Despite the dominance of molasses-based alcohol in the 250 million cases a year Indian Made Foreign Liquor (IMFL) market, the trend of using grain-based alcohol is steadily growing.
Data from Praj Industries, a firm that undertakes turnkey projects for companies in the alcohol business, shows the grain-based lot of all potable alcohol produced in India is now about 10 per cent. It was two-three per cent only five years earlier. And, is projected to touch 22 per cent in the next five years, according to Uday Kulkarni, head of marketing for the western region at Praj.
There are multiple factors, he says, for the growing acceptance of grain-based alcohol and, hence, grain-based distillation in India. One is the volatility in molasses’ prices. For instance, the current price per tonne of molasses is Rs 4,000, up from Rs 3,500 per tonne in May-June. Earlier this year, the price per tonne was Rs 2,500.
Competing demand
The second reason is the pressure in procuring molasses. The demand from allied users such as the fuel and chemical industries is growing. Of the total alcohol produced in India, half goes to the potable alcohol or liquor industry, 20 per cent to oil marketing firms for blending ethanol with petrol and the balance 30 per cent goes to the chemical industry for industrial usage. With the government having increased the procurement price of ethanol to Rs 27 per litre this year from Rs 21.5 per litre earlier, distilleries, say experts, are likely to switch to producing ethanol more than portable liquor to take advantage of this. “Which means ethanol production for blending purposes will grow,” says Deepak Desai, an expert based in Pune.
Says Deepak Roy, executive vice-chairman & chief executive, Allied Blenders & Distillers, the maker of Officer’s Choice Whisky and Class Vodka, among other products, “The pressure in terms of procurement will increase.”
Says V N Raina, director general, All India Distillers Association. “The last three years had molasses’ production stagnating at 7.5-8 mt. It has picked up this year, but you never know what the trend will be like next year.” This cyclicality to molasses, plus the pressure from allied users, is compelling liquor companies to switch to grain-based alcohol, say experts.
For instance, number two IMFL company Pernod Ricard’s products are all grain-based, say industry experts. The number one player, United Spirits, though still largely dependent on molasses, is switching to grain-based alcohol for some of its premium products such as Signature Whisky. The trend, increasingly, say industry experts, will be to have grain-based alcohol for premium products, while mass or volume products will be molasses-based.
This point is corroborated by Dilip Banthiya, chief financial officer, Radico Khaitan, the number three IMFL company, who says their premium products including Magic Moments Vodka, Morpheus Brandy and After Dark Whisky, are all grain-based. “This trend is growing,” he says. “Our premium products are grain-based.”
