ALCOHOLIC DRINKS IN INDIA - ANALYSIS

Country Report | Jun 2018

EXECUTIVE SUMMARY Market Sizes

Market impacted in 2017 by demonetisation and a ban on roadside Sales of Alcoholic Drinks
alcoholic drinks sales Total Volume - million litres - 2003-2022
Growth in the Indian alcoholic drinks industry slowed in 2017, primarily due to the
effects of demonetisation and a ban on roadside sales of alcoholic drinks. Cash was
5,160 Forecast
previously the primary method of payment in India when purchasing alcoholic drinks 7,000
and so sales were affected by the government’s decision to discontinue INR500 and
INR1,000 bank notes. Sales were further affected by a Supreme Court ruling imposing a 6,000
ban on the sale of alcohol within 500 metres of national and state highways across the
country. This resulted in many retail outlets and hotels closing down permanently, 5,000
leading to disruption in the supply chain. The market was further affected by the Goods
and Services Tax (GST). Even though alcoholic drinks remained outside the GST, 4,000
manufacturers have to pay the tax when purchasing raw materials and packaging.
Recovering this tax has particularly affected the working capital of smaller companies.
3,000
The market’s slowdown was slightly offset by growth in the third and fourth quarters,
which, however, was slower than in 2016 in volume terms. The market is nevertheless 2,000
expected to recover over the forecast period as demonetisation is unlikely to have any
long-term effect. 1,000

Premiumisation being seen across alcoholic drinks 0

2003 2017 2022
Manufacturers launched premium products across the different categories in 2017 in
order to attract consumers, who continued to demand high standards from their local
bars and shops, with many shunning economy brands and trading up to more authentic Sales Performance of Alcoholic Drinks
flavours and imported drinks. This premiumisation trend continued to be supported by % Y-O-Y Total Volume Growth 2003-2022
millennials who like to experience new things. UB Group introduced the premium
imported beer brands Desperados, Sol, Edelweiss, Dos Equis and Affligem, while the
South Korean brewer Hite also entered India during the second quarter of 2017. In
3.6% Forecast
spirits, Diageo introduced Captain Morgan Original Rum, while Bacardi-Martini 20%
launched Bacardi Black. Similarly, in whiskies, Sula introduced Eclipse, a premium
single malt Scotch, while Diageo launched Jane Walker. Radico Khaitan, meanwhile,
plans to introduce three white spirits and two brown spirits brands in India.
15%
Premiumisation in the alcoholic drinks industry is expected to continue to be driven by
rising consumer demand for more authentic flavours, new experiences and products
which have fewer after-effects. Furthermore, manufacturers are also expected to
expand their premium portfolios by introducing foreign brands or new brand 10%
extensions to India.

Diageo and UB Group continue to lead alcoholic drinks 5%

Diageo remained the clear leader in spirits in 2017 in GBO terms through its subsidiary
United Spirits, with second-ranked Pernod Richard some way behind. Diageo has been
focusing on increasing its presence in premium whiskies by introducing the Jane 0%
Walker brand. It has also licensed its economy brands, including Bagpiper whisky and 2003 2017 2022
Celebration rum, to local manufacturers so as to strengthen its distribution.
UB Group, meanwhile, remained the clear leader in beer. The company has introduced
many international brands to India, including Desperados, Edelweiss, Sol, Affligem and Sales of Alcoholic Drinks by Category
Dos Equis, so as to cater for a growing consumer preference for premium beers. New Total Volume - million litres - 2017 Growth Performance
entrants, including B9 Beverages and Simba, continued to expand their craft beer
portfolios to address consumer demands, with the leading players thus facing Beer
increasing competition from micro-breweries. 2,407.6
Cider/Perry
-
Distribution disrupted due to the roadside ban and gradual emergence
of the online channel RTDs/High-Strength Premixes
36.4
The distribution of alcoholic drinks in India was disrupted in 2017 by a ban on roadside Spirits
2,688.5
sales. This led to the closures of all outlets selling alcohol within 500 metres of the
highway. However, the ban was then revised and limited to 220 metres, while also not Wine
27.5
being applicable within city limits. Following the revision of the ban, the market
started to pick up again and recover slightly. The effect is expected to last over the 0% 10% 20%
forecast period as a number of stores remain closed. CURRENT % CAGR % CAGR
ALCOHOLIC DRINKS 5,160.0
YEAR % 2012-2017 2017-2022
Internet retailing, meanwhile, is slowly emerging in India. Although currently limited GROWTH
to the cities of Delhi-NCR and Bengaluru, the channel is expected to grow further over
the forecast period as consumers recognise the convenience it offers. Furthermore, as

