Premiumisation spurs domestic spirits market to record highs post-pandemic

Since FY21, the annual sales of spirits in India have surpassed the combined consumption of prominent European markets such as the UK, France, and Spain

India’s growing interest in spirits is at an all-time high, driven by a burgeoning middle-class population and its longstanding affinity for whiskey. The domestic spirits market has witnessed a remarkable surge, with annual sales soaring from 228 million cases in FY11 to a staggering 330 million cases by FY18, as reported by The Economic Times.

The market faced a downturn during the Covid-19 pandemic, when sales dropped to 311 million cases (in FY21). However, it swiftly rebounded, adding approximately 100 million cases in annual sales within just three years, soaring to 412 million cases by FY24.

The incremental surge in annual sales since FY21 outshone the combined spirits consumption of major European players like the UK, France, and Spain, industry players said.

 

This growth comes despite the market’s expansion rate slowing to 4 per cent in the fiscal year ending March 31, a third of the growth rate witnessed in the preceding years. Companies attribute this resilience to robust demand across various categories and price points, particularly for premium offerings, coupled with the growing trend of at-home consumption.

“We feel consumers should drink better, not more. With 20 million people entering legal drinking age in India every year, we are consistently focusing on repertoire drinking instead of volumes. The Indian market per capita consumption is still low compared to most developed nations, indicating the potential for years to come," said Vikram Damodaran, chief innovation officer, Diageo India.

Although the spirits industry has returned to more modest growth levels after the heady 12-15 per cent surge witnessed in the post-Covid era, the trend towards premiumisation persists, propelling value growth across various categories.

The country has an estimated legal drinking-age population of about 300 million of its vast 1.4 billion population. However, only around half of this demographic can afford cheap, unbranded liquors. The rapidly expanding middle-class segment, capable of buying premium and super-premium spirits, constitutes roughly 150 million individuals.

Premiumisation continues to gain momentum on the back of the dynamic economy, growing disposable income and consumer aspirations, believes Jean Touboul, CEO of Pernod Ricard India. “In the last few years, we have observed a significant shift in consumption patterns supported by premiumisation and out-of-home consumption. The trend is particularly promising as consumers increasingly prioritise value over volume, leading to sustained double-digit growth across premium categories,” said Touboul. The overall outlook for India’s alcoholic beverage industry remains optimistic, he added.