India - Alcoholic Beverages Industry - August 2020

Indian Alcoholic Beverages Industry
Research Report
On
By
August 2020
CARE Advisory Research and Training Limited.

A-1102/1103, 11th Floor, Kanakia Wall Street, Chakala, Andheri - Kurla Rd,
Andheri East, Mumbai- 400093
Contact No. 022 – 6837 4400/ E-mail: cart@care-cart.com
Page 1 of 51
EMISPDF in-xlri2011 from 13.232.140.242 on 2021-07-08 06:58:36 BST. DownloadPDF.

Downloaded by in-xlri2011 from 13.232.140.242 at 2021-07-08 06:58:36 BST. EMIS. Unauthorized Distribution Prohibited.
DISCLAIMER
This report is prepared by CARE Advisory Research and Training Limited (CART). CART has
taken utmost care to ensure accuracy and objectivity while developing this report based on
information available in public domain. However, neither the accuracy nor completeness of
information contained in this report is guaranteed. CART operates independently of ratings
division and this report does not contain any confidential information obtained by ratings
division, which they may have obtained in the regular course of operations. The opinion
expressed in this report cannot be compared to the rating assigned to the company within
this industry by the ratings division. The opinion expressed is also not a recommendation to
buy, sell or hold an instrument.
CART is not responsible for any errors or omissions in analysis/inferences/views or for

results obtained from the use of information contained in this report and especially states
that CARE (including all divisions) has no financial liability whatsoever to the user of this
product. This report is for the information of the intended recipients only and no part of this
report may be published or reproduced in any form or manner without prior written
permission of CART.
Page 2 of 51

List of Abbreviations:
Abbreviation Full Forms

Bn Billion
CAGR Compounded Annual Growth Rate
CART CARE Advisory Research and Training Limited
CMIE Centre for Monitoring Indian Economy
EBIDTA Earnings Before Interest Depreciation tax and Amortisation
GDP Gross Domestic Product
GVA Gross value added
IIP Index of Industrial Production
IMF International Monetary Fund
PAT Profit after Tax
R&D Research and Development
US$ / USD United States Dollar
Page 3 of 51

Table of Contents
1. ECONOMIC OUTLOOK .............................................................................................................................. 5
2. OVERVIEW OF GLOBAL ALCHOHOL BEVERAGES INDUSTRY .................................................................. 14
3. OVERVIEW OF INDIAN ALCOHOLIC BEVERAGES INDUSTRY ................................................................... 19
4. DEMAND DRIVERS FOR THE INDUSTRY .................................................................................................. 40
5. CHALLENGES FOR INDIAN ALCOHOLIC BEVERAGES INDUSTRY ............................................................. 45
6. ALCHOHOL BEVERAGES INDUSTRY OUTLOOK ....................................................................................... 47
Page 4 of 51

1. ECONOMIC OUTLOOK
1.1 Global Economy

Global growth for the year 2019 was at 2.9%. As a result of Covid-19 pandemic, the same is
expected to contract sharply by -3.0% in 2020. Also, it is expected that the pandemic will
fades in second half of 2020 and containment efforts can be gradually unwound, the global
economy is projected to grow by 5.8% in 2021, as per The World Bank, World Economic
Outlook April 2020. Growths for advanced economies are projected to contract at -6.1% in
2020 and grow at 4.5% in 2021. Emerging market and developing economies are projected to
experience similar trend of contract of -1% in 2020 and growth of 6.6% in 2021.
Summary of World Economic Outlook Projections is given below:

(In %)
2019 2020p 2021p
World 2.9 -3.0 5.8

Advanced Economies 1.7 -6.1 4.5
United States 2.3 -5.9 4.7
Euro Area 1.2 -7.5 4.7
Japan 0.7 -5.2 3.0
United Kingdom 1.4 -6.5 4.0
Canada 1.6 -6.2 4.2
Other Advanced Economies* 1.7 -4.6 4.5
Emerging market and developing economies
3.7 -1.0 6.6
(EMDEs)
Emerging and Developing Asia 5.5 1.0 8.5
China 6.1 1.2 9.2
India** 4.2 1.9 7.4
ASEAN-5*** 4.8 -0.6 7.8
Page 5 of 51

Emerging and Developing Europe 2.1 -5.2 4.2

Latin America and Caribbean 0.1 -5.2 3.4
Middle East and Central Asia 1.2 -2.8 4.0
Sub-Saharan Africa 3.1 -1.6 4.1
Note: p- Projections
* Excludes the Group of Seven (Canada, France, Germany, Italy, Japan, United Kingdom, United States) and euro area
countries
** For India, data and forecasts are presented on a fiscal year basis and GDP from 2011 onward is based on GDP at
market prices with FY 11-12 as a base year.
*** Indonesia, Malaysia, Philippines, Thailand, Vietnam
(Source: World Economic Outlook April 2020 as published by IMF)
Growth in the advanced economy group—where several economies are experiencing widespread
outbreaks and deploying containment measures—is projected at –6.1% in 2020. Most economies
in the group are forecast to contract this year. In parts of Europe, the outbreak has been as
severe as in China’s Hubei province. Although essential to contain the virus, lockdowns and
restrictions on mobility are extracting a sizable toll on economic activity. Adverse confidence
effects are likely to further weigh on economic prospects.
Among emerging market and developing economies, all countries face a health crisis, severe
external demand shock, dramatic tightening in global financial conditions, and a plunge in
commodity prices, which will have a severe impact on economic activity in commodity exporters.
Overall, the group of emerging market and developing economies is projected to contract by –
1.0% in 2020. Even in countries not experiencing widespread detected outbreaks as of the end of
March (and therefore not yet deploying containment measures of the kind seen in places with
outbreaks) the significant downward revision to the 2020 growth projection reflects large
anticipated domestic disruptions to economic activity from COVID-19. It is expected that the
growth would be even lower if more stringent containment measures are necessitated by a
wider spread of the virus among these countries.
Page 6 of 51

Emerging Asia is projected to be the only region with a positive growth rate in 2020 (1.0%), albeit
more than 5% points below its average in the previous decade. The rebound in 2021 with
projected growth rate of 8.1% in emerging Asia depends critically on the pandemic fading in the
second half of 2020, allowing containment efforts to be gradually scaled back and restoring
consumer and investor confidence. In China, even with a sharp rebound in the remainder of the
year 2020 and sizable fiscal support, the economy is projected to grow at a subdued 1.2% in
2020. Several economies in the region are forecast to grow at modest rates, including India at
1.9%.
Financial markets across the world are experiencing extreme volatility: equity markets recorded
sharp sell-offs, with volatility touching levels seen during the global financial crisis; flights to
safety have taken down sovereign bond yields to record lows; risk spreads have widened; and
financial conditions have tightened. Global commodity prices, especially of crude oil, have also
declined sharply in anticipation of weakening global demand on the one hand, and the failed
negotiations of the Organization of the Petroleum Exporting Countries (OPEC) and Russia, on the
other.
Many central banks have eased monetary, liquidity and regulatory policies to support domestic
demand, including through emergency off-cycle meetings. The International Monetary Fund
(IMF) and the World Bank Group are making available US$ 50 billion and US$ 14 billion,
respectively, through various financing facilities to their membership to help them respond to the
crisis.
Page 7 of 51

1.2 Indian Economy
The annual growth of India for 2020 has been projected to be 1.9% as per IMF world Economic
Outlook April 2020.
Statistics for Indian Economy is provided below:

I. Gross Domestic Product (GDP)
GDP is the sum of private consumption, gross investment in the economy, government
investment, government spending and net foreign trade (difference between exports and
imports). Sectorial GDP Growth is as under:
Sectorial Growth
Sectorial growth of GDP (in %) (At constant FY 11-12 prices):
9.4
8.2 7.7
6.8 8.8
5.7 6.1
7.3
5.6
2.4 4.6
3.7
2.8 3.0
0.9
FY 19 FY20
-5.8
(Source: Mops)
(Note: Agriculture includes Agriculture, forestry & fishing, Utility includes Electricity, gas, water supply& other utility
services, THTCB include Trade, hotels, transport, communication and services related to broadcasting, FRP include
Financial, real estate & professional services, PAD include Public administration, defense and Other Services).
Page 8 of 51

II. Gross Value Added (GVA) for FY 18-19

Gross value added (GVA) is the measure of the value of goods and services produced in an
economy. GVA gives picture of supply side where as GDP represents consumption.
Real GVA, i.e., GVA at Basic Constant (FY 11-12) Prices for the FY 19-20 is estimated to
grow at 3.7% over Revised Estimates of GVA for the FY 18-19 as estimated by Mops.
Sector wise estimated contribution to GVA is provided below:
% contribution to GVA at Constant prices (FY 11-12) for

