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Liquor: Policy Changes Vital Market Survey BY: DR I. SATYA SUNDARAM LIQUOR: POliCY CHANGES VITAL Experts say uniform tariffs on imports from all neighbouring countries will be quite simple and easy to administer. If need be, sensitive items can be allowed at higher duty. ndia’s country liquor (or ar- wines are growing annually at the cases the previous year. Currently, rack) industry is known for rate of 30 per cent. Liquor consump- the Indian wine market is estimated chaotic business, and esti- tion in India increased by 106.67 per at one million cases per year and is mated at Rs 220 billion, with cent between 1960-72 and 1994-96. expected to grow at 20 per cent an- annual volume sales of over Wine consumption recorded a 14 nually. By 2012, the figure is expect- I200 million cases. Of course, the In- per cent growth in 2003-04 to reach ed to touch five million cases. dia-made foreign liquor (IMFL) sales 490,000 litre cases against 430,000 The total liquor industry is worth are pegged at around Rs 20 billion. IMFL 150 million cases, and accounts for only a growing at 8 to 10 per third of the total liq- cent annually. uor consumption in Manufacturers of India. Most IMFLs are country liquor will cheap and priced be- soon have to adhere low Rs 200 per bottle. to common standards Whisky accounts for almost similar to that 60 per cent of the liq- of branded spirits. uor sales, while rum, The Bureau of Indian brandy and vodka ac- Standards (BIS) may count for 17 per cent, prescribe fresh manu- 18 per cent and 6 per facturing norms for cent, respectively. country liquor. MNCs’ share is only IMFL and country- 10 per cent and their made liquor account presence is felt in the for the bulk of alco- premium and super- holic consumption. Of premium ranges. course, there is an up- In January 2008, per crust that demands there were over 2826 and gets the choicest of wholesale outlets and scotch. 110,374 retail outlets (of which 53,440 are Scope for for country liquor) in the country. The popu- growth lation per retail outlet The per capita con- in India is approxi- sumption of wine in mately 9000, whereas India is a meager 0.006 population per retail bottle compared to 0.5 outlet globally ranges bottle in China, 56 in from 94 in Peru to France, 55 in Italy and 2122 in South Africa. 36 in Spain. Indian Market leader Market Survey packaging is its unbreakability and cases (of twelve bottles each), it en- Growth Rates of lower cost. However, beer is sold joys 45 per cent market share. Of Alcoholic Products exclusively in glass bottles and pet course, it is facing tough competition (Per cent) packaging is not considered suit- from MNCs. Other global brands Product Growth rates able. Packaging in metals is yet to such as Budweiser, Heineken, Car- Strong beer 30-40 make inroads. ishers Cobra and Beck’s have man- Illegal liquor imports cost the aged a 12 per cent market share. Light beer 10-15 government heavily. In 2005, only Heinecken, Carlsberg and Bud- Wines 35-40 two per cent of the liquor coming weiser cater to only 30 per cent of the Scotch whisky 35-40 into the country contributed to the market—the mild beer segment. For Vodka 20 government’s coffers through cus- the remaining 70 per cent of the vol- Rum 15-20 toms duty, resulting in an annual ume in strong beer, the new entrants Gin declining loss of Rs 100 million every year to have launched multiple brands that the exchequer. The government does are priced competitively. Overall 14-15 not want to lower duties on foreign To push retail sales, Indian beer whisky because Indian whisky is not manufacturers are laying stress on United Spirits Ltd (USL) has re- allowed to be sold in Europe. packaging and shelf space. They are cently launched McDowell’s Cele- introducing cans in the Indian mar- bration rum and McDowell’s whisky Status of beer ket. For instance, Cobra Beer is plan- in tetrapacks. It has also acquired ning to introduce 500ml cans across vodka brand pinky in perfume bot- Per capita beer consumption is beer categories in 2008. It is realised tles. Tetrapacks proved to be 20 per still low at 0.7 litre per year. Though that packing beer in cans would be cent more profitable than glass bot- the current growth is pitched at 13 good for exports also. tles. The company is also relying on per cent, the total beer market is ex- Asia-Pacific Breweries Ltd, the youth-friendly ad-campaign for its pected to more than double to 23.3 makers of Tiger beer too is planning wine brand Zinzi. It has realised that million