Why did liquor demand drop for the first time since Covid in Sep quarter?

Whisky, which makes up two-thirds of the spirits segment, experienced a 1 per cent drop in volume, with brandy and rum also falling by 3 per cent and 2 per cent respectively

Demand for spirits dropped by 1 per cent in the quarter ending September, marking the first decline since the Covid-19 pandemic. According to a report by the Economic Times, companies attribute this dip to heavy flooding in certain states and rising taxes, which dampened demand amidst a broader economic slowdown affecting multiple consumer categories.

 

Industry executives cited in the report indicated that whisky, which constitutes two-thirds of the spirits segment, experienced a 1 per cent drop in volume, with brandy and rum also declining by 3 per cent and 2 per cent, respectively. In contrast, vodka and gin registered growth, with vodka volumes up by 17 per cent and gin by 2 per cent, though from a smaller base.

   

This decline in liquor demand reflects trends in the consumer discretionary sector, where sales of items like apparel, footwear, and beauty products slowed after two years of pandemic-driven growth. The country’s spirits market recorded a sales volume of 101 million cases for July–September, down from 103 million cases during the same period in 2022. After a period of 12-15 per cent growth in the years following Covid-19, the industry has now stabilised at a more moderate pace, the report noted.

 

Executives from United Spirits quoted by the business daily indicated that this quarter marked the first instance where the top-end segment lagged behind the mid-tier bulk in performance. However, they suggested that this slowdown is likely temporary due to macroeconomic conditions. The impact of weather, particularly rains and flooding, also played a role, they explained.

 

Premiumisation holds steady as industry prepares for a festive boost

 

Premiumisation across categories, though slower, has nonetheless driven value growth even under volume pressure, industry sources added. Radico Khaitan’s chief operating officer, Amar Sinha, pointed out that market shifts, such as anticipated policy changes in Andhra Pradesh and uncertainty in Karnataka, influenced retailer buying patterns in these states.

 

Additionally, ritual periods like Shradh, along with temporary issues in the Delhi and Rajasthan markets, weighed on demand, Sinha stated.

 

To capture higher margins, several companies have introduced products in the premium segment. Allied Blenders & Distillers (ABD), for instance, recently launched brands like Iconiq White Whisky, Srishti Premium Whisky, and X&O Premium World Grain Whisky. ABD has also entered into a new partnership with actor Ranveer Singh to promote luxury spirits.

 

ABD managing director Alok Gupta noted that while the prestige and above categories experienced a slight decline, the company saw robust growth, gaining market share amidst the ongoing premiumisation trend as consumers increasingly favour higher-quality products.

 

Companies remain optimistic about a stronger second half of the year, citing the festive season, a busy commercial calendar, and the reopening of the Andhra Pradesh market as factors likely to help the spirits segment recover.