Policy and Premiumisation Fuel Growth India’s Alcobev Market Enters Its Most Dynamic Phase

The illustrious career of VIJAY K. Rekhi, former President and Managing Director of United Spirits Ltd., is a study in foresight, innovation and transformative leadership. Recognising early on the importance of a structured dialogue between the alcoholic beverages industry and regulators, he spearheaded the formation of the Confederation of Indian Alcoholic Beverage Companies (CIABC) in 1993–94, followed by the creation of its South India–focused counterpart, the Alcoholic Beverages Distillers and Vintners of India (ABDVI), establishing a truly pan-India platform for policy engagement.

As the longest-serving President and MD of United Spirits Ltd., Vijay Rekhi introduced visionary strategies that redefined the industry — from establishing Regional Profit Centres and driving a purposeful premiumisation strategy to pioneering packaging innovations and implementing robust working capital management. Under his stewardship, USL evolved into a global leader, setting new benchmarks in product innovation, marketing and exports.

Soon after being conferred the Lifetime Achievement Award at the Spiritz Conclave & Achievers’Awards on October 29, SHALINI Kumar spoke with the industry’s most admired leader. In his characteristically insightful style, Vijay shared his vision for the future of India’s alcobev sector.

Vijay K Rekhi envisions a dynamic, evolving industry shaped by premiumisation, diversification, and continuous innovation. He foresees sustained growth in blended Scotch, single malts, craft gins, beers, RTDs, and premium rums, alongside the rise of strong domestic brands and microbreweries. With modernised production, distribution, and retail infrastructure - supported by progressive regulatory reforms and stronger collaboration between industry and policymakers — he believes India’s spirits market is poised for enduring expansion, greater consumer choice, and enhanced global competitiveness.

What were the significant regulatory milestones you initiated for the industry, and how did you facilitate engagement with the regulator?

We certainly needed an industry platform to engage with the government and regulators, not just to safeguard the interests of stakeholders, but also to help regulators see the industry beyond its role as a mere revenue-generating entity. It was at my suggestion in 1993-94 that McDowell’s, Shaw Wallace, Mohan Meakin, and possibly Jagatjit came together to form the Confederation of Indian Alcoholic Beverage Companies (CIABC). That was the beginning of a structured dialogue between industry and policymakers.

Over time, we realised that while CIABC represented the industry nationally, its activities were largely North India– centric. To address this imbalance, another body, ABDVI, was set up in Bengaluru with a primary focus on South India. ABDVI worked in close collaboration with CIABC, creating a broader, pan-India platform for engagement.

Around the same period, when the Indian wine industry was beginning to take shape, I was inducted into the Indian Grape Processing Board (IGPB) and later steered the industry as Chairman. The then Agriculture Minister encouraged us to introduce industry-friendly policies such as low licencing fees and simpler processes that could encourage more wines to enter the market and reach consumers easily.

My interface with regulators was not limited to the Centre. I worked closely with various state governments to develop excise policies that were both practical and revenue-accretive. A notable example was in Karnataka, under the Chief Ministership of Mr. S.M. Krishna, CIABC helped consolidated the best excise practices of different States to frame a progressive excise policy tailored for the state.

What were the most significant steps you took during your 15 years at the helm of USL to enhance profitability and create long-term value for the company?

Profitability was always a KRA very close to my heart, and during my tenure at United Spirits, several strategic initiatives were undertaken to strengthen it. The first step was the creation of Regional Profit Centres. Initially, the country was divided into four regions, with a fifth added later. Each region was headed by a COO with clearly defined KRAs and complete operational authority, barring pricing and procurement. This structure delayered the organisation, ensured sharper ground-level focus, and made regional COOs directly accountable for profitability.

The second major initiative was the premiumisation drive. Early in my tenure, we launched Signature Whisky in 1993– 95, marking our first step into the premium segment. This was followed by the acquisition of brands such as Antiquity and Royal Challenge, which significantly strengthened the portfolio. Our evaluation of the product contribution showed that only a handful of brands contributed substantially to margins, while others delivered modest to minimal returns. This insight drove our deliberate focus on building and expanding premium products and Scotch offerings, which became a key pillar of profitability enhancement.

The third priority was prudent working capital management. USL pioneered the “cash-and-carry” model in nongovernment corporation markets, ensuring that customers paid upfront for products from McDowell’s, Herbertsons or Phipson, thereby minimising outstanding receivables in markets that were otherwise notorious for delayed payments. This improved liquidity, reduced interest costs, and protected the balance sheet.