FY 19-20
Agriculture, Forestry & Fishing
13.58% 14.45% Mining & Quarrying

2.64%
Manufacturing
22.26% 17.39%
Electricity, Gas, Water Supply &
other Utility Services
Construction
7.82% 2.31%
19.56%
THTCB
(Source: Mops)
It may be noticed from the above that Financial, Real Estate and Professional services (FRP)
contribute highest followed by contribution from Trade, Hotels, Transport and Communication
services (THTCB). Share of Manufacturing and Agriculture sector was 3rd and 4th largest
respectively.
III. Industrial Growth for FY 18-19
The cumulative Index of Industrial Production (IIP) growth during FY 19-20 was at -0.7%.
Page 9 of 51

IIP Growth (%)
4.6
4.4
4
3.8
3.3
-0.7
(Source: Mops)
As per IIP, in view of the global COVID-19 pandemic and consequent nationwide lockdown
measures implemented since March, 2020, the data flow from the producing units was impacted.
As some of these units are yet to resume operations, the response rate has been lower than
usual. Consequently, the Quick Estimates are likely to undergo revision and will be incorporated
in subsequent releases as per the revision policy of IIP.
Page 10 of 51

IV. Growth in Per Capita GDP, Income and Final Consumption
6.1%
5.1% 5.1%
4.2%
3.9% 3.9%
FY 18-19
FY 19-20
Per Capita GDP Per Capita GNI Per Capita PFCE
During the year FY 19-20, growth in per capita GDP, income and private consumption have
decreased compared to previous FY 18-19. It may be noted share of private consumption as %
GDP has increased slightly from 56.7% in FY 18-19 to 56.9% in FY 19-20 indicating an increasing
share of private consumption in the country.
V. Indian Economy outlook
India has not been spared from the exponential spread of COVID-19. As per IMF, growth in India
is projected to be 1.9% in 2020 and “V” shape recovery with 7.4% growth in 2021.
While efforts are being mounted on a war footing to arrest its spread, COVID-19 would impact
economic activity in India directly through domestic lockdown. Second round effects would
operate through a severe slowdown in global trade and growth.
Domestic and global shocks to key conditioning variables such as global crude oil prices, global
trade and growth, the exchange rate, the monsoon outturn and the rising frequency of their
visitations make forecasting a challenging task. Such uncertainties make the forecasting of growth
highly challenging. The actual outturn would depend upon the speed with which the outbreak is
contained and economic activity returns to normalcy.
Page 11 of 51

The Q4 FY 19-20 GDP growth number offers the first indication of the impact of the Covid-19 led
lockdowns on the Indian economy. The country’s GDP grew by 3.1% in Q4 FY 19-20, the slowest
pace of growth under the new series (base year 2011-12). The fall in growth during the last
quarter of FY19-20 can in large part be attributed to the near absence of economic activity due to
the restrictions and lockdowns in March, which typically tends to be a month which sees
increased output with businesses trying to meet targets before the end of the financial year.
Private consumption, in particular, is at serious risk from the COVID-19 pandemic,

notwithstanding improved Rabi prospects and the recent rise in food prices, and the
rationalization of personal income tax rates in the Union Budget 2020-21 along with measures to
boost rural and infrastructure spending. Aggregate demand is expected to be impacted adversely
by likely recession in the global economy, caused by disruptions in global supply chains, travel
and tourism, and lockdowns in many economies. Domestic production will also be impacted by
the nation-wide lockdown. In the near-term, the challenge is to mitigate the adverse impact of
COVID-19.
Since March 2020 the inflation outlook has become highly uncertain due to the COVID-19
outbreak turning into a pandemic. Crude oil prices have collapsed to lows not seen since early
2000s. With several major economies in lockdown mode, demand conditions may weaken
sharply. Accordingly, countries across the world are bracing up for deflationary forces to take
hold. India may not be immune to these extreme downside pressures imparted by the pandemic.
If the fall in GDP growth in Q4 FY19-20 is any indication, the prospects for the Indian economy in
FY 20-21 are grim. In the first quarter of Q1 FY 20-21, economic output of the country is expected
to be very limited, with 2 of the 3 months of the quarter seeing virtually no activity in many
sectors.
The pick-up in economic activity would be dependent on the easing of lockdown across the
country and the containment of the spread of the virus. The longer the economy at a standstill
the longer the return to normalcy. Even with easing of lockdown, revival across sectors would
Page 12 of 51

vary significantly and be contingent on how they are able to address the challenges of liquidity,
labor, logistics, and demand and capacity utilization.
Significant monetary and liquidity measures taken by the Reserve Bank and fiscal measures by
the government would mitigate the adverse impact on domestic demand and help spur economic
activity once normalcy is restored. Still, the government would have to play a critical role for the
revival of the economy mainly through investments which could to an extent address the dire
employment situation and also prompt consumption.
Page 13 of 51

2. OVERVIEW OF GLOBAL ALCHOHOL BEVERAGES INDUSTRY
Alcoholic drink refers to the drink containing fermentation of grains, fruits, and other sources of
sugar. Wine, beer, and spirits are formed using the fermentation process, which is a natural result
of yeast digestion of the sugars found in the raw materials used. Beer is one of the most famous
member of the alcoholic beverages and contains malt, rice, hops, and corn.
Before 1990, most alcohol was consumed in high-income countries, with the highest use levels
recorded in Europe. However, this pattern has changed substantially, with large reductions across
Eastern Europe and vast increases in several middle-income countries, such as China, India, and
Vietnam.
The total alcohol consumption in this time period went from 21 billion litres to 35.7 billion litres,
a whopping 70 percent increase. The highest recorded increase was shown by Vietnam at 8.9
Page 14 of 51

litres per capita, an 89 percent increase from 2010, and the highest recorded decrease was
shown by Australia at 10.7 litres per capita, a 14.4 percent decrease.
India and Japan were among those that showed high increase at 5.9 litres per capita and 7.9 litres
per capita, amounting to 37.2 and 11.3 percent increases respectively, while France and Germany
were flat at 0.2 percent increases. while France and Germany were flat at 0.2 percent increases.
Among those who recorded reduced consumption over the period were Russia, which consumed
12.3 litres per capita, a 3.5 percent decrease and the UK with 11.4 litres per capita, a 7.3 percent
Belarus, a small landlocked country in Europe, consumed the greatest average number of liters of
pure alcohol per capita. On average, its citizens consumed 14.4 liters each year, over 1.5 times
more than Americans. Russia, known for its heavy consumption of vodka, drank an average of
11.5 liters of pure alcohol each year, less than the average of five other countries. While it still
makes the top 10, the stereotype of Russians and vodka may be dwindling as Putin has been
cracking down on illegal alcohol consumption in light of numerous deaths.
Ireland, Luxembourg, and Slovakia consumed slightly less, all drinking an average of 11.4 liters
per capita. The U.S. claimed the 25th spot, drinking an average of 8.7 liters of pure alcohol per
capita annually.
Of the top 12 countries by GDP (gross domestic product), Japan had the highest average life
expectancy at birth: 83.7 years. The long-living country had one of the lowest levels of wine
consumption and levels of beer consumption that remained well below average, and overall
consumed about one liter less of pure alcohol than the average. The country with the lowest
average life expectancy, India at 68.4 years, also had low levels of consumption of alcohol .
Page 15 of 51

Alcohol Market in America
Americans prefer beer most over wine and spirits. In fact, 46 percent of alcohol consumption is
beer, followed by spirits (37 percent) and wine (17 percent). Between 2000 and 2018,
consumption of spirits has grown 28 percent, followed by a slight rise (6 percent) in wine.
Consumption of beer, however, fell 18 percent during that time period.
Source:- Alcohol.org
Among spirits, U.S. consumers prefer vodka by a wide margin. Seventy-seven million 9-liter
bottles of vodka are consumed every year, followed cordials and liqueurs (25 million) at a distant
second. Rum (24 million), American whiskey (24 million), tequila (19 million), Canadian whiskey
(17 million) and brandy/cognac (14 million) follow.
Page 16 of 51

Source:- Alcohol.org
For wine drinkers, merlot rules. The red wine represents 23 percent of all wine Americans drink
every year, followed by chardonnay (19 percent), cabernet (19 percent), pinot noir (17 percent),
pinot grigio (16 percent) and rose (15 percent). Shiraz is the least consumed wine at 6 percent.
In 2018 alone, Americans drank nearly 1.2 billion cases of beer. The beer that a majority of
Americans prefer is light beer (1.2 billion bottles), followed by super-premium and premium beer
Page 17 of 51

(371 million), craft beer (310 million), and popular beer (180 million). Malt liquor is the least
consumed beer at 52 million.
Outlook
Globally, India ranks among the most attractive alcoholic beverage market. Global alcoholic
beverage market is estimated in the region of US$1.4trn. From a regional perspective, Asia Pacific
is the largest and fastest-growing market led by countries such as China, India and Japan. The
Indian alcoholic beverages market is estimated to be in the region of around US$35bn which is
approximately 2% of the global market. Per capita consumption trend is estimated to see an
increase of 2%-3%, which coupled with healthy new consumer addition of a similar magnitude,
increase in occasion-based drinking and significant growth in disposable income should translate
into high single-digit and low-teen growth well ahead of global growth estimated to be in the
range of 3%-4%. Overall consumption occasions have gone up fairly significantly from merely
being a late night affair to now being a more mainstream affair along with food. We are also
witnessing new types of consumption occasions such as festivals and concerts. .The sector could
see addition of 500mn new consumers over the next decade, a large part of this coming from
India and Africa.
Page 18 of 51