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alcohol is generally considered a social taboo in India, consumers who buy it will
appreciate the anonymity of the online channel. Companies such as Diageo and UB Competitive Landscape
Group will seek to benefit from the emergence of internet retailing over the forecast
period. Company Shares of Alcoholic Drinks
% Share (NBO) - Total Volume - 2017
Slower but still solid total volume growth expected over the forecast
period UB Group 24.0%
United Spirits Ltd 17.5%
The alcoholic drinks market has been affected by new legislation in India. The ban on
roadside sales, although having been relaxed, is expected to continue to disrupt SABMiller India Ltd 8.5%
distribution. In addition, many Indians are becoming more health-conscious and are Carlsberg India Pvt Ltd 8.3%
reducing their alcohol consumption. Furthermore, the industry will be further affected
by the GST. Although alcoholic drinks are currently not subject to this tax, the raw Pernod Ricard India Pvt ... 7.0%
materials and packaging used in their manufacture are subject to GST, resulting in Allied Blenders & Distil... 5.9%
difficulties recovering the tax.
Radico Khaitan Ltd 2.7%
Over 2017-2022, the market as a whole is set to record slightly weaker total volume Mohan Meakin Ltd 2.6%
growth than that seen over the review period, although categories such as RTDs and
wine are expected to achieve double-digit gains, with sales driven by the fact that John Distilleries Pvt Lt... 2.1%
consumers view these beverages as healthier than other types of alcoholic drinks. Jagatjit Industries Ltd 1.8%
Anheuser-Busch InBev Ind... 1.6%
MARKET BACKGROUND
Tilaknagar Industries Lt... 1.2%

Legislation Mount Shivalik Industrie... 1.0%

Bacardi-Martini India Lt... 0.7%
Legal purchasing age and legal drinking age
Amrut Distilleries Pvt L... 0.6%
Sales of alcoholic drinks are controlled by state and union territory legislation in Shiva Distilleries Ltd 0.5%
India, which results in different legal purchasing and drinking ages in different
states. Some states have set 18 as the minimum legal purchasing and drinking age, Diageo India Pvt Ltd 0.3%
including Sikkim, Mizoram and Himachal Pradesh, while most other states and union Empee Distilleries Ltd 0.3%
territories have set the age at 21. However, in some states, such as Meghalaya,
B9 Beverages Pvt Ltd 0.2%
Haryana and Punjab, it is 25. The legal drinking age is generally the same as the legal
purchasing age. Others 13.3%

Although the minimum legal age for drinking in the on-trade in India is 25, this is not
widely observed. Many college students are seen outside pubs in Bangalore and
Gurgaon, among other cities, with the number of pubs and bars also growing rapidly
in many areas. This is linked to long working hours in many industries, higher Brand Shares of Alcoholic Drinks
disposable incomes at a younger age and peer pressure. % Share (LBN) - Total Volume - 2017

Drink driving Kingfisher Strong 15.1%

The blood alcohol content limit is fixed at 0.03%. For those drivers found to have a Officer's Choice 5.9%
blood alcohol level above this, a first offence can result in a fine of INR2,000 or six Tuborg 4.9%
months’ imprisonment. A second offence within three years is subject to a fine of
Kingfisher Premium Lager 4.6%
INR3,000 and up to two years in jail.
Knock Out 4.2%
Advertising
McDowell's No 1 4.0%
Advertisements for all alcoholic drinks have been banned in India since 2000. This Haywards 5000 3.8%
means that brands launched and heavily promoted before then generally enjoy
Carlsberg 3.3%
much better recall than more recent launches. This benefits a number of brands,
such as UB Group's Kingfisher beer. Imperial Blue 3.0%
Royal Stag 2.8%
However, surrogate advertising continues in India, with sports tournaments, events
and surrogate brands in mineral water being offered under alcoholic drinks brand McDowell's No 1 Celebrat... 2.1%
names. For example, Foster’s Soda was launched in 2010 by SABMiller, while the Old Tavern 2.1%
company also offers Haywards 5000 Soda. The Advertising Standards Council of India
(ASCI) is a self-regulating body and can only take action against such surrogate Original Choice 1.9%
advertisements if and when it receives complaints from the public. Budweiser 1.6%

Smoking ban McDowell's No 1 Brandy 1.5%

Bagpiper 1.3%
Smoking has been banned in most enclosed public spaces in India since 2008,
although designated areas for smoking are permitted in airports, on-trade outlets Haywards 1.3%
and some enclosed workplaces. There are, however, a number of cities which are UB Export Lager Beer 1.3%
aiming to become smoke-free, including Jaipur, Shimla and Chandigarh. Smoking
bans have, however, had little impact on the consumption of alcoholic drinks. In on- Aristocrat Premium 1.1%
trade outlets without smoking areas, consumers typically smoke outside the Others 33.9%
premises on the streets.
Increasing share Decreasing share No change
Opening hours

