Whiskies: Growth Engine for Alcoholic Drinks in India

“Too much of anything is bad, but too much good whisky is barely enough,” Mark Twain once said. Indian consumers would agree.                                                                                                                                                                              - Amulya Pandit Senior Consultant – Euromonitor International

In 2023, the alcoholic drinks market in India reached 6.7 billion litres, reflecting a 7.5% growth compared to the previous year. India is predominantly a spirits-drinking nation, with whisky consumption leading the way. This consumption pattern contrasts with most other countries, where beer is typically the dominant choice. For instance, in 2023, beer accounted for 80% of total volume consumption across the Asia-Pacific region, while spirits made up a modest 13%. However, in India, beer contributed to 46% of alcobev volumes, lagging to spirits, which made up 52.5% of the alcoholic drinks market in the same year. Moreover, in India, nearly two-thirds of spirits consumption comes from whisky, further emphasising the importance of this category. On the surface, whisky consumption in India in the past was largely driven by rural consumers and the way alcoholic drinks are taxed in India. As India developed, and with most of the population historically living in rural areas, brown spirits, particularly whisky, became the preferred choice for most consumers. Rural consumers often sought inebriation, a trend that contrasts with urban consumers, who drink primarily as a means of socialising. Additionally, in most states, taxation on alcoholic drinks is based on overall volumes rather than alcohol by volume (ABV), which hampers the affordability of categories with lower ABV, particularly beer. Across the world, India leads in absolute whisky consumption, with the United States a distant second, followed by Japan, France, and the UK. As whisky remains the preferred alcoholic drinks category among Indian consumers, India ranks among the top ten countries for per-capita whisky consumption.

Whiskies Lose a Bit of Momentum in 2023

After two years of double-digit growth, the demand for whiskies slowed down to 5.3% in 2023. This decline in demand is due to a recovery in the on-trade sector. When consumers begin drinking outside the home, it typically reduces overall consumption volume because on-trade prices are higher than off-trade prices. Additionally, the cost[1]of-living pressures have impacted discretionary spending. On the demographic front, female consumers are contributing to the growth. As more women enter the workforce and gain independence, along with making more sophisticated choices, they are aiding the demand, especially at the premium end. Lastly, in the last few years, there has been a notable rise in the number of experiential alcoholic drinks specialist retailers across India. Some stores are even equipped with virtual screens that aid customers as they browse their catalogues. These new-age liquor shops facilitate off-trade consumption, ensuring safety and comfort.

Millennials Drive Sales of Imported Whiskies

India has a young demographic, and according to Euromonitor Economies and Consumer Data, the country, with a median age of 29.1, includes 331 million millennials and 383 million members of Generation Z as of 2023. Millennials and the expanding middle class with high disposable incomes are the main drivers behind the demand for imported whiskies in India. Over the next five years, a significant number of people are expected to reach the legal drinking age each year, sustaining the momentum for this category. Indian consumers are more aspirational and informed than the global average. They are increasingly open to trying new products and services, and they show a strong preference for branded goods, making them keen to trade up. Indian-made foreign liquor (IMFL) dominates the consumption of whisky in India. However, after the pandemic, there has been an uptick in demand for a variety of whiskies in the Indian market, particularly among urban consumers. During the pandemic, there was a paradigm shift in purchase patterns of imported whiskies, with a large volume of sales moving from global travel retail to domestic retail. Among imported whiskies, Scotch leads in volume consumption in India. Most Scotch whisky imported into India is bottled locally, with only a quarter of total exports arriving in bottled form. Furthermore, a growing sense of openness and a preference for experimentation are fuelling demand for Irish, Bourbon, and Japanese whiskies as well. Foreign manufacturers adopt an island approach to combat the success of Indian single malt manufacturers. Previously, companies like Diageo and Pernod Ricard were importing their single malts. However, after witnessing the success of Indian brands, they have adopted a more local approach, highlighted by the launch of Godawan by Diageo in 2022 and Longitude 77 by Pernod in 2023, both manufactured in India. Historically, single malt Scotch dominated the Indian market, with brands like Glenlivet and Glenfiddich leading due to the perceived superior quality of Scottish ingredients. However, Amrut Distilleries successfully elevated the image of Indian single malts, leading to a surge in locally produced brands. As younger, more ambitious consumers seek niche and experiential products, Indian single malts have grown in popularity, surpassing single malt Scotch and contributing 53% of overall single malt volumes in India, in 2023.

India is Expected to Lead the Shift of Whisky Consumption

As most developed markets have reached saturation in whisky consumption, India is expected to continue driving the whisky market during the forecast period, with a young demographic and a relatively favourable macroeconomic environment, contributing to a projected 5.6% CAGR growth from 2023 to 2028, outpacing the global growth rate of 4%. Despite many positives, inflation and its associated challenges persist. India lacks uniform regulation, making it difficult for companies to set domestic prices across states, absorb inflation, and protect their profit margins. Likewise, Indian stakeholders are calling for consistency across various trade deals with regions like the UK, Australia, and the EU, seeking to ensure equal opportunities for local players. Stakeholders are hopeful for positive developments on the ground, including favourable discussions regarding the regulatory landscape and a reduction in bureaucracy to further stimulate growth.