Indian alcoholic beverages sales grew 7-8% in 2023

As the year draws to a close, the sales of alcoholic beverages in the country seem to have lost the fizz in 2023. Confederation of Indian Alcoholic Beverage Companies (CIABC) estimates that the sales of alcoholic beverages has declines from a 14% growth in 2022 to about 7%-8% in 2023. But, the segment which is pulling this growth is the demand for product selling above ₹500 a bottle. And when it comes to 2024, the sector aims to continue to grow at similar levels of 2023.

Vinod Giri, Director General, Confederation of Indian Alcoholic Beverage Companies (CIABC) told CNBC-TV18, “last year for the industry was extremely good and we were about 14% over the previous year. So we were expecting a bit of slow down this year because that's a very high level of growth and difficult to sustain at the same level. On the demand side, we did not see much issue this year. We did have some challenges on the supply side, especially with the elections in five states, which does disrupt the supply chains. We had some issue in Karnataka because of very steep price increase after the new government came to power. Otherwise the growth remained fairly consistent across markets. I think we would be our estimate is about 7 to 8% grow a bit depends on of course the how this festive season which we are currently in the midway, so it depends on how this season pans out.”

India is the third largest alcoholic beverage market in the world with an estimated volume of over 970 crore litres per annum, or ₹4.5 lakh crores in value. It is a major economic contributor, accounting for close to Rs 3 lakh crores in taxes to various State Governments. The sector provides livelihood to over 50 lakh farmers and directly and indirect employs nearly 20 lakh people. Liquor or Indian made Foreign Liquor (IMFL) is the most prominent part of the alcoholic beverage industry accounting for over 55% of the value as well as the tax contribution of the alcoholic beverage industry, Liquor industry has played a major role in supporting the economy.

Giri further shared that "apart from the volume side, the value of the market has been increasing, we will see 2% more premiumization what we refer to, which is the product selling above ₹500 a bottle. So that segment will further work. So in terms of value, we will see the market going up and which is a very positive side."

Not just this, the industry is witnessing a phenomenal growth in the Indian single malts, reflecting a healthy sign. "This shows that the quality of products coming out of India are extremely good and they're being accepted all over, which means that we are not only a large volume consuming country, we are also becoming a production and export country for alcoholic beverages," Giri added.

But, the industry is facing challenges due to the ethanol blending program. According to Giri, "as we know a lot of these costs are related with each other, we are having a cost pressure and we hope the things to calm down a bit on that front."

Confederation of Indian Alcoholic Beverage Companies (CIABC) is confident that for the next year the industry will be able to sustain the 7-8% growth levels.

"We expect to see very similar growth coming and despite the big beast is in the middle of the year, which is the general elections and which will have its own bearing before and after. But, we had some positive development in the in Manipur where the prohibition was lifted. And while the size of the state may not be very big to us, the importance of the development lies in in the change in the narrative, which is prohibition pretty much for all practical purposes and lost steam. If we have been pleading with the Bihar government to pursue or to follow suit, and if that happens, then that will be a big boost for the industry in the coming year. We're keeping our fingers crossed," Giri said.

The growth in the sector is also due to fresh evolving acceptance of Indian made single malt whiskeys. According to Giri, "Before COVID in 2018, Indian single malt whiskies accounted for about 30% of the all single malls sold in the country. Today, that number is approaching 60% witnessing a phenomenal growth."

Shelves in the retail shops are displaying more varieties of Indian single malts, giving confidence to the sector.

"The recognition of a different and superior good quality product in the market is the new phenomenon. Two things we have to prepare in our mind. First of all, the Indian barley is different from what we get in Scotland, the other major producing country. This means there is a little bit of difference in the flavor.

However, the most important thing in my view is the maturation, because in our climate which is a much more warmer climate, the rate of maturation is much more rapid and that has an effect on the spirit. What we are achieving here in three to five years given in quality in 15 years time in Scotland. So Indian single malts are having distinctive flavour. Third thing to me is a very important factor driving growth is increasing belief in the Indian brands. Earlier there used to be a notion that imported is better but this notion is disappearing. The consumers tends to evaluate a product more on the basis of the quality, so the imported being better, that notion is now melting away. So with all these factors together we see the single malt whiskey segment is exploding." Giri said.

But, to sustain the growth he industry is in talks with the government to ensure that unscrupulous producers do not dent the reputation being built by serious players.

"We do not want that unscrupulous producers to come and spoil their reputation which the early manufacturers have created. So we are in touch with the government. We already have FSSAI defined the Indian single malt whisky standards, they have been notified now and we're also working with the government to put stringent controls to ensure that the right product is produced and exported out of the country," Giri added.

Apart from Whiskey’s Indian made Gin too is creating ripples in the global market. According to CIABC, Gin in particular a segment where a lot of developments are happening.

"Indian premium gin or what is what is referred to as the craft gin, has seen an explosive growth over the last few years and today they account for 60% of the premium gin products, which is the products being sold above ₹1000 a bottle. Now 60% of that is Indian product. Not only that, we are seeing the Indian craft Gin being exported to UK, which used to be the country of the Source engine."

India last year exported about 30,000—35,000 cases of gin.

Indian industry is pushing for more innovation in this segment. “Apart from Gin, India is also seeing the RTD or the ready-to-drink products being launched. We saw this segment grow to the extent that even Coca-Cola launched the alcoholic beverage RTD last week. So we see a lot more innovation happening, there's a lot more buzz.," Giri added.

Innovation is buzzing the sector but so are the challenges and global headwinds, especially in the backdrop of trade deals, with UK, EU and Australia.

Industry is seeking a fair and equitable deal to push Indian made products with UK and EU. “. Industry said that there should be a mechanism of a minimum import price….For equal opportunities, both sides, we have asked for the removal of the maturation condition, which is a mandatory condition for the product in UK and EU.” Giri said.

“So in our view, the deal for EU cannot be different from whatever is eventually agreed with UK. The second thing we have to keep in mind is most of these trade agreements have the most favoured nation clause inserted. Australia has for example. It which means that whatever deal you offer to another country, because of the fact that MFN clause the deal has to be identical for other trade pacts as well,” Giri added.

Apart from the trade deals, domestically, setting the price is also a challenge that the industry is facing.

“After much argument we have realised that seeking help from centre to help industry have a uniform pricing structure is neither feasible nor realistic to expect. So we have been approaching the state governments and reminding them that the cost increases are a regular phenomenon. They keep happening through the through the year and most of the factors are beyond our control,” Giri said.

Pricing has been  a challenge due to increasing costs because of ethanol auto fuel blending program, sugar industry fluctuations, etc.

Industry claims that they are talking to state governments for free pricing mechanism.

“We have been trying to push away the fierce apprehensions that that will lead to a drop in your collapse of sales because there are enough competitive brands in the market. Talking to states we want them to allow us to price our products freely. And if that is not possible, if the government wants to retain some element of control, then we say that there should be a mechanism so to incorporate our factor in the inflation. So what our suggestion is that we should be given the freedom to link prices with wholesale price index. So whatever has been the change in the wholesale price index in the previous year, the same can be given to us as a price increase. So at least we ensure that there's no negative impact on the margins,” Giri added.

To be seen is whether the new year brings in more hope for the alcoholic beverage industry or it continues to remain equally challenging as 2023.