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Alcobev market in India – current growth and future opportunities — Vision 2030
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Tuesday, 03 January, 2023, 08 : 00 AM [IST]
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Arundeep Singla
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Alcohol has historically been consumed at celebrations in India, and social restrictions on drinking alcohol with family or at customary events are gradually being lifted. In this scenario, the consumer’s attitude is changing increasingly, with more young adults gathering with their friends for drinking in Tier-II cities (cities with a population of over a million) or ladies enjoying an outing over a few drinks. The steady fading of societal biases surrounding alcohol usage contrasts with the rise in spendable money and changes in lifestyle. Therefore, the alcoholic beverage market benefits from converging economic opportunities and social reforms. Moreover, its demand has been influenced by myriad factors, including a large middle-class population with higher spending power, rising urbanisation, shifting consumer preferences, and decreasing cultural barriers pertaining to drinking. In addition, the holiday season often fuels purchases of alcoholic beverages as customers hog liquor stores as part of their celebratory ritual.
Rise In Alcoholic Beverage Industry
In contrast to other emerging markets, the consumption of alcohol is still under-penetrated. Today, India as a country is embracing a greater demand for imported alcoholic beverages. In major cities, the wealthy and upper-middle class typically dominate this group. Moreover, young professionals and business owners who switch from local to international brands are other groups noticing its rising popularity.
One of the top three sources of revenue for state governments comes from the taxation of sales in the alcoholic beverage sector, which also supports an ample amount of direct and indirect jobs. It is anticipated that the industry will develop further owing to the growth in alcohol consumption and subsequent increase in the number of pubs and bars. Additionally, a favourable demographic with a median age of 27.9 years and a surge in the number of female drinkers are also expected to fuel the proliferation of the global alcohol market. Similarly, the Indian market for alcoholic beverages, as per Statista, generated US$47,500 million in revenue in 2022. The report also highlights that the market is anticipated to expand by 8.86% yearly (CAGR 2022-2025). Furthermore, MarketWatch suggests that the demand for alcoholic beverages in India is predicted to boost at a CAGR of 3.1% from 2022 to 2030.
Here’s a look at the contributing factors that are integral to the growth of the alcoholic beverage industry:
Government Initiatives Aimed At Youth
The alcohol sector has gained traction, which is a sign of its robust and significant consumer base, which increasingly includes millennials and Gen-Z. Amid India’s growing population, 13 million individuals of legal drinking age are born each year, and at least 3-5 million end up drinking alcohol in some fashion. As a result, it is clear that the market is enormous and will continue to develop quickly for all types of liquor.
The government has introduced changes to its youth-friendly excise policy in response to this trend. For instance, the government changed the Union Territory’s legal drinking age from 25 to 21. The young population of the capital and the entire alcohol business praised this change (still waiting for approval). However, just after two months, the government made another statement, notifying all districts of the opening up of the home delivery of alcohol via mobile apps and online web portals. This significant change undoubtedly resonated with the capital’s tech-savvy millennial drinkers, who see home delivery as a more secure and practical way to restock their home bars.
The Height Of Experimentation And Exploration
Consumption patterns are drastically shifting, with surprising trends appearing every year due to the industry’s strong development trajectory and a growing consumer base of young drinkers becoming more affluent and conscious of global trends. Regarding the Indian alcohol sector and the bar industry, we are at an exciting moment where we are seeing significant changes and will continue to do so for the following five years due to the influence of millennials in the market. As Indian consumers have grown more tolerant of and adventurous with various forms and types of alcohol over the past 10 years, they have also demonstrated a noticeable change in cocktails. As a result, these customers frequently experiment with new alcohol brands and flavours rather than sticking with tried-and-true options.
Rise Of Indian Startups In The Alcohol Industry
In order to capitalise on the potential opportunities in this business, numerous new Indian entrepreneurs have joined the market with various fresh concepts and intriguing new alcoholic beverages. Despite the pandemic, many entrepreneurs have already established their identities and are prepared to take off in this sector. Some Made-in-India companies have emphasised authenticity, craftsmanship, and originality to carve out a distinctive and ground-breaking niche in the market. In this sense, two categories - high quality local liquor created in India and traditional craft liquor - have formed within the premium and semi-premium markets.
Due to this, the Indian alcohol sector is seeing a wave of locally produced, premium-level brands enter several categories and perform far better than their imported equivalents. These brands will transform the market in the following years with their novel concepts, distinctive charms, and carefully selected products.
Final Takeaway: Surge in Alcohol Beverage Industry
It is evident that India has experienced an upsurge in alcohol consumption over the last three decades due to the rapid population growth. On the other hand, many entrepreneurs have entered the market to open up the gateway for potential opportunities in this industry with various innovative ideas and new alcoholic beverages. However, the rise in alcohol consumption among the younger generation, increasing disposable income, shifting social norms as well as rising alcohol acceptance are all to be credited for the growth in industry.
(The author is chairman and managing director, Alcostar Group of Companies)
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