Deciphering the Evolving Luxury Space

The topic for the ThinkPad Session I titled ‘Decoding India’s Affluent Consumer Class’ is not only very relevant but gaining increasing importance for India’s fast evolving alcoholic beverages industry. The growing recognition of India as a market for luxury alcobev brands, reducing age of consumers associated with luxury brands’ consumption, the role of women in fostering the consumption of luxury, the emergence of tier-II and tier-III cities as destinations for luxury alcobev consumption, and the growing respect and recognition for domestically produced alcobev products were some of the focal points discussed at the introspective session.

Anchal Kaushal - VP - Customer Marketing - Diageo India who moderated the session, articulated that the luxury segment was growing within the alcobev space. She wanted to explore from the panelists how the luxury segment had swelled in India’s alcobev industry in the post Covid period. Rohini Menezes - Portfolio Manager, House of Suntory, Suntory Global Spirits, viewed that India’s alcobev industry was insulated by the pandemic and saw much premiumisation. “Among Indian consumers there has been exponential growth in terms of disposable income and discretionary spending over the years, and there has been a rise in demand for luxury products. The maximum growth of India’s alcobev industry during the recent years has been in the upper segment; in prestige and luxury brands,” she observed while predicting that this segment would continue to bring impressive growth in the near future.

Impressive Potential for Luxury

Amulya Pandit, Senior Consultant - Euromonitor International gave a comprehensive perspective with his presentation, stating that in 2023, alcoholic drinks market in India reached 6.7 billion litres, reflecting a 7.5 percent growth compared to that of the previous year. “This growth has been relatively slower as compared to those of the last two years,” Amulya asserted. He viewed that the reason for comparatively slower growth was high taxes, high cost of living and recovery of on trade in the post Covid period. “When people start drinking in on trade, they drink comparatively less alcohol,” Amulya reasoned. According to his information, India’s alcobev market was a predominantly spirits drinking market where 2/3rd of the overall alcobev sales in India comes from whiskies. “India has close to 700 million millennials and Gen G which translates to a significant number of people entering legal drinking age every year. And our real GDP growth is outpacing inflation and India’s disposable income is expected to grow at more than 30 percent during 2023- 28,” he commented on the basis of researched figures which were presented on the chart being displayed on the screen. All these conducive factors, according to him, have contributed to significant consumer exponential growth for India, across a host of categories. Amulya further disclosed from research findings that affluent class in India, which includes persons with an annual income of 10,000 USD per annum, is 39 million at present, but is expected to increase to 90 million by 2028, which is more than the population of Germany, the UK and South Korea. This entails a huge market potential for luxury spirits in India. Amulya said that they (Euromonitor International) conducted a survey of 28,000 individuals across the globe, which comprised 554 people from India with income of more than 10000 USD per annum. In the survey, in terms of affirmative responses (agree and strongly agree) for questions like ‘I like to try new products and services’; ‘I prefer branded goods to non[1]branded alternatives’; ‘I like to be distinct from others’; ‘I enjoy spending my money rather than save it’ the Indian consumers were seen outpacing their global counterparts. This again indicates the growth of the luxury market in India, which is reflected in alco[1]beverages too. Amulya again pointed out with the help of data from Euromonitor that millennials were fueling the growth of the premium whisky market in India, in which Scotch was leading the category. “In the Indian alcobev market, Indian single malts in 2023 were outpacing other single malts, which clearly indicate the demand for Indian single malts in the country as well as the rise in affluent Indian consumers,” Amulya disclosed. The research-oriented panelist also expressed that companies in India would continue to push luxury products because of the trend of going for less quantity but better quality of alcoholic beverages and the high inflation, which has been inducing companies to concentrate on premium products. Here, Rohini pointed out the fact that luxury brands were available on e-commerce platforms, which was contributing to their growth. “A lot of whisky brands have entered into local collaborations by partnering with home-grown brands and now more and more Indian alcobev brands are competing in the premium segment,” she informed.

Fostering Premiumisation

The role of regulatory framework in facilitating premiumisation in alcobev cannot be discounted. Prarrthona Pal Chowdhury -Head of the Regulatory Affairs at Moët Hennessy India (Wines and Spirits Division of LVMH) talked about how the concerted efforts of regulatory players had helped the affluent alcobev drinkers in India. “We helped lower the taxes on international alcobev brands in Maharashtra, in 2021, making them more accessible to the affluent classes,” informed Prarrthona. They continued the same success story in West Bengal, Odisha in 2022, and in Karnataka in 2024 too, which made the international alcobev brands more accessible across these states.