hectolitres by 2012. In spite to set up canning lines in its brewer- capturing the youth market is key of low consumption, India is cur- ies by early 2009. Liquor major Unit- for wine makers to popularise their rently among the top three markets ed Breweries already sells canned offerings. in Asia in terms of expected growth beer. The company declares canning The Mumbai-based Indus Wine rates. The beer segment is banking has enhanced sales thanks to chang- is making steady progress. Today, on huge potential primarily driven ing life styles of the consumers. its products are available at hotels by the increasing purchasing power The beer cans segment has been like the JW Marriott, up-market res- and the expected deregulation of the growing phenomenally over the taurants, clubs and across 120 retail segment. past few years. In 2007-08, the seg- outlets in Mumbai. There are plans Beer consumption in India went ment grew by 50 per cent and con- to extend the business to cities like up more than 90 per cent between tributed to over 10 per cent of the Delhi, Chandigarh, Pune, Bangalore 2002 and 2007. The total beer mar- revenues. On an average, a canning and Goa, among others. The com- ket in India is around 136 million line requires an investment of Rs pany also has plans to go global, but cases of 7.8 litres each, and is grow- 10 million. India imports packaging the main hindrance is slow sales in ing by more than seven per cent an- material for cans. Beer makers are the domestic market. nually. The growth in beer consump- now looking forward to sourcing the Scotch whisky is becoming more tion is attributed to certain factors canning material domestically. This and more popular in India. This has like growing middle class, reduced would also reduce the average cost even driven global exports to a record taxation, market liberalisation and of a can. high. The spurt in Scotch exports to arrival of international brands. India has been recorded after the In 2007-08, beer consumption Price trends government abolished additional was up by 14.5 per cent. This hap- import duty on imported spirits in pened for the third year in a row. In 2007, global liquor giants 2007. Exports to India from England Beer shipments touched 158 million Diageo and Groups Pernod Ricard rose by 36 per cent worth 33 million cases (of 7.8 litres each) in 2007-08 dropped prices of their front-line pounds. up from 137 million cases in the pre- Scotch whiskies by 10 to 30 per cent. In the alcoholic sector, packag- vious year. Prices of Diageo’s Johnnie Walker ing is gaining importance. Alco- Vijay Mallya’s United Brewer- and Seagram’s Chivas Regal have holic beverages are being sold in ies holds a grip over the Indian beer fallen below Rs 1000 per bottle of small and large glass bottles and market with Kingfisher, Kalyani and 750 ml in select markets of the coun- pet bottles. The advantage of pet Sandpiper brands. With 137 million try. Another major brand Racardi Market Survey has also cut rum prices between Rs liquor appear to 500 and Rs 1500. This is the result protect against men- of renewal of additional custom du- tal decline in older ties and internal price mechanisms women. Studies re- of the companies. veal benefit of mod- Liquor companies may raise erate drinking. Some prices, thanks to the hike in the cost studies, however, say of molasses—a byproduct of sugar that over-enthusiam which is used to make potable alco- is unwarranted as hol. The prices may go up by 15 to more focused and 20 per cent because of lower molas- controlled studies ses production. The manufacturers should be done. feel that the government should Researchers are consider ban on export of molasses trying to make white or allow duty-free import. Molasses wine as healthy as prices have almost doubled from Rs red. Efforts are on 190 a quintal in November 2007 to to boost the anti- Rs 375 in May 2008. Also, in 2007, oxidant content of 2.5 million tonnes of molasses was the alcoholic drink processed to make ethanol for spik- so that it has health ing with motor fuel. benefits similar to In India, the tax rates for liquor red wine. Red wine are ludicrous. The five-star hotels contains higher lev- buy liquor at duty-free rates (up to a els of anti-oxidants percentage of their dollar earnings) called polyphenols but sell them to customers at even which are said to 1000 per cent mark-ups. Consider- lower cholesterol, ing the benefits of moderate drink- protect heart and ing, a gentle push in consumption prevent cancer.
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