Why India is the toast of the global alcohol market: Its young voters

“Following a tough year in 2023… future value gains will be led by India, China and the US, which are expected to add a combined $30 billion in incremental value (at 2023 prices) by 2028,"international drinks consultancy IWSR said in a report dated 15 August—India’s Independence Day, when selling or serving alcohol is prohibited across the country.

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“India and the US will each add incremental value of approximately $7.6 billion," said the London-basedIWSR.

However, the growth rates in the two countries tell a different story.

While the US beverage alcohol market is projected to expand at a modest 0.8% compound annual growth rate between 2023 and 2028, India’s market is set to expand at over 4% annually.

“Given that the US beverage alcohol market is four times larger than that of India in volume terms, and almost six times larger in value terms, the growth that’s expected to come out of India is quite remarkable," Emily Neill, chief operating officer-research and operations, IWSR, said in the report.

Of legal drinking age

The Indian beverage alcohol market’s rapid growth is fueled by several key factors. For one, an estimated 65 million Indians will be of legal drinking age (18-25, depending on the region) over the next five years.

This expanding consumer base and regulatory easing are creating a fertile ground for the beverage alcohol market in India, driving significant value growth that outpaces many mature markets. In 2023, all major beverage alcohol categories (except rum and wine) registered higher volumes, with both Scotch and US whiskies recording 7% gains.

“The market will grow in the higher-end segment led by premium whiskies, which are a blend of Indian grain spirits and imported Scotch malt," Vikram Achanta, co-founder and chief executive of Tulleeho, an independent beverage training and consulting firm, told Mint.

“This segment is growing at a high-single digit level across India and this is considered very healthy. We are also seeing premiumization also happening across the sector and in brandy and rum as well," he added. 

“Because India is such a large market and has a growing number of legal drinkers being added to the mix, many pockets across the country will contribute to this growth as distribution touch points are getting better."

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DesmondJi, a maker of craft alcoholic beverages like Indian agave-based spirits and mahua, is seeing strong growth in the premium and super-premium end, a market that is well developed in urban centres.

Desmond Nazareth, the company’s managing director, said Indian companies are becoming aggressive in selling their high-end products to global alcohol markets, which will potentially contribute to the strong growth of the premium sector over the next 5 years.

“Domestically, too, we are seeing a huge demand in India and so we are able to charge export rates," Nazareth told Mint. “It is a very good sign that in urban areas our products are being well accepted. We are currently doubling our production capacity due to the high demand for our products."

The other contributing factor—the regulatory landscape—is becoming more favourable to alcohol makers in several key states, with local governments focusing on the alcohol industry as a major contributor to tax revenues.

In fact, Reserve Bank of India data suggests that Karnataka and Uttar Pradesh were neck and neck in excise duties collected as a share of their tax revenue in 2022-23, with over 22% being generated by both states. They were followed by Punjab, West Bengal and Delhi-National Capital Region.

A few hiccups, but no hangover

Last year saw a slowdown in the global total beverage alcohol, or TBA, market, with only a modest 1% increase in value. TBA is a term used in industry reports to refer to the combined market for all types of alcoholic beverages, including beer, wine, spirits, and other alcohol products.

While other developing markets like Mexico, South Africa, and Brazil are also expected to see growth, India’s trajectory in the beverage alcohol space is particularly striking.

In contrast to sluggish or declining value growth expected in mature markets such as the UK, Japan and Germany, India is on an upward trend with no signs of slowing.

However, the short-term outlook for consumer spending on alcohol in India is not without challenges. Inflation and geopolitical tensions could temper growth, although the long-term forecast remains positive.

Consumer sentiment in India is strong, with robust gains in alcohol spending even as global markets remain cautious, IWSR said. “India is a clear outlier in the global market, driving value growth with positive consumer sentiment and strong spending intentions."