3. OVERVIEW OF INDIAN ALCOHOLIC BEVERAGES INDUSTRY
India’s alcohol industry is the third largest in the world with a value of $35 billion. Indian alcoholic
beverage industry is one of the biggest alcohol industry across the globe only behind from two
major countries such as China and Russia. India’s spirit sector -- which includes whiskey, brandy,
rum and vodka.
Alcohol is playing an increasingly important role in India’s emerging economy as the number of
consumers of spirits and imported alcoholic brands is growing rapidly. India is the dominant
producer of alcohol (65%) in South East Asia region and contributes to about 7% of total alcohol
beverage imports into the region. Alcohol use in India has registered a steady growth rate of 10
to 15% each year during the past decade with greater expansion seen in southern parts of India.
Growing demand for alcoholic beverages in India is majorly attributed to the huge young age
population base and growing consumption of alcohol by the young generation as well as rising
disposable income is strengthening the industry growth. With population of 1.3 billion India is
one of the largest consumer markets across the globe. It is also demographically one of the
youngest with around 50% of its population below the age of 25 and around 65% below the age
of 35. Most of the alcohol volume is consumed by people between the ages of 18 and 40. These
demographic stats are expected to fuel the growth of the alcoholic beverages market over the
forecast period at a rapid pace. Additionally, rapid urbanization of tier-II cities is further fueling
the market growth.
India is the largest consumer of Whiskey in the world. The Indian Market is still largely untapped,
making it attractive for liquor players. Several global companies consider India as an under-
consumed market, which has seen steady growth in the last five years. As per the industry
sources, India faces IMFL deficit of around 1000 million liters with room for more. In case the
government makes 10% ethanol blending with petrol mandatory, another 1380 million liters
deficit would arise. Largely consumed Beer/IMFL drinking states and Union Territories are Daman
Page 19 of 51

& Diu, Andaman & Nicobar Islands, Dadra & Nagar Haveli, Arunachal Pradesh, Sikkim and
Puducherry, followed by Goa, Andhra Pradesh, Kerala and Karnataka.
Most of the sale of alcohol in India is coming from Tier 1 and Tier 2 cities. Growing income leading
to rising spending power mixed with access to alcohol at restaurants and liquor stores is the
reason for such a remarkable increase in demand.
The share of alcohol imported into India is 0.08% (FY 2018-19) of the Indian market which is
negligible primarily because the heavy duties and taxes raises its price. But, nevertheless, there is
a sizeable income group which can easily afford the expensive brands.
Structure of Indian Alcoholic Beverages Industry
Geographical Population
Type of Liquor Market Share Pricing
Consumption Target
Indian Made Foreign Affordable and

36% Mostly South India Above 35
Liquor Competitive
In Small Towns and

Country Liquor 48% Cheap Pricing Above 35
Tribal Belt
Beer 13% Expensive Urban Cities 18-40 Years
Imported Liquor 3% Luxury Metropolitan Cities Above 35
Source:- CARE Research
India’s consumption of alcohol is still low compared to the rest of the world. About 32% of
Indians consume alcohol, out of which 4-13% are daily consumers. Around 30-35% of adult men
and approximately 5% of adult women consume alcohol on average. The average age of initiation
of alcohol use has reduced from 28 years during the 1980s to 17 years in 2015.
Page 20 of 51

Region wise Market Structure
North East
12% 9%
West
30%
South
49%
South India dominates the alcohol market in India, with that region accounting for about 60% of
total IMFL sales and 45% of total beer sales. The two states in the southern part of the country,
i.e. Andhra Pradesh and Telangana are the highest alcohol consuming states in India. The
population of these two states is not only ahead in consuming Indian Made Foreign Liquor (IMFL)
but also gets high on country liquor. These states are followed by Assam, Jharkhand and Bihar
(the state has now banned liquor consumption). As a result the south zone held almost half of the
market share of the India alcohol market in 2019 and is expected to continue its growth in
revenue contribution to the India alcohol market. Also, white spirits such as Vodka and Gin are
gaining popularity across the country and this is boosting the India alcohol market growth
significantly.
The alcohol market in India divided into different segments such as country liquor, Indian Made
Foreign Liquor (IMFL), beer, and imported liquor. Country liquor commands the highest market
share given its affordability.
The Indian alcohol industry is a high-risk industry, on account of the high taxes and innumerable
regulations governing it. The international liquor industry, the Indian one too has seen players
with strong brands; diversified portfolios and large operations achieve market leadership
positions. The Indian liquor industry comprises the IMFL, country liquor, foreign liquor bottled in
origin (BIO), illicit alcohol, beer and wine segments.
Page 21 of 51

Source:- CARE Research
The regulatory environment for alcohol in India has changed a great deal in the last two years.
Sale of alcohol has been banned in various places, including bus stops, open markets, railway
stations, petrol stations and airports. Alcohol advertising has been banned, along with drinking in
public places. Hours of trading have been limited, prohibiting the sale of alcohol between 11pm
and 8am. A minimum price has recently been placed on vodka, doubling the price of the cheapest
brands. Rum has potential to attract new drinkers, being the drink of choice for young adults.
Page 22 of 51

Alcohol Industry by Volume
Historical Consumption of Alcoholic Beverages in India (Billion Liters)
6.23 6.53
5.66 5.94
5.38
2015-16 2016-17 2017-18 2018-19 2019-20
The Indian Alcohol industry in terms of consumption stood at approximately 900 Million cases in
FY 2019. The Indian alcohol industry is broadly divided into 3 categories namely Beer, Distilled
and wine
Indian Made Foreign Liquor:
IMFL is a by-product of sugar production which is used as raw material for potable alcohol and
ethanol production. IMFL can also be produced through grains like rice and corn which most of
foreign liquor brands use to sell at a premium over molasses based. IMFL further processed to
produce ethanol and potable alcohol.
Page 23 of 51

Indian-made foreign liquor products, which include brands such as Royal Stag, McDowell's and
Officer's Choice, are locally produced adapted versions of European spirits and account for almost
70% of the market.
IMFL comprises brown spirits like whisky, rum, and brandy; and white spirits like gin, vodka, and
white rum. Indians still prefer brown spirits (95 percent consumption by volume) over white
spirits (5 percent consumption by volume). Whisky is the most popular drink among the spirits,
accounting for about 60 percent of the IMFL market. Whisky consumption is reportedly expected
to grow 8-8.5 percent annually. The overall IMFL market is increasing at the rate of 9-10 percent
annually. IMFL spirits are made under government license. The maximum permissible limit for
alcohol content in spirits is 42.8 percent v/v (volume to volume).
India is the fastest-growing producer of IMFL in the world; the country also remains the most
attractive destination for international alcohol beverage companies despite high duties. It is
apparent from the number of new companies who are entering the market, and the number of
new brands being introduced across the country. The alcoholic beverage industry is a multi-billion
dollar business.
The major drivers for this growing demand seem to be its increasing popularity among young
drinkers who prefer white spirits over brown spirits; aggressive marketing with the introduction
of new flavors; increasing overseas travel among Indians, making them develop a taste for
imported white spirits; and preference for white spirits among women.
In January 2013, Indian government has issued order of 5% mandatory blending of ethanol with
petrol. Despite that, sugar mills have not been able to supply sufficient amount of ethanol
requirement by the oil marketing companies (OMCs) thereby rendering deficit to the tune of
hundreds of millions of liters. Also, chemical industry also faces deficit due to diversion of IMFL
for ethanol production.
The consumption of spirits and hard liquor accounts for the majority of alcohol consumption in
India. However, the scenario is gradually changing. In fact, most countries are experiencing
Page 24 of 51

changing trends, with people switching over to white spirits like vodka and gin and to drinks with
lower alcoholic content like beer and wine. In India, the IMFL (notably vodka) market is increasing
at a higher rate as compared with country liquor categories and is likely to see tremendous
growth in the distant future.
IMFL Industry Break-up 2019
Brandy
16% White Spirits
5%
Whiskey Rum
59% 20%
IMFL is a large segment of the Indian liquor industry segmented into various types (whisky,
vodka, gin, rum and brandy). This segment is dominated by whisky (60% of volumes), followed by
rum (20%). This segment sells around 80 billion cases a year. In the IMFL segment, vodka is the
fastest-growing at around 9-10%, consumption of which has increased due to increased
popularity among women. Besides, evolving consumer preferences towards premium IMFL
varieties are likely to enhance realisations and prospects.
Whiskey
Whisky is decidedly the spirit choice of India. India consumed 48% of the world’s whisky
produced in 2019. India drinks over three times more whisky than any other country. In 2019, the
total consumption of whisky was recorded 1775 mn liters. The market for whisky grew at a CAGR
5.8%, in value, to £14 bn from 2011-17. Whisky accounts for 61.2% of India’s total spirit market
by volume in 2017.
Page 25 of 51

