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How will Covid-19 impact the market dynamics of the Indian Liquor Industry in FY21?

Overview

  • India’s liquor industry is one of the largest alcohol industries across the globe followed by two significant countries such as China and Russia. According to the Goldstein Research analyst estimates the India liquor market to grow at a CAGR of 7.4% during the period 2017-2030. Moreover, the market is expected to attain USD 39.7 billion by the end of the prediction period as alcohol consumption is growing in metropolitan regions of the country.

alcohol growth rate due to the closure of restaurants for covid-19 pandemic
Alcohol growth rate during Covid-19

Source: Nielsen Retail Measurement Services


  • Due to the rising population in India which majorly consists of the young generation, the Indian alcohol market has surged and strengthened the overall industry growth. One of the largest consumer markets across the globe, with a population of 1.3 billion, India is considered to be one of them.


  • Liquor is mainly consumed by people aged between 18 and 40. As per data, India with nearly 50% of its population below the age of 25 and nearly 65% below the age of 35, is comparatively one of the freshest countries. The urbanization of rural areas in the country is also a factor for further growth in the liquor market.


How will the market dynamics transform into the Indian Liquor Industry?


  • According to an India Alcoholic Beverages market study based on inclusive primary and secondary market research ascertained due to a huge transformation in the lifestyles and beliefs of people over the years, the consumption of alcohol has become more socially acceptable. For instance, the acceptability to drink on family occasions and other social events by the younger generation has shifted the market dynamics of the Indian liquor segment.


  • India with its rising population consisting mostly aged between 18 to 40 has increased the market profitability. The liquor industry targets them as potential customers.


rising India's alcohol consumption in 2020-22
India's rising alcohol consumption

Source: Bloomberg


  • The India alcohol market was priced at INR 2,807,236.7 billion in 2018 and is forecasted to attain INR 5,482,851.3 billion by the end of 2027, growing at a CAGR of 7.8% during the period 2019 to 2027.


  • In 2020, the revenue in the Indian liquor market amounts to US$49,221 million. The market is anticipated to rise yearly by 9.3% CAGR between 2020 to 2025. In terms of global identification, the largest revenue is generated in China (US$268,623m in 2020). Another challenge in the Indian liquor market is licensing and sourcing. It is mandatory to attain several and regulations in the liquor business.


How will the Covid-19 impact the Indian Liquor Market consumption and sales?


  • The coronavirus induced lockdown that began in late March 2020, has resulted in the closure of many industries along with a disruptive supply chain. Amongst the industries in India, the liquor market has also been impacted due to the Covid-19 pandemic in the fiscal year 2020.


  • In fact, there was a total ban on the selling of alcoholic drinks during the first two phases of the lockdown. This was also due to the World Health Organisation (WHO) associating the consumption of alcohol to the weakening of immunity which makes people inclined to COVID-19.


Low spirit content market growth in India
Size of India Liquor Industry

Source: Economic Times


  • Indian liquor sales are expected to decline by 35-40% in the prevailing year in volume terms. The closure of bars and restaurants is also a factor for the liquor sales drop. The corona fee taxed by the government on alcohol had surged the alcohol beverage market and due to which there had been an increase in the price of the alcohol which has influenced consumers with the high cost and a decline in demand.


  • In India, beer is taxed 60% higher than stronger drinks despite the lower alcohol rate, which ranges from 4-7% as against 40% in hard liquor. According to a recent ABC report, states which had imposed taxes between 15-50% reported an average deterioration of 34% in alcohol sales. On the other hand, the prices have risen by approximately Rs. 100 in a few states.


The growth of beer in the alcohol market in India
Growth of the beverage - Beer

Source:timesofindia


  • By further expanding home delivery and the concept of bulk buying, liquor sales have recovered in several regions of the country. With a yearly value of $35 billion, India is reported to be the third-largest liquor market segment across the globe. Apart from India, other countries will also see an overall fall of 15% in the consumption of liquor as per a report in the Financial Express. India is recognized to be the largest market in terms of Whiskey.


  • Five southern states, Andhra Pradesh, Telangana, Tamil Nadu, Karnataka, and Kerala are accountable for over 45% of entire liquor sales in India. More than 10% of their revenues are generated from taxes on liquor sales, according to the research report of Crisil, ratings, and analytics firm. Another six top consuming states, Punjab, Rajasthan, Uttar Pradesh, Madhya Pradesh, West Bengal, and Maharashtra, less than 5-10% of their profits from liquor.


What is the highest potential of profit among the liquor markets in India?


  • India-made Foreign Liquor establishes the most extensive section of the Indian liquor industry in terms of value, due to the price per bottle, making up ~65% of the total market by value. The IMFL industry is controlled by whiskey, the top-selling IMFL type in India.


Future of the Indian wine market
India Wine Market

Source: Globaldata


  • It is moreover classified into Whisky, Rum, Brandy, Vodka, and Gin. By 2026, It was assumed to attain a market estimate of over INR 3,000 billion with a CAGR of 5.2% over the estimated period. Nearly more than half of the IMFL sold in India is whiskey.

India's top 12  states by revenue from liquor market
Revenue from Alcohol

Source: Inc42


  • Whereas, Vodka is the most preferred alcohol among Indian youths. The segment is expected to have grown by 25% in the last few years. The Indian wine market is expected to be INR 175 crore, increasing at a CAGR of 20–25%.


Hike in beer prices as per cities in India
Hike in beer prices

Source: Yourstory


  • Tourism and shopping have expanded the wine business of India. Mumbai, Bangalore, and Delhi are the prime consumers of wine in the country. The Indian liquor market is anticipated to increase at a CAGR of 7.6% over a predetermined period of 2018–24.


Summary


According to Netscribes research, the liquor market in India is anticipated to increase at a CAGR of approximately 7.72% over a 10 year period to attain a value of INR 5.3 trillion in 2026. In India, there are several types of alcoholic beverages available, but beer is the fastest-growing liquor market in the country. It is foreseen to grow at a CAGR of 7.5% between 2017 and 2021.




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