Consumers’ Perspective

Aanchal shifted the focus on consumers’ perspective observing that the new concept of luxury for consumers includes authenticity, individualism with a wee bit of simplicity. Arjun Batra, an alcobev industry expert, pointed out that the age bracket associated with luxury consumption has reduced. “I also think consumers are looking at associating experiences through products and brands. They focus on authentic storytelling from the brand. More than anything else consumers are looking at experiential engagement with the brands. Brands that are able to connect with consumers across varied age brackets tend to be successful,” he elaborated. He also emphasised that focus on attention to detail was now very important for today’s consumers. They want to know what they are consuming. Anchal endorsed Rohini’s statement and said that earlier there was slight hesitation in the premium consumer segment in India regarding accepting Indian single malts, which was now gone. “We today have various expressions of Indian single malt, ranging from Diageo’s Godawan to Amrut to Radico’s and Paul John’s single malt expressions. There is a pride for locally made premium products, which is so refreshing,” the moderator expressed. “Indian single malt makes us proud. We are having sparkling wines produced in India, which we are proud to showcase to the world,” Prarrthona stated while gushing about Godawan and Longitude 77. She said that with taxes coming down for international alcobev brands it would be a bit difficult for domestic premium alcobev brands in the price war but in the same breath she maintained that “Luxury is all about preference and not pricing. If I prefer a Godawan or L77 or Amrut, I would go for it, irrespective of its price.” Arjun commented on the growing pride for Indian alcobev brands among international consumers. “I see people coming from different countries and taking back Indian alcobev brands and proudly showcasing them,” he averred. Arjun further cited data to say that a segment of middle[1]income households in India that is those earning Rs 5-30 lakh per annum, which was 430 million people+ in 2021, is expected to increase to 730 million+ in 2031. This he rightly thinks represents a significant opportunity for luxury products in India to grow, while adding that he was seeing the luxury space having huge potential for growth for the economy. Rohini lamented the heavy tax on luxury brands and lack of accessibility of luxury products in India. She also believes that the luxury segment would grow exponentially in the future, and observed that India’s alcobev November 2024 47 www.spiritz.in industry was making lots of inroads in this direction and would continue to do so in the years to come. According to Anchal, consumer brand loyalty is becoming passé, and on an average, now consumers are interacting with 11 to 18 brands, which makes the companies vulnerable. “We need to evolve with the changing times,” she reasoned. Anchal went on to the emergence of boom towns or the tier-II and tier -III cities of India in the luxury segment. According to her, youth consumers in India are more similar than different in metro and tier-II cities, for which growing digitisation and social media are responsible. Rohini said that at Suntory Global Spirits they focused on the top six cities of India as their market while acknowledging there was growing affluence in smaller cities in India too like Surat, which they couldn’t overlook. She also pointed out that there was a significant segment of consumers of luxury alcobev products who were not that digital savvy. “So for them we go for on-ground engagements,” Rohini explained. “Digital medium is a real channel of engagement for marketing strategy today. Understanding what the consumers are speaking through digitally is equally important for developing that strategy,” Arjun ascribed. He thinks that while engaging with consumers it is important to ensure that consumers are able to connect with brands, which is integrated with their lifestyle.

Women Driving Luxury

Anchal, while introducing the topic of women driving luxury, presented some startling figures. “Women earn 13 trillion USD around the world and this figure would swell to 18 trillion USD in five years. In 2028, women would control 3/4th of discretionary spending,” she elaborated. She questioned whether as marketers they were doing enough to put forth their products or campaigns, targetted at women. Prarrthona, while agreeing with Anchal said, “We definitely drive luxury and also consume a lot of it.” Rohini expressed that brands were doing a lot to target women specifically but in the same breath pointed out that they needed to do more in this regard. “In our industry, lots of headway needs to be made by brands as far as talking to women specifically are concerned,” Rohini asserted, while stating that though wine, vodka, and gin brands were seen targeting women specifically women were now consuming lots of whisky as well. She said there was still some stereotypical representation in some alcoholic beverage ads. According to Arjun, the stereotypical definition of consumer is changing. He pointed out that in many affluent circles, equal numbers of women were seen enjoying single malt as men and a great number of men were seen enjoying cocktails. “We need to be sensitive to gender and cultural perspective in how brands are being portrayed,” Arjun remarked. Anchal too voiced that gender segmentation regarding comsumption of alcoholic drinks was a dated marketing approach. Amulya however, implied that for India, women empowerment still had a long way to go. “Only one out of three women above the age of 15 is part of the workforce whereas for men it is 4 out of 5,” he observed. Amulya advocated for a safer environment for shopping of alco-beverages in India so that more women are encouraged to go for retail shopping for alco-beverages while agreeing that there is still a long way to go in this regard, as far as India is concerned.

Buoyancy in Indigenous

Spirits In the Q&A session, senior industry professional Ankur Sachdeva probed on the luxury dimension for the indigenous spirits to which Anchal cited the example of artisanal single malt Godawan from Rajasthan, which shows that India is getting comfortable about the idea and fascinating reality of Indian single malt. “There are interesting innovations happening in the realm of luxury indigenous spirits and consumers are very much open to new expressions. However, storytelling regarding the brands needs to be very powerful,” explained Anchal. Prarrthona also cited the work happening in mahua and feni segments to drive home the point that the work of India’s alco[1]beverages industry in the area of premium indigenous brands is impressive. Anchal concluded by saying that the definition of luxury in India was evolving. “It is no longer stiff; it is now more simple, attainable, authentic and there is also recognition about the layers of luxury,” she expressed. And brands need to gear themselves to this evolving reality.