The Indian alcoholic beverage market represents one of the most compelling spirits opportunities in the world. Being the third largest, after China and Russia, it is estimated to grow at a CAGR of 7.4% during the forecast period of 2017-2030, according to a report published by Goldstein Market Intelligence. However, despite such a high performance, the industry could not escape the wrath of the COVID-19 pandemic which brought it to its knees.
Once perceived to be a recession proof industry, its sales witnessed a 29% decline in the first half of 2020 given that it does not fall under the category of essential commodities, according to figures compiled by industry body Confederation of Indian Alcoholic Beverage Companies (CIABC). As a result, the industry took a heavy blow which had an adverse effect on manufacturing companies, liquor shops and bars/clubs.
Fortunately, the storm died down and a strong revival in sales took place in the second half of 2020 because of which the industry could restrict its overall decline to 9% in the fiscal year 2020-21. Moreover, revenue from the alcoholic drinks market amounted to USD 1,371,385 million in 2020 which is anticipated to reach USD 39.7 billion by the end of 2030.
This quick recovery can be attributed to a rise in needs of in-house entertainment and time out from everyday chores which prompted people to buy liquor in bulk as soon as sales resumed in the country. The festive season further provided impetus to already increasing sales as consumers started celebrating occasions and attending small-scale events.
Youth-friendly government interventions
The swift bounce back of the alcohol industry is indicative of its strong and vast consumer base which is increasingly being dominated by the millennial and Gen Z population. “Because of India’s high population growth rate, every year produces 13 million drinking age adults, out of which at least 3-5 million eventually end up consuming alcohol in some way or the other- so its definite that the market is huge for any category of liquor and will grow at a fast pace,” said Desmond Nazareth, Founder and Managing Director of Agave India, an alcohol beverage company focusing on indigenous spirits made to international standards with homegrown raw materials.
In lieu with this trend, the Aam Aadmi Party (AAP) led government in Delhi recentlyinitiated youth-friendly amendments to its excise policy. For starters, in March it lowered the legal drinking age from 25 years to 21 years within the Union Territory, a move welcomed by the capital’s young population and the liquor industry at large (still waiting approval).
Just two months after that, the government announced another amendment which notified the opening up of home delivery of liquor through mobile apps and online web portals across all districts. This key shift certainly struck a chord amongst the tech-savvy millennial drinkers of the Capital who view home delivery as a safer and convenient option to restock their high-end home bars amidst the ongoing pandemic.
Ever young and growing alcohol industry
It’s not just the youngsters, even industry professionals view these change as progressive steps taken by the Delhi government towards the growing liquor market.
Karina Aggarwal, Vice President, Indian Craft Spirit Company, who recently launched an Indian craft gin brand- Terai Gin added to this and said, “This is definitely a well thought-out decision on part of the government. Not just from a sales perspective, but I also feel that this will help change the perception of what it means to socially drink in a country like India.”
While Delhi is the newest Union Territory to lower its legal drinking age, nearly 60% of the 28 states and eight union territories have allowed the sale of liquor to those above 21 years for quite some time. This is partly because the majority of the alcohol consumed is by people between the age of 18 and 40 and being a relatively young country, more than 55% of its population falls under this category, making it plausible for governments to legalize drinking at such an age.
Experimentation and exploration at its peak
With such a high-growth trajectory and a rising consumer base of young drinkers becoming more affluent and aware of global trends in the industry, consumption patterns are significantly changing with surprising trends emerging every year.
“We are in a very exciting phase when it comes to the Indian alco-bev industry and the Indian bar industry where we are witnessing dramatic changes and will continue to do so for the next 5 years because of the influence of millennials in the market,” said Shatbhi Basu, India’s first female bartender who is currently heading a bartending academy, and is the former American Whiskey Ambassador for India. Basu further added, “Over the last decade, Indian consumers have shown a marked evolution when it comes to cocktails as they’ve become more appreciative and experimentative with different types and versions of alcohol.”
