The Market Buzz: A Toast to Growth
The Indian alcohol beverage (Alco-Bev) industry is set to pop its cork with a projected compound annual growth rate (CAGR) of 7% over the next decade, according to Infomerics Ratings. As of 2023, the market’s worth reached a hefty $55 billion, up from $52.4 billion in 2021. With such promising prospects, this sector is considered a ‘rising star,’ not just for its growth potential but also for the increasing social acceptance of alcohol consumption in India.
Demographics and Economics: The Perfect Cocktail
India’s demographic dividend is nothing short of a golden goose for the Alco-Bev market. With over 600 million individuals between the ages of 18 and 35, and a working-age population (20-59 years) expected to peak at 59% by 2041, the market is teeming with potential consumers. Currently, 33% of the Indian population is of legal drinking age, ready to enjoy everything from a classic whiskey to a trendy L.I.I.T. at your nearest Social. Couple this with the fact that 30.7% of the labor force is employed in the services sector, as reported by the International Labour Organization (ILO), and you’ve got a recipe for robust economic growth and higher disposable incomes.
Who’s Drinking the Most?
Karnataka, Maharashtra, West Bengal, Odisha, Telangana, Delhi, Haryana, and Punjab top the charts when it comes to liquor consumption. The lifting of pandemic restrictions in FY23 saw a significant rebound in out-of-home drinking. Beer consumption, for instance, more than doubled from 776 thousand kiloliters in FY22 to a frothy 1,134 thousand kiloliters in FY23. Spirits followed suit, with consumption jumping from 550 thousand kiloliters to 644 thousand kiloliters over the same period. In 2021, an impressive 92% of all alcohol consumed in India was spirits, with the segment expected to hit a value of $50 billion in the next decade.
Regional Sips and Nips
According to a Statista survey, the northeastern and eastern regions of India exhibit higher alcohol consumption rates for both men and women. The southern and northern regions also show high male alcohol consumption. Interestingly, states like Telangana and other northeastern regions report higher female alcohol use compared to the national average, shaking up the traditional dynamics of alcohol consumption in the country.
IMFL vs. IMIL: The Great Indian Liquor Debate
Indian Made Foreign Liquor (IMFL) includes a variety of spirits such as whiskey, brandy, rum, gin, tequila, and vodka. IMFL sales volumes rose by 14% in FY23, with premium products priced over INR 1,000 per 750 ml bottle growing by a staggering 48%. Whiskey remains the star of the show, accounting for 63% of industry sales with an estimated 243 million cases sold in FY23. The share of whiskey in India’s total alcohol imports has surged from 44.3% to 63%, while gin’s share has grown from a modest 0.5% to 2.5%.
On the flip side, Indian Made Indian Liquor (IMIL) includes locally produced drinks like Toddy and Feni, which are widely consumed in the southern parts of India. These traditional beverages are beloved by the masses and continue to hold a significant place in the market.
Premiumization: Sipping in Style
The trend towards premiumization in India’s Alco-Bev market is unmistakable. Increased international travel, rising disposable incomes, and favorable import regulations have fueled a shift towards higher-end alcohol. Consumers are now more inclined towards grain-based alcohol over the traditional molasses-based variants. According to International Wine & Spirit Research (IWSR), premium-and-above blended Scotch volumes are set to grow at a CAGR of 13% from 2022 to 2027, while premium-plus malt Scotch is expected to grow at an even brisker 19% CAGR.
Data from the Confederation of Indian Alcoholic Beverage Companies (CIABC) shows that spirits priced above INR 1,000 grew by 48% year-over-year in FY23, compared to just 12% growth for the sub-INR 500 segment. The market share of Indian premium brands in the INR 1,000+ category increased from 18% in FY22 to 20% in FY23, highlighting the growing preference for homegrown high-end spirits.
Historical Tidbits: The Long Pour
The Indian Alco-Bev industry’s journey is a fascinating one, steeped in history. From the ancient brewing of Soma, an intoxicating drink mentioned in the Vedas, to the colonial era’s gin and tonic (a British invention to ward off malaria), India’s relationship with alcohol has evolved dramatically. Post-independence, the industry faced stringent regulations and prohibition in various states, only to bounce back with liberalization policies in the 1990s that opened the floodgates for both domestic and international brands.
Investment Case: Cheers to the Future
Given the robust growth projections, favorable demographics, and increasing trend towards premiumization, the Indian Alco-Bev industry presents a compelling case for investment. With a significant portion of the population entering the legal drinking age, coupled with rising incomes and changing social norms, the market is set to expand even further. Whether it’s investing in well-established brands or new entrants catering to niche markets, the opportunities are plentiful.
Conclusion: Pouring it All Together
In summary, the Indian Alco-Bev industry is brimming with potential. Its diverse product range, from traditional IMIL to sophisticated IMFL, combined with a favorable economic and demographic landscape, makes it a lucrative sector for investment. As consumers continue to shift towards premium options and the market expands, investors can look forward to a spirited performance in the years to come.
So, whether you’re a seasoned investor or a novice looking to dip your toes in the market, raising a glass to the Indian Alco-Bev industry might just be your best bet. Cheers to a future filled with growth, prosperity, and of course, good spirits!