Study On Scope & Limitation Of Liquor

Industry In India

ABHISHEK JAGTAP
ROLL NO.30
MBA-1

NITIN BHIDEKAR
ROLL NO. 41
MBA-1
 Index Of Contents
TITLE PAGE NO

OBJECTIVE OF STUDY 3

INTRODUCTION 4-8
1. TYPE OF MARKET
2. INDIAN LIQUOR MARKET
3.CONSUMER TRENDS

REGULATORY STRUCTURE 9-10

MARKET STRUCTURE 11-12

KEY GROWTH DRIVERS 13-14

SWOT ANALYSIS 15

FINDINGS 18-20

CONCLUSION 21
 Objective Of Study
• Indian alcohol industry at glance
• Emerging trends in a industry
• Demand supply scenario factors driving
growth, issues & challenges
• Government regulations
• Major players, financial & their swot analysis
• Forecasts
 Introduction
India has the world‘s third largest and fastest growing market for
alcoholic beverages. The whiskey market estimated at 300 million
cases. Is the largest in the world. The World Health Organization
(WHO) reports that liquor consumption in India has been growing
steadily since 2005. In the meantime, per capita consumption of
alcohol beverages has increased from 3.6 litres to 4.3 litres between
2003 and 2010, 93 per cent of this growth comes from liquor
(spirits).While tariffs on imported liquor remain high, domestic liquor
manufacturing and sales are also enmeshed in a complicated network
of laws and regulations on both the federal and state levels.

The association between India and whiskey consumption is seldom

known 46.7% of all global whiskey consumption last year occurred
in India. That’s more than three times the size of the second largest
market – the United States, home of famed whiskey brand Jack
Daniels.
 Type Of Market
The alcohol industry in India is a quintessential example of Oligopoly market
witnessing presence of giant MNCs like Diageo, Pernord Ricard, Heineken,
SAB Miller, etc
The products manufactured can be divided into the following categories:

1. IMFL (Indian Made foreign liquor)

2. Foreign liquor bottled in India (BII)
3. Foreign liquor bottled in Origin (BIO)
4. Beer
5. Wine
6. Country liquor: which includes cheap and spiced indigenous liquor

Although Beer, Country liquor and IMFL occupies almost the same market share in
volume but due to high price of IMFL it occupies almost 65% of market share
in terms of value. Total market size of this industry in India is about $35 billion
and is also showing a growth trend of 8% per annum. IMFL and beer is
showing an almost constant growth of around 8% CAGR per annum but the
growth isn’t divided uniformly over the products of different prices.
Indian Liquor Market
 Consumer Trends
• IMFL is dominated by Whiskey – Almost 60% of
the IMFL market is whiskey. India is the world’s
largest whiskey market. 6 of the top 7 selling brands
in the world (by volume) are Indian.
• Beer is dominated by Strong Beer – India has a
distinct preference for strong beer (8% alcohol v/v).
Over 80% of the market is strong beer.
• Premiumization – On the back of growing income,
there is a strong trend of premiumization. All liquor
companies are increasingly looking at introducing
better quality, more expensive brands in their portfolio.
• High Growth White Spirits – This is the fastest growing
segment in India. Vodka has emerged as the preferred liquor
for the youth. Growth has been at over 25% per annum over
the last few years (albeit on a smaller base of ~9 million
cases).

• Unexciting Wine – Wine has been a slow growth market in

India, with a very niche audience. Although it is highly visible
in the cities, the total market is just over 1 million cases. Sula,
Four Seasons (UB Group) and Nine Hills (Pernod Ricard) are
the leading brands. Maharashtra and Karnataka are the two
states with most of the wineries as well as wine consumption.
This is due to a preferential tax structure in these states.
 Regulatory Structure
• The Indian liquor market is characterized by very high
regulation. The liquor industry is a State subject and hence
subject to laws in each state. This means a company has to
have licenses and permissions to operate in each state. Hence,
there are very few players who are truly “National”.

• Independent Licenses are required to produce, bottle, store,

distribute or retail all liquor products.