Key Indian Whiskey Players Market Share
13%
United Spirits Ltd

7%
Pernod
45%
ABD
9%
Jagjit
John Distelleries
11% Others
15%
Whiskey Consumption in 2017 Million Liters
Whiskey Consumption in Million Litres

1775
485
89
India USA UK
India USA UK
Country Liquor
Country liquor is the largest consumed alcohol type in India (about 50 percent of the market),
growing at a rate of 6-8 percent per year with faster growth in some states in the north and east.
The average alcohol content in country liquor is 33 percent v/v. It is produced in local licensed
Page 26 of 51

distilleries and is made of cheap raw material, primarily rectified spirits of grains or molasses. The
raw materials used in the production of country liquor vary from state to state. In the northern
states, the availability of molasses is in abundance due to large sugarcane plantations, while in
the southern states coconut and other palms are used as raw materials in the production of local
liquor. Each state may have a different name for country liquor, but it is mostly known as arrack,
desi sharaab, daru, tharra, toddy, fenny and tari. As the production cost for country liquor is low,
the excise duties are also lower than they are for other liquor. The idea behind country liquor was
to provide cheap alcohol and thus check the illicit trade of alcohol. However, illicit production of
country liquor is still fairly common in India. Some alcoholic drinks that are low in alcohol content
are also made in homes in some tribal areas.
Potable Alcohol Market
Liquors are manufactured in a synthetic way to imitate foreign liquors viz. Whisky, Brandy, Rum
and Gin. They are called Indian Made Foreign Liquor (Different varieties are produced by addition
of flavors & are called spiced liquor.) The excise duty on IMFL is much higher than that on country
liquor. The IMFL requires alcohol of very high purity and high quality. For this purpose separate
distillation plant to redistill and purify Rectified Spirit is necessary. This alcohol is called Extra
Neutral Alcohol. It is also useful in cosmetics and perfumes manufacturing.
Extra Neutral Alcohol (ENA) is used as the main raw material in the manufacture of consumption
alcohol. There are two varieties of ENA: Molasses based ENA and Grain based ENA. The molasses
based ENA is mainly used to manufacture cheap liquor and Grain based ENA is used for premium
brands. In developed nations it has been declared that consumption alcohol should not be
manufactured from molasses as it is dangerous for human consumption. But in India there is an
acute shortage of Grain ENA and only available raw material for consumption alcohol is molasses
ENA so it is been widely used.
Page 27 of 51

Beer
India got its first brewery in 1830 (in Kasauli, later shifted to Solan) and there has been steady
beer-drinking through the centuries, beer has become a popular beverage in the country only
over the last two decades. This could perhaps be linked to the entry of foreign companies which
began acquiring Indian breweries around the late 1990s. Indians consume about 1.5 litres of beer
annually; the global average is 27 litres. In India, beer is manufactured in licensed breweries and
there are more than 60 beer brands available in the market.
Over the years, strong beers (which contain 5.1-8 percent of alcohol) have been gaining
popularity over standard and premium categories, which have lower alcohol content. The growth
in the beer market appears to be driven by young consumers and professionals who consider
beer a trendy drink, as compared with traditional spirits. There is also a small demand for foreign
beer in the upmarket urban areas. The highest levels of beer consumption in India are observed
in the southern states.
Beer emerged as the second most popular alcoholic beverage after whisky in India, having 4.7 bn
liters sales by volume in 2017 and expected to reach 6.5 bn liters in 2022 with a CAGR growth of
6.9%, owing to rise in the disposable income.
• Strong beer (~5-8% of alcohol) is dominating the market, with nearly 85% of the total beer
consumption, with the major driver/ intend to ‘get buzzed’.
• The beer market in India was valued at ~GBP 6.7 billion in 2017, and is projected to grow at a
CAGR over 7.6% during 2017-2022 to reach GBP 9.7 billion.
Page 28 of 51

Key Beer Players Market Share
17%
United Spirits Ltd

8%
47% AbinBEV
Carlsberg
Others
28%
Beer Industry in India remains highly regulated with high taxation, restrictions on cross border
movements, constraints on production, retailing and other barriers. In many parts of the country,
wholesale and/or retail distribution is controlled by State Government monopolies. Also, in over
60% of the markets, State Governments dictate the price at which beer can be sold.
Region-Wise Market Share for Beer
9%
12%
South
49% West
North
East
30%
Page 29 of 51

The beer market in India continues to be in its growth stage. The Industry has evolved from
manufacturing standard beers such as strong and lager beer to flavoured and variety beers in line
with trends in other developed countries. Beer has become one of the most popular alcoholic
beverages in the country over the past two decades. There are more than 140 beer brands
available in India to address the palate of various consumer segments. Majority of beer market
growth is driven by young consumers, who consider beer a trendy drink, compared to other
traditional spirits.
Strong beer which has an alcohol content between 6% and 8% dominates the beer market
accounting for over 85% of the total beer consumed in India. Super Premium beer segment,
within both the Strong and Mild beer categories has been growing faster than the overall beer
industry and has grown at a Compounded Annual Growth Rate (CAGR) of almost 30 per cent over
the last three years (FY 2016-19). The Indian beer market continues to grow in line with
expectations. Industry volumes grew at a CAGR of 8% during the last five years. There has been a
trend of emergence of brew pubs in large cities such as Bengaluru, Pune and Gurgaon over the
last few years. These outlets have introduced consumers to new types of beers for e.g., wheat
beer.
Wine
Wine was not produced or consumed on a large scale in India until recently. Urbanization and
globalization have led to a radical increase in the sale of wine, mainly in the bigger cities like
Mumbai, New Delhi, and Bangalore. Wine companies are especially targeting urban women. The
annual growth rates have been recorded at 20-25 percent and are expected to increase. Though
champagne and other sparkling wines are gaining popularity, they are far behind in comparison
with red and white wines . The major reasons for this upswing in wine consumption are: increase
in the levels of disposable income, lifestyle changes, and exposure to international experiences.
India imports wine from many countries, with France being the leading exporter, followed by
Australia, the United States, and Italy. India has a small, but growing, production segment in
wines.
Page 30 of 51

In 2020, Indian wine production is estimated to rise to 17.6 million liters (1.96 million cases at 12
bottles per case of 750 milliliters each) on area of approximately 6,000 acres (2,428 hectares).
This represents a five percent increase in production over 2018 which also experienced a good
harvest. Although wine production in the country is booming, Indian output represents less than
a percent of global wine production.
Area is expected to expand in 2019 as one of the larger wine producers plans to plant 355
hectares of vineyards in response to greater domestic wine demand. Smaller wineries and
farmers are supplying wine and grapes to larger wineries though long-term contracts (5-10 years)
as it assures them payment at end of every season in contrast to other horticultural crops. The
sector has witnessed significant consolidation in last few years where several larger wineries have
acquired small ones in other states to overcome the differential taxation policy among states.
Small wineries are also choosing to supply grapes to the more commercially viable wineries that
can support marketing and branding of their products.
Production Regions: Wine production in India is concentrated in the states of Maharashtra (90
percent) and Karnataka (7 percent), while the states Goa and Himachal Pradesh represent less
than 3 percent of output combined. Most wineries and production are concentrated in the
Nashik region in Maharashtra, which is considered the home of the country’s wine sector. Other
significant wine regions include Sangli (Maharashtra), Nandi Hills (Karnataka) and Bangalore
(Karnataka). The country’s diverse mix of climates allow it to grow an array of grape varieties for
wine including indigenous varieties such as Anabeshahi, Arkavati and Arkashyam in addition to
imported varieties such as Syrah, Cabernet Sauvignon, Merlot, Chardonnay, Sauvignon Blanc,
Zinfandel, Shiraz, Chenin Blanc, and Clairette Blanche.
Illicit Alcohol
There are a number of distilleries that produce alcohol illegally. They do not follow any set
standards and thus have no quality control. The alcohol produced from these units is usually
adulterated and may contain a highly fatal substance called methylated spirit or methanol. This
Page 31 of 51

added methylated spirit can lead to death or blindness. Most of the illicit production occurs in a
cottage industry like set-up. In addition to commercial production, it is fairly common to produce
illicit liquor in homes for personal use.
Apart from being adulterated and harmful, illicit alcohol also evades all national and state-level
taxes and duties, thus making it very cheap and affordable.
Foreign Liquor Bottled in Origin (BIO)
Imported liquor forms a very small part of alcohol consumption in India. It is usually imbibed by
the rich and upper middle class in metropolitan cities and is also popular among young
professionals and entrepreneurs who migrate from local brands to international brands.
International exposure to imported liquor and developing a taste for it during international travel
are also reasons for its increasing popularity. Apart from excise duties, it is also subjected to
customs duty, making it much more expensive. The imported spirits market in India is growing 25
percent yearly and it is estimated that Indian spirit imports will soar to five million cases (a case
contains 12 bottles) by 2021.
Impact on Liquor sales volumes due to Coivd-19
Sales volumes of liquor fell by 30-90 per cent in the five markets that account for 40 per cent of
India’s liquor market. Sales fell by 90 per cent in Andhra Pradesh and by 70 per cent in West
Bengal. Delhi saw a 65 per cent fall in sales, and Telangana’s liquor sales dropped 44 per cent in
April to June quarter 2020 compared to last year in same period. Karnataka too saw a 33 per cent
fall in sales. The decline in sales was higher in states that had imposed higher taxes. Liquor
manufacturers said that they expect the government to assess the situation for another month
and are of the opinion that the government may roll back tax hikes if sales continue to fall.
Five of India’s southern states which amount to about half of the country’s total liquor
consumption are facing a revenue hit due to coronavirus lockdown. These five states viz Andhra
Page 32 of 51