Legal hours for the sale and consumption of alcoholic drinks in the on-trade and off-
trade vary between states in India due to alcoholic drinks legislation being imposed
at state level rather than national level. In West Bengal, sales of alcoholic drinks, for
example, are permitted between 10.00-22.00hrs. In 2014, the Karnataka state
government, in contrast, permitted on-trade outlets to serve alcoholic drinks until
21.00hrs every day from Monday to Thursday and 01.00hrs from Friday to Sunday.
Most Indian states also observe days when sales of alcoholic drinks are not
permitted, typically on Republic Day (26 January), Independence Day (15 August),

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 religious festivals such as Ram Navami, Eid and Gandhi Jayanti (2 October), as well as
voting days. Sales bans are, however, also imposed by some states on other days,
such as Muharram in New Delhi.

On-trade establishments

The review period saw a number of bars and pubs closed down due to fire safety
issues. In addition, many discos were temporarily closed until they had reviewed
their fire safety policies.

Table 1 Number of On-trade Establishments by Type 2012-2017

2012 2013 2014 2015 2016 2017

Bars/pubs 30,314 31,013 31,789 32,678 33,658 34,768

TAXATION AND DUTY LEVIES

GST was not implemented on alcohol in India in 2017, with the existing tax structure
remaining in place.
The taxation structure in India is state controlled and hence varies widely across the
country. Taxation on alcoholic drinks is furthermore very complex in many states,
with some for example taxing products differently according to price band. Like
excise duty, VAT is also set by the state, with levels varying widely and some states
opting for more complex VAT structures. The central government, meanwhile, issues
licences for alcoholic drinks manufacturing facilities and also imposes a central
import tax on alcoholic drinks in addition to state excise and sales taxes. This
complex system encourages inter-state smuggling and contraband, while creating a
heavy burden for alcoholic drinks players seeking a national presence in India.
While alcoholic drinks taxation varies across India, it is generally high and was
increased by state governments towards the end of the review period. A number of
states have increased taxes in 2018, with Karnataka, for example, raising excise on
spirits by 8%. Taxes are being increased in many states in order to boost revenues,
with many, such as Maharashtra, being heavily reliant on alcoholic drinks excise as a
source of income. Each state imposes:
A state excise duty on alcoholic drinks produced in the state
An import duty on alcoholic drinks imported from outside the state
An export duty on all alcoholic drinks manufactured in the state for consumption in
other states

Table 2 Taxation and Duty Levies on Alcoholic Drinks 2017

% customs basic duty

on AV
Beer made from malt 100
Grape wine, including fortified wine other than vermouth 150
Vermouth and other grape wine flavoured with plants or aromatic substances 150
Other fermented beverages (eg cider/perry, mead) 190
Mixtures of fermented beverages and non-alcoholic drinks not elsewhere 190
specified or included
Undenatured ethyl alcohol with an ABV of less than 80% 190
Spirits, liqueurs and other spirituous beverages 190

Source: Euromonitor Interna tiona l

OPERATING ENVIRONMENT

Contraband/parallel trade
Illicit sales of alcoholic drinks are soaring in India. This is partly due to differences in
excise duties and VAT across the country, with parallel trade and smuggling between
states thus remaining significant. In addition, the illicit production of spirits is also
rising, linked to growing demand as a result of tax increases and distribution
restrictions for legal spirits in many states towards the end of the review period. In
addition, poor police enforcement and a lack of duty stamp systems in some states are
contributing to the problem. Many consumers also buy these products unwittingly due
to a lack of awareness and also the adulteration of branded spirits with illicit spirits in
some on-trade outlets.

Duty free
At the start of the review period only imported goods could be sold in duty-free shops
at international airports in India. Indian-made goods were not tax-free and were thus
expensive. However, the government amended this law in May 2013 to allow Indian-
made goods to also be sold via duty-free shops within permissible allowance limits.
Accordingly, some local spirits companies, such as Radico Khaitan and Mohan Meakin,
offer their brands via duty-free outlets. Duty-free outlets, however, continue to focus
mainly on offering premium global brands, with local spirits accounting for just a small

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share of their product range and sales. In April 2018, the government announced that
duty-free shops at international airports are liable to GST.

Cross-border/private imports
Most cross-border or private imports occur across the land borders of India, mainly with
neighbouring countries such as Bangladesh and Nepal. However, a widening product
range and expanding distribution in India resulted in private import volumes falling
sharply over the review period. Inter-state private imports are, however, strong in
India due to taxation on alcoholic drinks varying from state to state. Cross-state border
sales are thus significant, with consumers travelling to states where taxes are low in
order to buy alcoholic drinks, such as from Goa to Karnataka.

