The Curious Case of Indian Liquor Industry: One Drinks Up, Another Gets High

The situation is at its most curious in the Capital city of Delhi, whose Bacchian loss is the National Capital Region’s (read ‘Gurgaon and Noida’s’) gain.

Since the infamous Delhi liquor excise case hit the headlines, things have been quite ‘different’ – that’s because the rulers and the ruled have been heading to bars of two very different kinds. For the moment, though, let’s leave incarceration and controversy behind us.

Let’s speak instead of those with a penchant for giving their evenings a whimsical shine. With Delhi’s liquor vends sporting a curious mix of wannabe brands of unknown origin and preposterous names, discerning drinkers have been heading to the city’s outskirts. And that is because all neighbouring states boast of vends that are overflowing with every brand and manner of alcoholic beverages known to tipplers.

In fact, the shops are so glitzy that they put counterparts in even the most happening global hot spots to shame. Further, as with other consumables lines, the liquor space is offering freebies and one-plus windfalls too. Hence, the best brands in the world are now not just available at your doorstep, they are being home-delivered at prices that outshine duty-free offerings at international airports, once the mainstay of foreign liquor purchases for Indians.

India Third Largest Alcoholic Beverage Market Globally

India is the third-largest alcoholic beverages market in the world, consuming 970 crore litres annually worth about Rs 4.5 lakh crore in value, contributing about Rs 3 lakh crore in revenue to state and central governments. According to the Confederation of Indian Alcoholic Beverage Companies, the liquor market grew by 7-8 per cent in 2023 after growing by a whopping 14 per cent in 2022. 

It is no wonder that the Indian-made foreign liquor (IMFL) market is booming, with key players pulling out all the stops to get their share of the keg and peg. A dynamic and integral part of the alcoholic beverages (Alcobev) space, IMFL encompasses diverse spirits produced in the domestic market, drawing inspiration from global distillation techniques and recipes. 

IMFL blends created by domestic firms seem to be working, with the market size predicted to witness 11-13-per cent growth in revenues on increased premium product sales and a volume growth of 3-5 per cent, according to rating agency ICRA. Beer sales are also reported to have increased in the extremely hot summer that India is experiencing, and sales are projected to be 10 per cent higher.

The Confederation of Indian Alcoholic Beverage Companies (CIABC) agrees, pointing out that the total sale of IMFL products in 2022-23 was 385 million cases, 14 per cent more than the previous year and 12 per cent higher than pre-covid levels. The Confederation also said that Indian single malts clocked 53 per cent of total sales, surpassing established foreign brands such as Glenlivet, Macallan and Talisker. 

Region-wise sales figures indicate that it is the Western part of the country that is shimmering in the liquid afterglow, growing by 32 per cent, with the Eastern Region coming next (22 per cent higher), followed by the North (16 per cent) and South (9 per cent).

Punjab Still Numero Uno In Liquor Market

Break down the list further to state-wise numbers and the trend is telling – Punjab leads the growth chart with a near-superhuman 54-per cent increase in IMFL sales, perhaps on the back of the new Excise Policy introduced by the Aam Aadmi Party-led Government. Most other states have also shown positive sales growth as well, barring Telangana (down 6 per cent), Uttar Pradesh (1 per cent lower) and Uttarakhand (3 per cent lower). 

Nuvama Institutional Equities has an interesting vignette on liquor consumption patterns in the country, with its analysts predicting that Indians will make up 39 per cent of the total Alcobev consumers in the world by 2025. As is wont, the Indian penchant for flamboyant marriages and colourful mega-events will be the new Alcobev-guzzling kid on the block, driving sales well above pre-COVID levels.

A thought-provoking insight: India’s Alcobev sales may save the blushes caused by the GST- and demonetization-led rout witnessed by MSMEs (Micro, Small and Medium Enterprises). “This (rise in overall liquor sales) will counter the slowdown that hit sectors such as fast food, footwear and apparel,” Nuvama said, adding that strong gains would be seen across all Alcobev segments, including the largest-selling whisky, followed by beer and wine(s).

Alcoholic Beverage Firms On A High

Given the Alcobev-induced brouhaha and celebration, it came as no surprise that the stock market also opened its arms (and perhaps its wine cellars too) to the liquor industry. Earlier this week, shares of Allied Blenders and Distillers (ABDL) listed at Rs 320 on the National Stock Exchange, a 14-per cent premium over its issue price of Rs 281. ABDL is one of only four Indian spirits companies and the leading exporter of IMFL.

However, it is not all hunky dory for the liquor sector, as revenue opportunity is bringing in its new best friend – intense competition from domestic and MNC firms – along for the ride. Key players, apart from ABDL, include United Spirits, John Distilleries, Radico Khaitan and Tilaknagar Industries, all of which are fighting an uphill battle with larger players who enjoy significantly more resources and have better economies of scale. The impact will be seen not just in the domestic marketplace, but also in all overseas expansion moves.

Even as liquor Excise Policy issues dog the industry (Delhi is an example), new Indian brands are entering the premium segment. Industry representatives have been lobbying hard with states such as Delhi, Uttar Pradesh, Karnataka and Kerala to shrug off the policy fatigue and incentivize the licensing process. Their olive branch in this controversy-hit space is compelling – give back the growth momentum to a sector that sustains 50 lakh farmers, contributes Rs 3 lakh crore in taxes and provides employment to 20 lakh people.

On paper, that sounds fantastic. However, states and leaders staring nemesis in the face are wary, wondering whether this could be one shot too many – for they know what even one extra shot or adverse statement can mean for their immediate sobriety and future.

The writer is a New Delhi-based journalist and communications specialist. Views expressed are personal