We are experiencing notable growth in metro cities, specifically Bangalore, which is a key market,” said Karan Vasani, COO of Sula Vineyards.

Speaking on the trends, Diwakaran Suryanarayana, COO of SOM Distilleries, said he sees a trend of new entrants entering the beer category. 

What is the alcohol industry’s outlook for 2024?

India’s alcoholic beverage market is set to boom, reaching US$64 billion in just five years, solidifying its position as a top five global contributor. The industry, currently valued at US$52.4 billion (2% of GDP), encompasses both branded and country liquor, according to a report by the International Spirits & Wines Association of India (ISWAI).

Trends like in-home celebrations with a heightened focus on creating memorable experiences through drinks, accessories and dining experiences are here to stay, Jain of Diageo India opined.

The momentum gained in the holiday season is likely to spill over into 2024, sustaining a healthy demand for premium and craft options. “We can expect a total 7-10 % total growth in the volume,” said, Bhandari of AABL.

“On the cost and profitability side, inflationary pressure is expected to remain. There are mixed signals regarding the ethanol blending programme, which affects the cost of Extra Neutral Alcohol, the primary ingredient for alcoholic beverages. Glass prices remain high, which affects the vast majority of alcoholic beverages. Fuel prices are uncertain. The industry is in touch with state governments for compensatory price increases to mitigate the adverse impact on margins, and while some relief is expected, the extent of that is not known at this stage,” the CIABC DG added.

The Australia-India Economic Cooperation and Trade Agreement facilitated the reduction in duty on Australian premium wine, which will enable them to be more accessible to the Indian consumer, said John Southwell, Trade and Investment Commissioner, Food and Beverage.

“On January 1, 2024, there will be further reductions in duties for Australian premium wine (in the US$5 and above category), so the year will be off to a great start! We expect that the alcohol industry in India will continue to grow (currently forecasted at a CAGR of 6.54 per cent per year out to 2027) and with it the wine category,” said Southwell.

What are the industry’s expectations?

Liquor is subject to state-wise taxation. Changes in the state governments' excise policies can have an adverse impact on the business, said Anant Iyer, COO, Alcobrew, speaking on expectations from the government.

“Free Trade agreements under discussion will have a material bearing on the future of the industry. If India is able to negotiate the removal of non-tariff barriers imposed by countries like the UK and EU on the majority of Indian products, we can see a surge in liquor export from India,” Giri added.

Speaking on factors that impact alcohol prices, Giri said that glass prices remain high, affecting alcoholic beverages. “Industry is in touch with state governments for compensatory price increases to mitigate the adverse impact on margins, and while some relief is expected, the extent of that is not known at this stage,” Giri told Mint.

Inflation, particularly related to Extra Neutral Alcohol (ENA) and other input materials, has shot up and is posing a serious challenge to the alcohol industry. Prices of ENA, a key ingredient of the alocbev industry, have risen by 9 per cent over the last year, said the CEO of ISWAI, while speaking about the challenges faced by the industry.