KEY NEW PRODUCT LAUNCHES

Manufacturers are introducing premium imported brands into India due to rising
disposable incomes and a willingness on the part of consumers to try out new flavours.
In the beer category, UB Group introduced a new range of imported beers in 2017,
while the South Korean brewer Hite also entered the Indian market. Similarly, Sula
entered the whiskies category by introducing the premium Eclipse brand, while Diageo
launched Jane Walker, a variant of its premium Johnnie Walker brand. The rum
category also witnessed the introduction of the premium Captain Morgan brand.
RTDs/high-strength premixes and wine witnessed multiple new product launches as
these types of alcoholic drinks are growing in popularity. Companies including Grover
Zampa and Sula Vineyards introduced a wide range of wines targeted at different
consumer groups.

Outlook
Apart from rising consumer demand for premium brands, manufacturers are also
pushing higher-end products to drive value growth. This premiumisation trend is
expected to intensify as more companies introduce new products in categories such as
rum, vodka, whiskies and beer. Indeed, premium products are expected to drive sales
over the forecast period.

Summary 1 Key New Product Developments 2017

Brand NBO Product USP Launch

year
Jane Walker Dia geo Blended Premium whis ky ta rgeted a t women 2017
India Pvt Ltd Scotch Whis ky
Bira Light B9 Non Alcoholic Conta ins fewer tha n 100 ca lories 2017
Bevera ges Beer
Pvt Ltd
Tuborg Classic Ca rls berg Imported La ger beer fla voured with Scotch 2017
with Scotch Malts India Pvt Ltd Premium ma lts
La ger
Hite Beer Hite Imported Firs t imported premium la ger from 2017
Brewery Co Premium the South Korea n brewer
Ltd La ger
Desperado UB Group Imported Imported cra ft beer from Mexico 2018
Premium
La ger
Sol UB Group Imported Light ta s te 2018
Premium
La ger

Source: Euromonitor Interna tiona l

DEFINITIONS
Explanations of words and/or terminology used in this report are as follows:
GBO refers to Global Brand Owner, which is the ultimate owner of a brand.
NBO refers to National Brand Owner, which is the company licensed to distribute a
brand on behalf of a GBO. The NBO may be a subsidiary of a GBO or it may be a
completely separate company. Share tables at both GBO and NBO level are provided
in the report. Reference to shares in the report analysis is at NBO level.

SOURCES
Sources used during the research included the following:

Summary 2 Research Sources

Official Sources Agricultural & Processed Food Products Export Development Authority
Biha r Sta te Bevera ges Corp Ltd
Ca nteen Stores Depa rtment
Centra l Boa rd of Excis e & Cus toms
Centra l Sta tis tica l Orga nis a tion India
Chha ttis ga rh Sta te Bevera ges Corp

© Euromonitor Interna onal 2019 Page 4 of 5

 Official Sources Agricultural & Processed Food Products Export Development Authority
Commis s ionera te of Prohibition & Excis e, Andhra Pra des h
Confedera tion of India n Food Tra de & Indus try
Directora te Genera l of Foreign Tra de
Dis tilled Spirits Council of the United Sta tes
Excha nge 4 Media
India n Gra pe Proces s ing Boa rd
Ka rna ta ka Sta te Bevera ges Corp Ltd
Minis try of Commerce & Indus try
Minis try of Sta tis tics & Progra mme Implementa tion
Oris s a Sta te Bevera ges Corp
Punja b Sta te Excis e Depa rtment
Ra ja s tha n Excis e Depa rtment
Ta mil Na du Government
Trade Associations All India Dis tillers As s ocia tion
Burea u Na tiona l Interprofes s ionnel du Cogna c (BNIC)
Cá ma ra Na ciona l de la Indus tria Tequilera
Comité Interprofes s ionnel du Vin de Cha mpa gne (CIVC)
Confra ria Del Ca va Sa nt Sa durni
Imported Spirits & Wine As s ocia tion of India
India n Scotch Whis ky As s ocia tion of India
Office Interna tiona l de la Vigne et du Vin
Scotch Ma lt Whis ky Society
Scotch Whis ky As s ocia tion
Trade Press Bevera ge World
BeverAs ia
Bus ines s Sta nda rd, The
Bus ines s Toda y
Drinks Interna tiona l
Economic Times , The
Expres s Hotelier & Ca terer
Fina ncia l Expres s , The
Food & Bevera ge News
Food Indus try India
Gla s s on Web
Hindu Bus ines s Line, The
India n Wine Aca demy
Times of India , The
Tribune, The
Wine & Spirits Interna tiona l
World Drink Trends

Source: Euromonitor Interna tiona l

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