Demand for luxury and ultra-premium liquor brands on the rise

While the consumption of imported liquor is already rising, the Maharashtra government last week slashed excise duty on imported liquor from 300 per cent to 150 per cent (50 per cent) in a bid to further boost the share of imported liquor in overall consumption, while curtailing smuggling and dealing in illicit liquor. The move will further increase imported liquor's share in overall consumption, according to the International Spirits & Wines Association of India (ISWAI), an apex body of the premium AlcoBev (alcoholic beverages) sector.

State excise officials said that while the government currently earns a revenue of about Rs 100 crore from the sale of imported scotch annually, this is expected to increase to Rs250 crore as the sale of imported scotch is expected to go up from 1,00,000 to 2,50,000 bottles while also curbing smuggling and bootlegging.

Meanwhile, the ISWAI revenue in the alcoholic drinks market amounts to $44,343 million in 2021. The market is expected to grow annually by 9.41 per cent (CAGR 2021-2025). On the IMFL front, the market's largest segment is the spirits with a market volume of $31,119 million in 2021.

In global comparison, most revenue is generated in China ($311,827m in 2021). In relation to total population figures, per person revenues of $31.82 are generated in 2021. In the alcoholic drinks market, 0.4 per cent of total revenue will be generated through online sales by 2021.

By 2025, 13 per cent of spending and 10 per cent of volume consumption in the alcoholic drinks market will be attributable to out-of-home consumption (e.g., in bars and restaurants). In the alcoholic drinks market, volume is expected to amount to 14,712.6ML by 2025. The alcoholic drinks market is expected to show a volume growth of 12.0 per cent in 2022. The average volume per person in the alcoholic drinks market is expected to amount to 8.32 liter in 2021.

The Maharashtra government's move will bring price rationalisation and parity with other states, thereby boosting state excise revenues from this segment. It will also significantly curtail the incentive for dealing in spurious/illicit liquor and help curb smuggling of alcohol products from other states while benefitting consumers in Maharashtra in terms of access to genuine products.

Alcobev is a dynamic sector and luxury and ultra-premium brands are being consumed more at home now. There will be more intimate celebrations and consumption occasions will increase. Conspicuous consumption will reduce and the trend will shift towards satisfying hedonistic needs. It will take consumers some time to begin venturing out and spend a premium over existing prices at bars and restaurants.

The spirits industry will focus on building sustainable business models: The focus will also be on building luxury brands with innovation at their core so that conglomerates can protect their interests in case of contingencies. Finally, and most importantly, delivering at an affordable price will be important.