The spirits market experienced a deceleration in demand, dropping to 2.2% growth in the quarter concluding in September. This marks a reversal from the robust 7-15% growth observed in the preceding two years. The downturn is attributed to diminished sales of mass-priced products, elevated taxes, and a high base. Although whisky, gin, and vodka witnessed volume increases ranging from 3-13%, sales in the rum and brandy category declined, according to industry executives referencing the latest data from the excise department.
“In general, the regular category or the popular category is having muted growth as far as the industry is concerned. Certain states, which are big states like Karnataka, increased the duty by 20%. There is an impact on the demand at that price point. In UP, there is some down trending,” said Dilip Banthiya, chief financial officer at Radico Khaitan during its earnings call.
In the period spanning July to September, whisky retained its dominant position as the largest segment, constituting two-thirds of the total spirits demand. It experienced a growth of 3.2% despite a substantial baseline.
Sales of brandy and rum declined by 0.7% and 0.3%, respectively. In contrast, vodka witnessed a robust growth of 13.1%, while gin sales saw a notable increase of 10.6%, albeit from a lower starting point, as indicated by the excise data.
While sales of mass-priced whiskey dropped by 4.5%, there was notable pressure on this segment. In contrast, premium products, particularly whiskey, exhibited growth ranging from 4% to 18%.
“The overall spirits industry after very strong growth in the post- Covid years has normalised to a steady state. Consumers continue to aspire for better quality products and brands,” said Bikram Basu, chief strategy and marketing officer at Allied Blenders and Distillers which saw newer brands – Sterling Reserve and ICONiQ Whiskies – each crossing sales of million cases annually.
During the initial half of the calendar year, the spirits market in India demonstrated a 10% expansion. In the quarter concluding in June, it sustained a growth rate of 7%, standing out as the sole discretionary category to maintain robust momentum amidst consumer cutbacks in other lifestyle segments like apparel and electronics.
Typically, the December quarter marks a peak period for spirits, driven by weddings, festivals, and the winter season.
USL, the producer of Johnnie Walker and Smirnoff, reported that September experienced subdued demand due to the delayed festive season, and October did not show significant improvement. The company noted a slowdown in discretionary spending during this period, and the festive uptick was not as vibrant as in previous years.
Nevertheless, companies anticipate accelerated growth in the latter half of the calendar year, which traditionally constitutes a substantial portion of liquor sales owing to the occurrence of festivals and weddings.
We remain cautiously optimistic that demand will pick up, though we don’t see the signs right now,” Hina Nagarajan, managing director at Diageo-controlled USL, told investors on an earnings call. “But we still have a big festival season to go through–Diwali and then Christmas, etc. So, we are cautiously optimistic and we are definitely investing and activating for growth.”