Pradesh, Telangana, Tamil Nadu, Karnataka and Kerala source 10-15% of their total revenue from
excise duty on liquor sales and collectively account for 45% of the total alcohol consumption.
Tamil Nadu and Kerala charge the highest duty in percentage terms at 15% each. Tamil Nadu is
also the biggest consumer of liquor in the country with the state alone guzzling 13% of total
alcohol consumption. Karnataka follows closely at 12%.
For Kerala, the tax levied on alcohol is its single biggest revenue source. On the other hand,
Karnataka and Andhra Pradesh’s revenue share is 11% each and Telangana’s at 10%. As
compared to the southern states, the national capital consumes only 4% of total alcohol intake of
the country while bringing 12% revenue share for the state government.
Meanwhile, the government recently eased restrictions on the sale of liquor in the country. Some
states also imposed additional excise duties on sales of alcohol to garner more revenues. Delhi,
for example is now charging 70% extra on MRP as ‘special corona fees’. Later, Karnataka and
Tamil Nadu also raised excise on alcohol for much needed revenues.
High taxes, migration of workers impact country’s liquor industry
Steep taxes and migrant workers have affected the demand for strong beer and country liquor
which are the categories that are some of the largest in terms of volumes in their respective
segments, as per media reports. Beer sales tanked 60-94 per cent across states during the period
of three weeks in May 2020 from the time liquor shops reopened, while country liquor, also
called Indian Made Indian Liquor (IMIL), witnessed a sharp drop of 30-40 per cent.
Alcohol sale is important to State Governments
Alcohol is a state subject and the aim of most state policies is to earn revenue from alcohol
products. Most states derive around one-fifth of their revenue from alcohol taxation, which is
their second largest source of income after sales tax. Each state and union territory has full
control of its alcohol legislation and state excise rates, as well as the organization of the
Page 33 of 51

production, distribution, and sale of alcohol. There are different policies that govern different
aspects of alcohol in each state.
Liquor contributes a considerable amount to the exchequers of all states and Union Territories
except Gujarat and Bihar, both of which have enforced prohibition. Generally, states levy excise
duty on manufacture and sale of liquor. Some states, for example Tamil Nadu, also impose VAT
(value added tax). States also charge special fees on imported foreign liquor; transport fee; and
label & brand registration charges. A few states, such as Uttar Pradesh, have imposed a “special
duty on liquor” to collect funds for special purposes, such as maintenance of stray cattle.
Sale of alcohol is one of the easiest ways for individual states to generate revenues, given the
other transactions in goods and services as well as public and private transport will stay limited.
Delhi, Uttar Pradesh, Maharashtra, Assam, Karnataka, Chhattisgarh and Rajasthan were among
the states that allowed the sale of liquor either across or the state or in select zones, much to the
delight of those who were in forced abstinence.
Excise duty on alcohol is the third-largest source of own tax revenues for states, with an
estimated contribution of 12.5 per cent in 2019-20. The state goods and services tax (SGST) and
sales tax/value-added tax on petroleum products are the largest sources of revenues for most
state governments.
Petroleum products are outside GST and therefore attract sales tax or VAT. The share of SGST in
states’ own revenues for 2019-20 was estimated at 43.5 per cent and sales tax/value-added tax
on petroleum products at 23.2 per cent.
RBI report shows that during 2019-20, the 29 states and the UTs of Delhi and Puducherry had
budgeted a combined Rs 1,75,501.42 crore from state excise on liquor. This was 16% higher than
the Rs 1,50,657.95 crore they had collected during 2018-19. the five states that collected the
highest revenue from excise duty on liquor were Uttar Pradesh (Rs 25,100 crore), Karnataka (Rs
19,750 crore), Maharashtra (Rs 15,343.08 crore), West Bengal (Rs 10,554.36 crore) and Telangana
Page 34 of 51

(Rs 10,313.68 crore). For amounts collected as VAT and special fees on import for foreign liquor,
state-wise figures are not available.
On an average, the states collected about Rs 12,500 crore per month from excise on liquor in
2018-19, which rose to about Rs 15,000 crore per month in 2019-20, and which was further
expected to cross Rs 15,000 crore per month in the current financial year.
State budgets and Excise duty on sale of Alcohol collections
States’ budget data published by the Reserve Bank of India in its annual publication titled State
Finances: A Study of Budgets show that the excise duty on sale of alcohol at the all India level for
2019-20 was estimated at Rs 1,75,501.42 crore (Rs 1.75 lakh crore). The report had estimated
states’ own tax revenues for the year at Rs 14,09,325.33 crore (Rs 14.09 lakh crore). States’ own
tax revenues refer to taxes imposed and retained by states.
For instance, the Goods and Service Tax(GST) usually has two components – the central GST and
state GST. The central GST, although collected by the state, is transferred to the central
government. States also get a share in personal income and corporate taxes that are collected by
the Centre.
Page 35 of 51

States budget documents show that while excise duty is the third-largest sources of own tax
revenue for states in the all-India average, it is the second-largest source of tax revenues for
states such as Uttar Pradesh, Karnataka, West Bengal. In these states as also Madhya Pradesh,
Chhattisgarh, Himachal Pradesh and Uttarakhand, the share of excise duty on alcohol in states’
own tax revenues was at least 20 per cent, according to a PRS India report published in December
2019 titled State of State Finances: 2019-20.
Expected excise duty collection from Alcohol
The RBI state budgets study show that Uttar Pradesh had expected to collect Rs 31,517.41 crore
as excise duty on sale of alcohol in 2019-20, Karnataka about Rs 20,950 crore and West Bengal Rs
11,873.65 crore, all of which was higher than the taxes estimated to be collected from the sale of
petroleum products.
While the industry has seen a temporary blip in sales in the first quarter this financial year, mainly
due to a few state-specific issues, the festive season kicking in next month will help stabilize
things and industry growth will bounce back to its earlier growth of 2% to 3%. A year ago, Kerala,
where 9% of liquor in the country is sold, announced that about 700 bars and some shops would
be shut in a move towards total prohibition to tackle the drinking problem in the state. United
Spirits, which controls half the country's market, changed its distribution model in Tamil Nadu to
a franchise system, hurting sales from the state that generates 17% of alcohol sales in the
country. Also, prices rose 15-30% in many sub-segments in Bihar and Uttar Pradesh after taxes
were increased, leading to a sales decline of 38% and 30%, respectively. In addition, country
liquor sales, which had slowed down five years ago when tipplers upgraded to low-priced Indian-
made foreign liquor brands, have been on the rise in recent times, thanks to improved quality
and packaging as well as rising prices of IMFL brands due to taxes.
Page 36 of 51

Investments in beer & alcohol industry to fall to 5-year low
The beer & alcohol industry’s investments towards project completions are expected to drop to a
five-year low in the 2020-21 financial year. The industry is expected to complete projects worth
Rs.5.9 billion, which is nearly half of the Rs.12.8 billion worth of projects completed last year.
This sharp fall in investments will be on account of the coronavirus pandemic and the impact of
the nationwide lockdown on the demand for beer and alcohol. The industry is hit hard because
the pandemic directly hurt the hotel industry, a demand driver for the beer & alcohol industry.
The shutdown of restaurants and bars is affecting the demand for beer and alcohol too. Alcohol
consumption depends on social interactions. With fears surrounding a second wave of the
coronavirus, we expect patrons to stay away from socialising even after the lockdown is lifted.
Standalone liquor outlets will also remain shut after a lack of social distancing played spoilsport
to the government’s plan of allowing liquor outlets to re-open. States may consider allowing
home delivery of liquor. Food delivery firms Zomato and Swiggy said that they are delivering
alcohol in Odisha and Jharkhand and talks are on to do the same in West Bengal. But home
delivery may entail higher charges. While premium brands will probably remain unaffected, low
and mid-ranged products may become less attractive. Besides, Swiggy and Zomato have a strong
foothold in terms of reach and delivery personnel in metros and tier 2 cities.
State governments also raised excise duty on liquor to bring in additional revenues to the
struggling economy. Some states have also imposed an additional cess to garner funds. For
example, the Delhi government has imposed a 70 per cent ‘corona cess’ to improve its income. A
rise in tax will also lead to a rise in retail prices of liquor as manufacturers will pass on the
additional tax burden to consumers. The rise in prices will not entirely derail demand, given the
nature of the demand for liquor, but it will have some impact on sales volumes. Sales of beer and
alcohol will therefore remain low for most of this year.
The industry may not have witnessed any project completions in the June 2020 quarter as
construction has come to a standstill due to the lockdown. Project completions are expected to
Page 37 of 51

