The Indian alcoholic beverages industry is the 3rd largest in the world with market size of ~Rs. 3.5 lac crore and sales of ~1,000 million cases. In terms of volumes, Indian Made Foreign Liquor (IMFL), Beer and Country liquor consumption are identical while IMFL contributes to two-thirds of total industry value.
As per a recent study by Euromonitor IMFL is expected to grow the fastest @ 5% volume growth and 8% value growth. Whiskey is expected to dominate consumption with ~62% of IMFL sale by volumes and ~74% by value. Beer is also seeing a steady 7%+ value growth with strong beer contributing to ~85% of sales.
Growth in IMFL and Beer is being driven by favorable demographics (young population with median age of 28 years, ~55% above the legal age of drinking and low alcohol consumption penetration of ~20%), economic trends (Rising affluence – 40% of families expected to earn Rs. 10 lac or more by 2025 and rapid urbanization – 50% of population expected to live in cities by 2025) and changes in societal attitudes (increasing acceptance and practice of social/ casual drinking especially among the millennials)
While consumption is increasing, heterogenous consumption patterns (the type of liquor and quantity) across states indicates growth opportunities for alcoholic beverage manufacturers. Companies need to be nimble with their strategies in targeting mature audiences in certain zones while aiding migration from indigenous drinks in others
Increasing premiumization has had an impact on raw material demand and consumption. Malt spirits are getting scarcer and imports are taxing the wallets of many an IMFL player. Government’s impetus for ethanol blending to support green fuels has driven Extra Neutral Alcohol (ENA) prices by ~10% – 15% higher across states. Ethanol Blending Program has also impacted supplies as distilleries are diverting to ethanol production further exacerbating supply and cost pressures. The industry is focused on ENA security, evaluating investments in Grain and malt spirits distilleries and finding innovative solutions to protect margins against rising costs in a price-sensitive market.