The corollary of this was the focus of the sales team to increase breadth and depth of distribution leading to product penetration in all outlets at all times with all the packs. To this effect the sales team had a credo: “The Elephant must dance.” Finally, strict cost control measures were implemented, including centralised procurement and approvals for major promotions at the head office. These were supported by a robust management information system (MIS) and, subsequently, the introduction of SAP, which further streamlined operations and reinforced profitability.

The alcohol beverage industry operates in a mediadark environment. Compared to other FMCG sectors, has this placed significant restrictions on an industry that might otherwise have been able to promote itself more extensively, albeit responsibly?

At USL, our primary objective was to connect with the consumer and truly understand their mindset. The term “media dark” is certainly evocative, but within the framework set by regulators, products can still be promoted in creative and effective ways. Our approach was to launch complementary products that aligned naturally with the core beverage alcohol portfolio

Since alcoholic beverages are commonly consumed with water or soda, it was a logical extension to introduce these under established brand names. Herbertsons Ltd. was the first to launch packaged Bagpiper water and soda in this manner, and the model was later adopted by McDowell’s and other companies. Wherever permissible under law, we also leveraged endorsements, positioning celebrities as ambassadors for these complementary products. For instance, when Bagpiper was launched, veteran actors such as Ashok Kumar, Pran and Sanjeev Kumar lent their credibility. They did not directly promote alcohol but endorsed the associated products, creating indirect brand equity. Over time, leading stars including Dharmendra, his son Sunny Deol, Shatrugan Sinha as well as Shah Rukh Khan and Ajay Devgan followed suit

Beyond product extensions, we invested heavily in sponsorships and lifestyle platforms. United Spirits was the first alcobev company to own a cricket team, Royal Challengers, Challengers, and a football club, Mohun Bagan, while also sponsoring golf tournaments, hockey, badminton, tennis, horse racing, Formula One, fashion shows and even vintage car parades, etc. These initiatives enabled us to create visibility and connect with consumers while remaining fully compliant with regulations.

Apart from Indian celebrities, the company also aligned its products with internationally reputed musicians and singers like Kenny G, Elton John, Black Eyes Peas, etc.

In essence, innovative brand extensions, celebrity associations and strategic sponsorships helped us successfully navigate the so-called “media-dark” environment and strengthen consumer preference for our brands.

What were some of the key innovations or industry firsts you introduced that went on to set gold standards for the sector?

One of the earliest industry firsts was the introduction of McDowell Single Malt produced out of its Goa Distillery, a pioneering step for the Indian market. This was followed by the launch of its own brand Black Dog, the first “bottled in India” Scotch, which set a new benchmark in accessibility to Scotch for Indian consumers and became a market leader.

This led to the Scotch Whisky Association (SWA) inviting me and offer membership of ‘Keeper of Quaich’, which is a global recognition for promoting Scotch in the Indian region

The premiumisation drive was another major innovation. We launched Single Malt, Signature and Antiquity, which firmly established premium categories in the Indian market. Alongside, we introduced pre-mixed products under the Blue Riband Gin label, such as Orange and Lemon Gins, well ahead of their time

Packaging innovation was also a strong focus. While we avoided drastic changes to brand identities, continuous refurbishments ensured products stayed contemporary. We introduced product variants such as McDowell’s Diet, Signature Premium and Black Dog 8, 18 & 21 Years Old along with Black Dog 12-Year-Old. These were clever strategies to capture an additional 5–10 percent market share. Signature was the first whisky to come in tin containers, McDowell’s Single Malt was the first in cardboard tubes, and McDowell’s No.1 pioneered the use of carry bags, moving away from traditional mono cartons, all setting new standards in consumer perception and convenience.

Exports were another significant achievement. McDowell’s No.1 became one of the leading companies achieving global leadership in volume by 2011, a remarkable first for an Indian alcobev company exporting to over 50 countries.

These initiatives across product innovation, premiumisation, packaging and exports collectively set gold standards that the industry continues to build upon today.

Uniform Guidelines Need of the Hour

I believe regulators need to move with greater speed in implementing reforms and simplifying excise structures. The current structure of compliance is highly complex, and there is an urgent need for standardisation on non-revenue issues. A good example is labelling. Today, every state has its own requirements, sometimes what is accepted as the front label in one state is treated as the back label in another. Such variations create unnecessary hurdles, with little regard for scale inventory, working capital and marketing considerations. Like GST, why not have a uniform template for labelling? States could mandate two or three languages, define front and back labels clearly, and leave room for companies to design labels that are aesthetic and consumer-friendly and uniformly informative. This does not impact state revenues in any way.