pick up significantly in the September 2020 quarter either. Although projects worth Rs.1.9 billion
are likely to get commissioned in the September 2020 quarter, this amount will be much lower
than the average quarterly investment of Rs.2.6 billion seen in the past two years.
Capacity additions are also expected to be sedate this year. Capacity additions will reach a five-
year low of 176.6 thousand kilolitres this year.
Some of the major projects that are expected to get commissioned in the ongoing financial year
are as follows -
 Svaksha Distillery is expected to commission a grain-based distillery plant at Dakshin Simla

in West Bengal with an investment of Rs.2 billion. The plant will have the capacity to
produce 66 thousand kilolitres of alcohol per annum and will also consist of an electricity
generation unit with 8 Mw capacity. The company expects to commission the plant by
December 2020. However, this may extend to the next quarter in light of the ongoing
lockdown.
 KPR Mills is expected to invest Rs.1.2 billion in an ethanol manufacturing plant at Almel in
Karnataka. The plant will have the capacity to produce 29.7 thousand kilolitres of ethanol
per annum.
 With an investment of Rs.825 million, Shri Balaji Sugars & Chemicals is scheduled to
commission a molasses-based distillery unit at Yeregal in Karnataka. The plant is expected
to get operational in December 2020 and has received the necessary approvals from
State-Level Single Window Clearance Committee (SLSWCC). The plant will have the
capacity to manufacture 19.8 thousand kilolitres of alcohol per year. The project also
consists of a 3 Mw electricity co-generation unit.
 Centurion Industries is setting up a molasses/grain-based distillery at Abdulpur Munna in
Uttar Pradesh. The plant will have the capacity to produce 19.8 thousand kilolitres of
alcohol in a year and will entail an investment of Rs.704.2 million. The project is scheduled
to begin operations by October 2020.
Page 38 of 51

Liquor companies are likely to defer any major capital expenditure for some time. Demand for
domestically produced beer and alcohol was low even before the coronavirus and so the
pandemic will only discourage manufacturers from adding new capacities. Beer output fell at a
compounded annual growth rate (CAGR) of 1.4 per cent over the past five years, while that of
Indian made foreign liquor (IMFL) was lower by 4.7 per cent during the same period. Beer
manufacturers to plan capacity additions is not expected. The economic turmoil following the
coronavirus crisis will prompt liquor manufacturers to use their resources towards ensuring
sufficient supply and optimal production through existing facilities. New investments in the beer
& alcohol industry are therefore likely to be muted for at least a year.
Page 39 of 51

4. DEMAND DRIVERS FOR THE INDUSTRY
Factors influencing the growth of alcohol industry in India:
 Urbanization:
More and more people are migrating towards bigger cities, where they are exposed to a
wider variety of alcoholic products, including IMFL.
 Brand Name
The brand name liquor carries is crucial to its success and will remain so in the year ahead
as well. Demand for branded liquor is led by the most affluent segment of society and
brand name led consumption includes demand for imported scotches and single malts.
Many of those who consume liquor sold in this segment are liquor connoisseurs and take
pride in enjoying all the trappings of an affluent lifestyle which includes knowledge of and
consumption of fine liquors. Much thought goes into purchasing liquor among consumers
in this segment. People in this segment are involved in the purchase of liquor and they
know what kinds of liquors are available in the market. Such consumers enjoy drinking the
highest quality liquor and have the means to do so regularly.
 Favorable Demographics:
Per capita income during FY2019-20 was estimated at Rs.11782, rising 8.3% compared to
FY2016-17, evolving consumption patterns. India is set to become the world’s youngest
country by 2020 with 64% of the entire population in the working age group. Rise in
education among the youth could lead to a decline in dependency ratio and enhance
lifestyles. India is a young country, with more than 60% of Indians falling in the 15-45
years age group. This is the cohort the industry targets as potential customers. About 485
million Indians are currently of drinking age and another 150 million will be added to this
group in the next five years.
Page 40 of 51

 Changing Social Norms:

Over the years, there has been a change in attitudes, making consumption of alcohol
more socially acceptable. This acceptability extends to drinking in family environments, at
social events, and by females/ youngsters.
 Increased Alcohol Accessibility and Availability:
There has been an increase in the variety of alcohol brands and types and all of them are
easily available in government-licensed outlets, government shops (monopolies), private
licensed retail chains (permitted since the past couple of years), restaurants and bars.
 Experiential Drinking
The experience led consumer purchases whiskey that is in the premium and deluxe
segment. People in this demographic are usually younger than those in the former
segment many being in their 20's and are employed in prestigious jobs or are college
students from relatively well-off backgrounds. They regularly experiment by consuming
different brands and hence are not completely won over by a single brand. Such
consumers are also open to consuming brands they have not tried before and they can be
won over by new brands when brands offer better value such as attractive packaging,
superior blend, a better consumer experience, and other high-value offerings. Because
people in this segment are younger than those in the former segment, their tastes are not
as evolved or as well matured as those of the latter. Many new brands have gained
traction in this segment because consumers in this segment prefer such new brands and
because they are open to experimentation.
 Price Sensitive Consumers, Change in income
Price point led consumers are very price sensitive and, unlike brand-name led consumers
and experience led consumers, display no brand loyalty. Members in this segment
regularly close their workday by consuming liquor and have incomes that are far lower
than those of people who consume branded liquor and experience led consumers. Many
such consumers fall in the lower middle class and many are also daily labourers. They
Page 41 of 51

don’t have any brand loyalty and will easily switch from one brand to another as long as
doing so saves them money.
Naturally large established liquor brands don’t serve this segment; rather this segment is
served by many regional players and by Indian players as well. Also, while very large
quantities of liquor are sold in this segment, because sellers in this segment can’t charge a
premium for their brand and don’t command any brand loyalty, profits in this segment are
the lowest of the three segments mentioned. Those who produce liquor in this segment
are also completely dependent on the price of raw materials and on their availability.
Hence if the price of raw materials used by producers in this segment rises, then
manufacturers of such liquor brands will earn lower profits or even losses.
Emerging Trends in Alcohol Beverages Industry

 The Growth of Low- & No- Alcohol
Tapping into the health & wellness trend, the low- and no- alcohol category is likely to see
some of the most innovation and evolution across the whole industry, offering consumers
more variety, better tasting and higher quality products. The biggest challenge will come
to wine producers, who will need to invest in R&D to create an alcohol-alternative that
appeals in terms of both quality and taste.
Other innovation within the health & wellness movement will come from an increasing
consumer demand for gluten-free, low- and no- sugar, low calorie and low carbohydrate
products; beverages that are light and fresh to drink will also likely see increased uptake,
as will products that offer functional wellness.
 Ecommerce & Technology
Primarily driven by a demand for convenience, the ecommerce channel to be worth

US$45.5bn by 2024, significantly outpacing the growth rate of total trade over the next
five years. China remains by far the biggest online market for alcoholic drinks, with a
turnover of over three times the size of the next largest markets, France and the US
Page 42 of 51

 Brand Ethics & Packaging Innovation
As consumers become more environmentally aware, there will be increased demand for
brands to share consumers’ approach to ethical and sustainable living. Sustainability is
having an impact on everything from packaging to production methods and ingredient
sourcing, with drinks producers looking at activities such as waste reduction, eco-friendly
packaging programmes and carbon footprint levels. Products that are organic, vegan, free
from additives, and/or that offer label and ingredient transparency, will strive to match
consumer ethics as well.
Within eco-packaging, innovation will come from drinks producers exploring ways of
reduced packaging, paper formats, recyclable materials, or even forgoing packaging
altogether. Premium packaging poses a key need for innovation, as much of this
packaging contains gold and metals that are non-recyclable.
Packaging trends will also be shaped by consumer demand for convenience, primarily
driven by millennials. Products such as canned wines have already gained popularity in
markets such as North America. However, this format is likely to gain bigger footholds in
markets around the world too, as quality concerns become increasingly quashed. Non-
glass packaging allows products to cater to a wider variety of drinking occasions, such as
the beach, outdoor events, sporting events and hiking. Further innovation from brand
producers could come in the shape of draft cocktails, bags and boxes, to name a few.
 Premiumization & the Evolution of Rum
The long-running premiumization trend in most global markets will continue. However,
the industry should watch out for the premiumization of local national spirits, both in
large markets such as China and India, as well as in smaller markets, like the Balkans.
These products will pose competition for Western premium spirits already in those
countries.
Page 43 of 51

There is room in the rum category for premiumization and product innovation as well.
Premium rum will re-position the spirit as a sipping drink, moving away from a consumer
perception of a low-quality party drink.
Page 44 of 51