• Market control – Distribution & retail are also subject to

control as depicted below. There is a complete ban on liquor
advertising in India. Brands try to go-around this by using
surrogate products (Bacardi Music CDs, Johnnie Walker golf,
Tuborg beverage).
FDI – 100% FDI is permitted in the alcoholic beverages sector. A
foreign entity can invest in an Indian business through the
automatic route, provided the required licenses are in place.
In some cases where the investor is an Indian entity with foreign
owners (Eg: SAB Miller India), the investment would require
clearance from the Foreign Investment Promotion Board (FIPB).
FDI approvals are issued on the basis of a particular licensed
capacity and any further increase in capacity will require FIPB
again.

Taxation is high, Price is controlled – Excise duties, sales tax, VAT

and various intermediary margins contribute bulk of the retail
price. To give you an idea, the typical manufacturer/ brand
realizations are below. In most states, the government tightly
controls the retail price of liquor. In many cases, a tender process
is used to determine prices and volumes that will be bought by the
distributors.
Market structure
 Key Growth Drivers:

• 1. Young population – India has amongst the youngest population

in the world. 60% of the population is under the age of 30. Further,
over 50% of the population is in the working age of 22- 54.

• 2. Rapidly growing consumption – Beer is increasingly acceptable

as a social drink and the urban youth in particular favors it as the
preferred alcoholic beverage. Per capita consumption of beer is 1.5
liter and has been growing at over 15% in the last few years.

• 3. Home grown brands – Even international giants like SAB Miller

and Carlsberg have not been able to grow their own brands
significantly. SAB Miller leveraged its acquired Indian brands like
Haywards, Knock Out and Royal Challenge to become a leader in
the industry.
 SWOT Analysis
STRENGTHS Weakness
1.India is the fastest growing liquor market 1. Independent Licenses
in the world. 2. A complete ban on liquor advertising
2.Attractive market for spirits. in India.
3.Young Population rapidly growing 3. High taxation & excise duties.
consumption. 4. Age factor
4. Social acceptance

Opportunities: Threats
1. Room for growth in per capita 1. Religious influence.
consumption of alcohol in India. 2. Burden of taxes.
2. Rising middle class income 3. Age factor
3. Growing no of women consuming 4. Socio cultural influence
alcohol
4. Emerging economy & westernized life
style
5. Pub culture on rise
Indian Market
 Findings
• India is the fastest growing liquor market in the world.
• For Indians now, it seems that alcohol is a status symbol. It is a
pleasurable luxury for many, so in a country with considerable
bourgeois growth, purchasing whiskey is a sign of affluence and
success.
• Indians are not traditionally associated with the popular distilled
liquor, yet 46.7% of all global whiskey consumption last year
occurred in India.
• Premiumization – On the back of growing income, there is a
strong trend of premiumization. All liquor companies are
increasingly looking at introducing better quality, more expensive
brands in their portfolio.
• Existing liquor policies in India are harmful to consumers and fuel
corruption, cronyism and black-marketeering. Increasing liquor price and
rising concerns over health issues led by poor quality of cheap liquor
produced domestically reflects a serious problem with India‘s current
liquor regime.

• Taxes increase the prices for consumers who purchase IMFL up by

five to six times.

• Tariffs on liquor have made foreign liquor unaffordable to the majority of

Indian consumers.

• Moreover, heavy taxes and non-uniformity of policies at federal state-level

have turned liquor businesses into the biggest cash cow for government.

• It is estimated that the combined earning of the states and union territories
(excise) from alcohol beverages in 2011 fiscal year is estimated to be
around 4.67 billion USD, accounting for about 16 per cent of their own tax
revenues.
 Conclusion
• International Impact Indian alcohol industry attracts a lot of foreign
attention. The demand of whiskey is declining around the world while
the demand of beer is increasing, but as seen in the scenario in India is
quite opposite, hence, India has become a cynosure for giant
manufacturers with strong whiskey brands.

• Further the sale of beer in India is expected to grow in the near future,
reason being the liberalization of beer products (de-linking with
IMFL), which has already been implemented in some Indian states like
U.P., Himachal Pradesh and Maharashtra.

• Indian alcoholic beverages market is the one of the fastest growing

industry in the world with several yet to be explored segment. With
compelling business potential & economics of scale poised by the market,
It is expected that several international players will expand their
operations in the Indian alcoholic drinks market in coming years.
Thank You