In FY23, the consumption of alcoholic beverages in India surged, with an estimated 400 million cases sold. This uptick in demand was seen across all major categories, including whisky, brandy, rum, gin, and vodka, with a particular preference for premium products. To give a sense of scale, this equates to an average of 4.75 billion 750 milliliter bottles consumed.
According to industry executives citing data from the excise department, the spirits market in the country witnessed a sales volume of 395 million cases in the year ending March, representing a 12% growth from the previous fiscal year. This surge in sales volume added nearly 40 million cases to the previous high recorded four years ago.
“We have been increasing prices to the highest level versus the recent past in India,” Pernod Ricard global Chief Financial Officer Helene de Tissot told analysts last month.
“All the fundamentals are very strong in terms of consumer confidence, in terms of demographics, in terms of the organisation, and then we have very strong brand equity that we have been building over the past 20 years. So we are very ambitious for India in the short and mid long term.”
According to data from the excise department, whisky continued to dominate the spirits market, making up two-thirds of the total demand and growing by 11.4% despite already having a significant market share. Brandy contributed 21% to the overall demand, while rum had a share of 12%. Meanwhile, vodka sales saw a 29% increase, and gin sales experienced a massive surge of 61%, albeit from a lower base.
Although several major brands experienced a decline in FY21, particularly in the whisky category, the latest fiscal year saw a significant rebound. Allied Blenders, for example, saw a 15% growth primarily driven by Officer’s Choice, one of the largest whisky brands globally in terms of volume. In addition, Allied Blenders introduced multiple new brands, including Iconiq White Whisky, Srishti Premium Whisky, and X&O Premium World grain whisky. Tilaknagar Industries also joined the trend by launching a premium flavored brandy called Mansion House Reserve.
“There were no disruptions last year from a demand standpoint and a few states also allowed price increases to offset rising input cost,” said Vinod Giri, Director General at the Confederation of Indian Alcoholic Beverage Companies (CIABC). “However, prices of glass have almost doubled in a year, squeezing margins for companies.”
According to Giri, the segment is expected to achieve a Compound Annual Growth Rate (CAGR) of 7-8% over the next five years.
Around eleven states, including Rajasthan and several southern states, have permitted companies to increase prices, providing some relief from margin pressure. Telangana, which is one of the largest consumers of spirits, reduced liquor prices last week, which is expected to further boost demand.
Despite the increasing competition in the premium segment, companies have reported that rising costs are impacting sales, particularly at a mass level.
“While the outlook is fairly good for premium brands, there has been a severe cost push pressure which is difficult to offset beyond cutting operating costs,” said Rakshit Jagdale, Managing Director of Amrut Distilleries. “Hence, posting double-digit growth going forward could be challenging and is not sustainable.”
The prices of raw materials, such as extra neutral alcohol, glass, and packaging materials, have reached unprecedented heights, affecting liquor companies.