5. CHALLENGES FOR INDIAN ALCOHOLIC BEVERAGES INDUSTRY
 High taxation:
Alcohol comes under the purview of state governments in India, and over 25% of state
revenues (even up to 40% in a few states) come from duties on alcohol. It is the second
largest revenue generator for most states after sales tax/VAT. For many cash-strapped
states, alcohol is a key source of incremental revenue generation.
All this is true of many emerging economies of the world, but what is markedly different
in India is that beer (4-7% alcohol) gets taxed at the same rate as other spirits that have
over 40% alcohol. This means lesser value for money for beer drinkers. Beer in India is
thus much more expensive compared to other comparable countries inhibiting growth of
the category. Excise increases by some states are extremely steep, and thus even if the
rise is passed on to consumers, there is an adverse impact on volumes which can even last
for a couple of years. On the other hand, if companies do not pass on the excise increase,
it leaves them with a hit on the EBITDA margin front.
 Government control over supply, distribution and pricing:

There are a meager 90,000 outlets serving beer for a country with population of 1.3b. On
a per capita basis, this is far lower than other emerging markets. India has 1 beer outlet
per 20,000 people while China has 1 outlet per 200 people. In 70% of the country, it is the
government which decides the pricing of the product, and price increases are not granted
on an annual basis to account for commodity cost inflation, but once in a few years. Until
then, the cost increase has to be absorbed by the manufacturer.
Government agencies are often the largest and in most cases the only suppliers of
alcoholic beverages in many states and are thus the deciding authorities of what to
procure and how much to procure (in some cases even going against what the consumer
wants).
Page 45 of 51

There are signs of small changes over the last 10 years. The only additional retail licenses
that the Maharashtra state government has allotted over this period has been to shops
selling only beer and wine. The Kerala government imposed prohibition on spirits outside
of five star hotels last year but spared beer and wine from such restrictions. The
Karnataka government has started campaigns against binge drinking which affects spirits
more.
 Ban on advertising:
Unlike other consumer products, advertising of alcohol is not permitted in the media. This
restricts awareness of products and new launches. Alcoholic beverage companies have to
take the resort of surrogate advertising, hoardings at alcohol vending outlets and
sponsorship of sports/ music events, but the impact of ban on direct advertising does
affect growth
 Surrogate advertising of alcohol products :

Advertising of liquor products is banned in India; alcohol companies can promote their
brands legally at points of sale. But they know that is not enough to boost their sales. As
there is a complete ban on advertising of alcohol brands, the companies resort to covert
advertising strategies such as surrogate advertising. Surrogate advertising involves
advertising for products (non-alcoholic) that use the same brand name as the alcohol
products. For example, many alcohol companies advertise music CDs, packaged drinking
water and other items under the same brand name as their alcohol product.
Page 46 of 51

6. ALCHOHOL BEVERAGES INDUSTRY OUTLOOK
Total global alcohol consumption, led by increases in beer and ready-to-drink products, grew by
+0.1% in volume and +3.6% in value in 2019. However, losses incurred in the months-long near
complete shutdown of bars and restaurants across the world this year, has not been offset by
upticks of beverage alcohol sales in retail and ecommerce channels. According to estimates
projected by IWSR this to lead to double-digit declines in 2020, and estimates it will take until
2024 to reach 2019 pre-Covid-19 levels. Global travel retail, severely affected by widespread
travel restrictions, will see a particularly harsh decline in 2020 but is expected to reach pre-crisis
levels by 2024.
Gin
The largest gain in global beverage alcohol consumption in 2018 was in the gin category, which
posted total growth of 8.3% versus 2017. Pink gin was a key growth driver, helping the category
sell more than 72m nine litre cases globally last year. In the UK alone, gin was up 32.5% in 2018,
and the Philippines (the world’s largest gin market) posted growth of 8%, fueled by a booming
cocktail scene and premiumization of the market. By 2023, the gin category is expected to reach
88.4m cases globally, with particular strong growth in key markets such as the UK, Philippines,
South Africa, Brazil, Uganda, Germany, Australia, Italy, Canada and France. Notably, Brazil has
emerged as a new hotspot for the category, with volumes there more than doubling last year and
forecasted to grow at 27.5% CAGR 2018-2023, as the gin-and-tonic trend has increased in
upmarket bars of São Paulo and Rio de Janeiro.
Whisky and Agave-Based Spirits
The global whisky category increased by 7% last year, driven in large part by a strong Indian
economy (whisky grew by 10.5% in India, as consumers continue to trade up in the category). The
US and Japan posted 5% and 8% growth, respectively. The IWSR forecasts whisky to grow by 5.7%
CAGR from 2018 to 2023, to almost 581m nine-litre cases. Also, continued interest in tequila and
mezcal (especially in the US), and innovation in more premium variants and cocktails, drove the
Page 47 of 51

agave-based spirits category to 5.5% global growth in 2018 – and is expected to post 4% growth
over the next five years (2018-2023 CAGR).
Mixed Drinks and Cider
The mixed drinks category (which includes premixed cocktails, long drinks, and flavoured
alcoholic beverages) grew 5% globally in 2018. By 2023, it is projected that more than 597m nine-
litre cases of mixed drinks will be consumed across the world. The growth is backed by continued
strong gains in ready-to-drink (RTD) cans in the US and Japan, the category’s two largest markets.
In Japan, most RTDs are locally made and almost exclusive to Japan. Their popularity is partly due
to the fact that they are relatively dry, which makes them more food friendly and sessionable. In
the US, the popularity of alcohol seltzers has been a tremendous engine for growth in the RTD
market. In the cider category, as investment levels in those products continue to rise, almost
270m cases are expected by 2023, a 2.0% CAGR 2018-2023. Both of those categories (mixed
drinks and cider) are taking share from beer as perceived accessibility increases (less bitter, easier
to drink.
Vodka, Liqueurs, and Cane Spirits
Vodka lost volume in 2018 (-2.6%) as the market for lower-priced brands continued its decline in
Russia and the Ukraine (two of the largest markets for this spirit). Higher-priced vodkas, however,
showed a more positive trend last year. Nonetheless, the outlook for total vodka over the next
five years remains sluggish as the category is forecasted at -1.7% CAGR 2018-2023. Also in decline
is the flavoured spirits category (liqueurs),
which dropped by -1.5% globally in 2018, and is expected to continue to slip in 2019 before
rebounding slightly in 2020. Cane spirits (primarily Brazilian cachaça) was down -1.6% last year,
and is forecasted to lose another 4.5m cases by 2023.
Page 48 of 51

Beer
Global beer declined -2.2% in 2018, impacted greatly from volume decreases in China (-13%).
Other large markets such as the US and Brazil also fell (-1.6% and -2.3%, respectively), while
Mexico and Germany saw growth (6.6% and 1%, respectively). The future outlook for beer,
however, paints a more positive picture, as the category is expected to show a slight increase in
2019 and post a 0.7% CAGR 2018-2023.
Wine
Wine, which had posted strong global growth in 2017, lost -1.6% in volume in 2018 as wine
consumption declined in major markets such as China, Italy, France, Germany and Spain (the US
market was flat). However, though consumers are drinking less wine, they’re increasingly drinking
better – pushing wine value to increase.
Globally, the retail value of wine is projected at $224.5bn by 2023, up from $215.8bn in 2018. The
one bright spot in wine volume is the sparkling wine category, which is expected to show a five-
year CAGR of 1.17% 2018- 2023, driven in large part by prosecco.
India
Over the coming year, it’s expected that demand for whiskey will grow by 3.5 percent and will
grow at this rate every year for the next 3 years while whiskey's share of the entire Indian liquor
market will be 60%. Whiskey sales will comprise73% of the value of liquor sold in India in 2019
clearly revealing that premium prices attached to whiskey don’t dampen Indian consumer’s
appreciation of this liquor. Within the whiskey segment, it is estimated that demand for Bottled
in India (BII) Scotch, Premium Whisky, and Semi-premium Whisky will grow between16%, 10%,
and 8% respectively.
Demand for scotch, Indian made foreign liquor (IMFL), deluxe whiskey, and regular whiskey will
be between 12%, 3%, 15%, and -2% respectively. The drop in demand for regular whiskey is
commensurate with rising standards of living in India and signals the aspirations of Indians some
Page 49 of 51

of whom prefer to consume more a higher quality whiskey instead of regular whiskey. A very
large number of those who consume whiskey next year will consume regular whiskey signalling
once again that despite an aspirational class, low prices still have an impact on the average
consumer’s decision to purchase whiskey in India.
Other liquors such as rum, brandy, and white spirits share by volume in India is expected to be
15%, 22%, and 3% while their share by value is expected to be 10%, 12%, and 5%. A casual
examination of these numbers reveals that in India consumers still prefer relatively inexpensive
rum and whiskey while those who consume white spirits are more likely to consume a premium
product.
Both Premium Brandy and Beer are poised to grow in coming years while Rum will be declining
along with Regular Brandy. Hence the demand for each of the mentioned categories of liquor
except massbrandy will grow. The decline in demand for mass brandy is also a result of rising
aspirations of Indians who will be more likely next year to opt to purchase a higher quality of
liquor than a mass brandy. The rise in demand for beer is congruent with the increasing numbers
of young Indians who consume beer to have a good time.
More and more Indians are saying cheers among friends every evening, a trend that is likely to
continue. Excitingly more Indians are willing to pay extra for a higher quality branded liquor than
did in the past; this trend is likely to increase the demand for branded liquor over the next few
decades at the expense of unbranded liquor brands.
Indian Alcohol Market Outlook
The Indian alcohol market is growing at a CAGR of 8.8% and it is expected to reach 16.8 Billion
liters of consumption by the year 2022. The popularity of wine and vodka is increasing at a
remarkable CAGR of 21.8% and 22.8% respectively. India is the largest consumer of whiskey in
the world and it constitutes about 60% of the IMFL market.
Though India is one of the largest consumers of alcohol in the world owing to its huge population,
the per capita alcohol consumption of India is very low as compared to the Western countries.
Page 50 of 51