Another important reform would be the removal of inter-state import and export duties. At present, when goods move from one state to another, the exporting state levies a duty and the receiving state imposes an import duty. This is a regressive practice. Within a single country, there should be free movement of alcoholic beverages, subject only to a permit system. Large-scale, automated plants are essential for manufacturing excellence, but these artificial barriers discourage scale and efficiency.

Over time, I am confident that regulators and the industry will work together to address these issues, creating a framework that supports both growth and revenue needs

At that stage, did USL’s leadership position give it the first-mover advantage to steer the industry towards premiumisation?

We certainly enjoyed a first-mover advantage in several areas. One of the earliest was the large-scale introduction of 1-litre and 1.75-litre packs across our popular brands, which quickly gained consumer acceptance. We then extended this strategy to smaller 60 ml and 90 ml packs, which became widely popular due to their affordability and accessibility. This approach significantly expanded our consumer base and underscored the strength of our first-mover advantage.

Our leadership position in market share further enabled us to leverage this advantage with confidence. Another pathbreaking innovation was the introduction of Tetra Pak packaging. I personally travelled to Denmark to ensure that the substrate would be compatible with our requirements. The format was well-received, particularly in states such as Karnataka, where it continues to hold strong even today with over 50 Tetra-type machines in operation selling over 50 lakh cases in Karnataka alone. Many other states now allow production and sale in Tetra packs. From the company’s perspective, Tetra packaging was also a highly cost-efficient solution, making it a win-win both for consumers and the business.

What key trends have you observed shaping the alcobev industry over the past decade, and how do you see them evolving today?

The alcobev industry has always evolved, and several clear trends have emerged over the past decade. We are seeing a steady influx of blended Scotch and Single Malts, with labels from both established and lesser-known companies entering the Indian market, a trend that will accelerate further following the India–UK FTA. Alongside, there is a visible rise in women professionals in leadership roles across the sector.

M&A activity continues to reshape the industry, with global players investing heavily in India. Diageo’s acquisition of USL, Sazerac’s stake in John Distilleries, Heineken’s takeover of United Breweries, and Diageo’s more recent acquisition of Nao Spirits are notable examples. On the product front, categories such as craft gins and beers, hard seltzers, premium rums, and Bourbons are gaining traction, while Japanese and other international single malts are also entering India. Distilled non-alcoholic spirits, such as Diageo’s Seedlip, signal another emerging opportunity.

Domestically, ad-mixed whiskies, brandies and premium single malts are growing strongly, with nearly 30 Indian brands now in play.

Also, there will be less dominance of whiskies as more products of other categories will be coming in. There’s a healthy growth in microbreweries in many states and RTDs too have a good future. We have been collaborating with some of the new entrepreneurs who want to move into RTDs. There is also modernisation in production processes, distribution techniques and in retail outlets, on the lines of Tonique in Bengaluru.

It is a good sign that regulators are also evolving. States like Maharashtra and Karnataka have recently made significant excise reforms. With India already a 400 million-case spirits market, favourable demographics and rising consumer sophistication, the outlook remains highly positive. Sustained collaboration between industry and regulators will be critical to balance growth with the revenue needs of the states.

As we conclude, what words of advice would you share with the next generation of alcohol professionals and entrepreneurs entering the industry?

I don’t have any one magic formula, but I see great opportunity for those who can arrange adequate working capital and have the wherewithal to sustain the enterprise and innovate. Recent successes, like a homegrown gin brand being acquired by Diageo, show what’s possible. Categories such as hard seltzers, American whiskeys, bourbons, and ryes will gain ground in India over a period of time. The key is to benchmark against global best practices, introduce new products and nurture the entrepreneurial spirit. Also, there is a need to think global and think scale.

Vijay K Rekhi Up Close

Favourite Book: Turning Good Companies to Great
Preferred Drinks: Single Malts, Blended Whiskies, Tanqueray Nº Ten Gin
Favourite Destinations: Italy, Rajasthan and South India.
Favourite Quote: ‘Focus’ is my singular word for a quote. Remain focused with family, with friends, in business and in society. And I think that mantra will carry you far.