As a consequence, these consumers are constantly trying out new brands and flavors of different categories of alcohol instead of focusing on the traditional ones. According to a report published by Nielsen, 65% of millennials are open to trying more than 3 types of alcohol and only 25% of them prefer sticking to a specific brand.
Entrepreneurs of Indian-craft liquor
With millennials ready to explore new and interesting liquor products, various start-ups have entered the market to tap into these growing opportunities. “The entrepreneurial spirit that was unleashed 3 years back, has continued to take wings in different categories even during the pandemic,” said Vikram Achanta, Co-founder and CEO, Tulleeho, a drinks training and consulting firm and Bar X, a bar accessory business.
In tandem with the atmanirbhar spirit of the Modi government, the entrepreneurial storm has hit the craft movement in India quite significantly where homegrown (Made in India) brands have started to focus on authenticity, craftsmanship and creativity to produce something uniquely ground-breaking in order to create their own niche within the market. In this regard, two broad categories have emerged within the premium and semi-premium segment – first one being Indian-made conventional craft liquor and the second being high-quality native liquor.
Made-in-India conventional craft liquor
Premiumization and distinctness
Within the first category, white spirits have taken the lead as compared to brown spirits and have been growing at a rate of 12.5% every year. Various factors such as the urge for new experiences among the urban population, rise in the percentage of female consumers, increasing disposable income, high consumption and influence of social media have contributed to this trend. “Earlier consumers had a preference for foreign brands because of their brand cachet but now-a-days that’s not the case, especially in the white spirits segment where consumers are judging brands on their own merit rather than the country they are produced in,” said Vikram Achanta.
As a matter of fact, two new rather promising, homegrown brands were launched in the past one year itself. The first one to launch during the pandemic was India Craft Spirit Company’s Indian Dry Gin- Terai, priced at Rs 1800 for a 750ml bottle. “With the renaissance of Gin, or rather Ginassiance taking place in India over the past three years, we wanted to create a grain-to-glass product which was much closer to home in terms of its taste and appeal but not exotically Indian and that’s when Terai came along,” said Karina Aggarwal.
Made from homegrown rice grains, infused with 11 local botanicals including tulsi, fennel, coriander, lavender and rose, Terai has a distinct flavor profile as compared to the traditional London Dry style of gin which further adds to its uniqueness. “Going for a distinct personality was a risk we were taking as consumers could either entirely dislike the taste or absolutely love it, based on their personal preferences for these ingredients,” said Karina Aggarwal. But it was a risk worth taking as Terai became the highest premium selling gin brand in Delhi within five months of its launch.
Taking the premiumization trend forward in this category, Blisswater Industries Pvt Ltd launched Rahasya Vodka, an intrinsically Indian-flavored vodka brand, in the beginning of this year. “When you take a sip of our drink, you are drawn to the Indianness of it as through your years of growing up you’ve come across these flavors in some form or the other,” said Varna Bhat, a Goan entrepreneur who is the CEO & Founder of Blisswater Industries Pvt Ltd. “Rahasya has a secretive air about it as it tastes different for different people, so people kept asking what’s in it and that’s how we named the brand,” added Varna Bhat. Having a mysterious touch to it, the brand has been able to mark its presence in the vodka category because of its quirky yet sophisticated taste. Priced at Rs 850 for a 750ml bottle, Rahasya is closer to Smirnoff in terms of its price range.
Marketing with a twist
Being newbies in the industry, both the brands have had a unique style of marketing, which is quite different from the conventional strategies carried out by top-notch liquor brands in India.
“We paid special attention to the art and design of the Terai bottle as we wanted the packaging to speak for itself and that’s why different parts of the bottle -from its cork to its structure and shape- everything has a unique Indian touch to it,” said Karina Aggarwal. In terms of their marketing strategy, they have utilized the power of social media and established a strong presence on platforms like Instagram and Facebook by posting tutorials and holding virtual workshops throughout the pandemic. On the other hand, Rahasya took a slightly different path for its marketing and brand promotion, which constitutes to about 30% of their total budget. “We are interested in branding Rahasya as a concept rather than just a drink and that’s why we are not going the big bash party route and are instead focusing on small exclusive events. In one of these events, we bring out mysteries and stories of a particular place through the medium of food and Rahasya-based cocktails, along with live music and games, and this really resonates with our consumers,” asserted Varna Bhat.
As the pandemic brought a decided shift from drinking at bars to entertaining at home, ready-to-drink, light and fresh beverages have gained immense traction amongst the masses. One such brand that has capitalized on this trend is Salud Beverages, which is an Indian start-up that produces ready- to-drink alcoholic and non-alcoholic beverages and Craft Spirits. “We believe in the holy trifecta of people-products-experiences and hence, market ourselves as a lifestyle brand that encourages people to find new ways to bond with their tribe and celebrate life,” said Akshara Kalappa, Digital and Communications Executive at Salud Beverages Pvt. Ltd. The company recently arrived in the market with India's first ready-to-drink gin and tonic beverage- G&T 2.0.
Spending 10-12% of their budget on marketing and sales promotion, the company has diversified their branding strategy by launching their own fashion and merchandise collection along with a musical vertical featuring collaborations with top DJs called Salud Sessions. “All these offerings come together in our messaging, which is all about making the right choices, doing things right and celebrating life the "Salud" way – Life 2.0, as we like to call it!,” maintained Akshara Kalappa.
Premium quality native liquor
Mahua- flag bearer of heritage alcohol
While these Indian-made craft liquor brands are spoiling Indian consumers with unique choices of conventional types of liquor, two distinct indigenous brands are trying to redefine desi daru into more premium and high-end quality native spirits of India. “Sri Lanka has Coconut Aarrack, China has Baijiu, Mexico has Tequila, Russia has Vodka, however, when it comes to India, despite being one of the largest alcohol markets in the world, it currently does not have any special heritage liquor to contribute to the international market,” said Nazareth who is trying to take his version of Mahua- an indigenous liquor made by tribals in Central India, to the global market as a high-quality national heritage spirit of India.
Through his company, Agave India, Nazareth has recently launched two DesmondJi (DJ) Mahua alcohol products - DJ Mahua and DJ Mahua liqueur. “Mahua is a very unique type of liquor as it is the only distilled spirit made from a sweet flower in the whole world and it's sad to see that since British times it has been suppressed by the government and the conventional alcohol industry,” said Nazareth.
Feni- a global cultural drink
Another local brand that is trying to rewrite the history of a different regional liquor is Cazulo Premium Feni. “I want to re-contextualize Feni for the rest of the world and for my community, so that Goans feel proud about their culture and heritage,” said Hansel Vaz, owner of Cazulo Premium Feni. Feni is a colorless clear Goan liquor made of coconut or cashews and dates back to centuries, even before the Portuguese rule. Being oppressed by the Portuguese, just like other regional liquors, Feni too has had a bad history associated with it.
Hansel Vaz has a mission to change the face of Feni in the global market and to do that he has opened up India’s first feni cellar and tasting room called Beco das Garrafões located in Cansaulim in South Goa.
Changing profile of the alcohol industry
The ever-changing landscape of the Indian alcohol industry is witnessing a wave of homegrown premium level brands coming up in different categories of liquor and doing much better than their imported counterparts. These brands with their distinctive appeal, refreshing ideas and specially curated products, are bound to change the face of the industry in the coming times.
“These new entrepreneurs are not just approaching their brands from a business perspective, but rather are creating products which reflect their passion for that particular category of liquor. So, there is a personal touch applied to every part of the product - from its making to its packaging and when you have that amount of dedication towards your brand then even the consumer resonates with it and gives the regard back to the product,” quoted Vikram Achanta.
- This article is written by Hargun Sethi, Ashoka University.