The states of Andhra Pradesh, Telangana, Kerala, Karnataka, Sikkim Haryana and Himachal
Pradesh are amongst the largest consumers of alcohol in India. The most popular channel of
alcohol sale in India is liquor stores as alcohol consumption is primarily an outdoor activity and
supermarkets and malls are present only in the tier I and tier II cities of India.
*****
Page 51 of 51

Advisory
Research
Training
Delivering Excellence
CART Profile
CARE Advisory Research & Training Ltd. (CART) is a wholly-owned subsidiary of CARE Ratings Limited .
CART is engaged in the business of rendering financial and management advisory services,
undertaking diligence studies and appraisals of all types of projects and other related research. CART
also caters to the training needs of corporates and professionals through its training programme
offerings.
CARE Advisory CARE Research CARE Training

CARE Advisory
CARE Advisory is manned by top quality professionals from finance/management stream with extensive experience in infrastructure,
manufacturing, finance and service sectors. CARE Advisory offers its clients pragmatic solutions that are legally tenable, technically
feasible, commercially attractive and financially viable. CARE Advisory offers advisory services in the areas of credit capacity assessments
(of Corporates, State Governments and Government bodies), TEV studies, SME Ratings, MFI Gradings, Solar Gradings, enterprise
valuations, business and financial restructuring, markets & industry studies, financial modeling, diagnostic studies, project appraisals, bid
process management, feasibility studies, design of credit appraisal systems, formulation and implementation of risk management
strategies, due-diligence studies, etc.
CARE Research
CARE Research services a variety of business research needs with credible, high-quality research and analysis on various facets of the
Economy and Industries. CARE Research provides customised research services to Indian and Multinational corporates for their various
requirements. CARE Research draws its strengths from CARE group's more than two decade long experience and its in-depth
understanding of the economy/industries, use of rigorous analytical methods and its knowledge pool. CARE Research has an in-house
team of qualified, experienced analysts. CARE Research is committed to provide accurate and reliable research to its clients within
specified timeframe to enable them make superior decisions.
CARE Training
CARE Training caters to the training needs of corporates and professionals. Our training programmes are designed to assist trainees in
gearing up to the dynamic business requirements. Meticulous thought process, mix of case Studies and in-house expertise gathered
within CARE group over 2 decades is used to develop course module & content. CARE Training offers its programmes through on-line as
well as through class room mode. CARE Training also offers customised training programme to Corporates/FIs for their specific training
needs.
Contact us at:
CARE Advisory Research and Training Ltd.
1102/1103, 11TH Floor, A wing, Kanakia Wall Street, Chakala, Andheri Kurla Road, Andheri East, Mumbai - 400093.
Ph. No:by91-22-
Downloaded in-xlri20116837 4400 I E-mail:
from 13.232.140.242 cart@care-cart.com
at 2021-07-08 I www.care-cart.com
06:58:36 BST. EMIS. Unauthorized Distribution Prohibited.

India - Alcoholic Beverages Industry - August 2020

Uploaded by

Document Information

Original Description:

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

India - Alcoholic Beverages Industry - August 2020

Uploaded by

Copyright:

Available Formats

Indian Alcoholic Beverages Industry

Indian Alcoholic Beverages Industry

CARE Advisory Research and Training Limited.

EMISPDF in-xlri2011 from 13.232.140.242 on 2021-07-08 06:58:36 BST. DownloadPDF.

CART is not responsible for any errors or omissions in analysis/inferences/views or for

EMISPDF in-xlri2011 from 13.232.140.242 on 2021-07-08 06:58:36 BST. DownloadPDF.

Abbreviation Full Forms

EMISPDF in-xlri2011 from 13.232.140.242 on 2021-07-08 06:58:36 BST. DownloadPDF.

1. ECONOMIC OUTLOOK .............................................................................................................................. 5

2. OVERVIEW OF GLOBAL ALCHOHOL BEVERAGES INDUSTRY .................................................................. 14

3. OVERVIEW OF INDIAN ALCOHOLIC BEVERAGES INDUSTRY ................................................................... 19

4. DEMAND DRIVERS FOR THE INDUSTRY .................................................................................................. 40

5. CHALLENGES FOR INDIAN ALCOHOLIC BEVERAGES INDUSTRY ............................................................. 45

6. ALCHOHOL BEVERAGES INDUSTRY OUTLOOK ....................................................................................... 47

EMISPDF in-xlri2011 from 13.232.140.242 on 2021-07-08 06:58:36 BST. DownloadPDF.

1.1 Global Economy

Summary of World Economic Outlook Projections is given below:

World 2.9 -3.0 5.8

EMISPDF in-xlri2011 from 13.232.140.242 on 2021-07-08 06:58:36 BST. DownloadPDF.

Emerging and Developing Europe 2.1 -5.2 4.2

(Source: World Economic Outlook April 2020 as published by IMF)

EMISPDF in-xlri2011 from 13.232.140.242 on 2021-07-08 06:58:36 BST. DownloadPDF.

EMISPDF in-xlri2011 from 13.232.140.242 on 2021-07-08 06:58:36 BST. DownloadPDF.

1.2 Indian Economy

Statistics for Indian Economy is provided below:

Sectorial growth of GDP (in %) (At constant FY 11-12 prices):

EMISPDF in-xlri2011 from 13.232.140.242 on 2021-07-08 06:58:36 BST. DownloadPDF.

II. Gross Value Added (GVA) for FY 18-19

% contribution to GVA at Constant prices (FY 11-12) for

Agriculture, Forestry & Fishing

13.58% 14.45% Mining & Quarrying

III. Industrial Growth for FY 18-19

EMISPDF in-xlri2011 from 13.232.140.242 on 2021-07-08 06:58:36 BST. DownloadPDF.

IIP Growth (%)

EMISPDF in-xlri2011 from 13.232.140.242 on 2021-07-08 06:58:36 BST. DownloadPDF.

IV. Growth in Per Capita GDP, Income and Final Consumption

Per Capita GDP Per Capita GNI Per Capita PFCE

V. Indian Economy outlook

EMISPDF in-xlri2011 from 13.232.140.242 on 2021-07-08 06:58:36 BST. DownloadPDF.

Private consumption, in particular, is at serious risk from the COVID-19 pandemic,

EMISPDF in-xlri2011 from 13.232.140.242 on 2021-07-08 06:58:36 BST. DownloadPDF.

EMISPDF in-xlri2011 from 13.232.140.242 on 2021-07-08 06:58:36 BST. DownloadPDF.

2. OVERVIEW OF GLOBAL ALCHOHOL BEVERAGES INDUSTRY

EMISPDF in-xlri2011 from 13.232.140.242 on 2021-07-08 06:58:36 BST. DownloadPDF.

EMISPDF in-xlri2011 from 13.232.140.242 on 2021-07-08 06:58:36 BST. DownloadPDF.

Alcohol Market in America

EMISPDF in-xlri2011 from 13.232.140.242 on 2021-07-08 06:58:36 BST. DownloadPDF.

EMISPDF in-xlri2011 from 13.232.140.242 on 2021-07-08 06:58:36 BST. DownloadPDF.

EMISPDF in-xlri2011 from 13.232.140.242 on 2021-07-08 06:58:36 BST. DownloadPDF.

3. OVERVIEW OF INDIAN ALCOHOLIC BEVERAGES INDUSTRY

EMISPDF in-xlri2011 from 13.232.140.242 on 2021-07-08 06:58:36 BST. DownloadPDF.

Structure of Indian Alcoholic Beverages Industry

Indian Made Foreign Affordable and

In Small Towns and

EMISPDF in-xlri2011 from 13.232.140.242 on 2021-07-08 06:58:36 BST. DownloadPDF.

Region wise Market Structure

EMISPDF in-xlri2011 from 13.232.140.242 on 2021-07-08 06:58:36 BST. DownloadPDF.

Source:- CARE Research

EMISPDF in-xlri2011 from 13.232.140.242 on 2021-07-08 06:58:36 BST. DownloadPDF.

Alcohol Industry by Volume

Historical Consumption of Alcoholic Beverages in India (Billion Liters)

2015-16 2016-17 2017-18 2018-19 2019-20

Indian Made Foreign Liquor: