With its vast population, rapidly rising incomes, and increasingly global outlook, India is emerging as a key growth market for beverage alcohol brands in the years to come, according to IWSR data.
The country, along with Mexico and Brazil, is poised to lead the next wave of global growth, shifting the axis from traditional markets like the US and China.
Shifting the Global Growth Axis
India’s significance in the global beverage alcohol industry is growing. From 2021 to 2022, the country accounted for one-third of all global total beverage alcohol (TBA) volume growth. This was driven by the nearly complete recovery of the beer market and significant growth in spirits. Consumers are increasingly trading up within whisky, and similar trends are starting to emerge in categories like brandy, rum, vodka, and gin. Over the next five years, India is projected to be a major volume driver for TBA, replacing the US and China as key growth markets.
Although China’s TBA volume is expected to remain flat from 2022 to 2027, the country, along with the US, will continue to be critical value drivers. China’s TBA value is forecast to grow by USD 41.7 billion during this period. However, India’s rapid growth trajectory indicates it could soon challenge China, though it will take time before it matches China’s scale.
Premiumisation Gains Momentum
India’s growing middle class, increasing disposable incomes, and post-pandemic market recovery have fueled a wave of premiumisation across beverage alcohol categories. Jason Holway, a market analyst at IWSR, notes that higher-quality products are now widely available, and consumers are willing to pay more for better options.
“Momentum is trending positively across drinks categories, with brown spirits performing particularly well,” Holway explains. “Consumers are trading up, notably in sparkling wine, whisky, and agave-based spirits.”
Imported Scotch whisky, especially bottled Scotch, has seen the most dramatic rise in premiumisation. Since the turn of the century, Scotch sales volumes in India have multiplied by 20 times. From 2020 to 2022 alone, sales nearly doubled, driven by demand for premium and super-premium single malts. IWSR consumer data from late 2022 supports this trend, with 37% of consumers in Kolkata purchasing more expensive bottles of Scotch. This trading-up trend extends beyond whisky, with 28% of Mumbai consumers drinking more wine than the previous year.
Premiumisation is also evident in other spirits categories. Gin, rum, and Tequila have all consolidated gains made during the pandemic. Around 30% of consumers in Mumbai now drink gin or rum weekly, while 24% are drinking more Tequila. This is supported by a growing number of high-end cocktail bars, once limited to Delhi and Mumbai, now expanding to other urban centers.
Evolving Consumption Patterns
Indian consumers are showing a preference for higher-quality experiences when dining and drinking out. According to a February 2023 survey, 60% of Indian alcohol consumers prioritized “having the best of everything” over cost-saving measures when dining out. This willingness to spend is a reflection of changing post-pandemic habits. As Abhishek Khaitan, managing director of Radico Khaitan, observes, “During Covid, people developed a taste for superior products while at home, and that habit has persisted.”
Holway points out that, while imported alcohol brands hold strong appeal in India, domestic brands are quickly gaining traction. Indian consumers, especially younger adults, are now recognizing and taking pride in locally-made premium products. This shift is creating a “twin-track momentum” where both imported and domestic premium brands are thriving. Sales of imported spirit brands have doubled in the last two years, while domestic Indian Made Foreign Liquor (IMFL) whisky sales at premium price points have tripled.
The Impact of UK-India Trade Relations
A free trade agreement (FTA) between the UK and India could further fuel the demand for imported spirits, particularly Scotch whisky, by reducing tariffs. However, the negotiations are complicated by various factors, including the need to respect Australia’s Most Favoured Nation status, state-level variations in taxes, and different classifications of imported Scotch.
Despite the complexities, an FTA could boost the market for bottled-in-Scotland (BIO) Scotch, which is popular in India. Nevertheless, India's complex regulatory environment, with each state operating under different rules, continues to pose challenges for both local and international brands.
India’s Rise, China’s Challenges
While India is poised for rapid growth, China is facing a more nuanced landscape. IWSR’s research director Shirley Zhu notes that premiumisation is still occurring in China, particularly in locally-produced premium wines and high-end baijiu, but the market is evolving. The craze for high-age-statement Scotch and Japanese whiskies has cooled, and consumers are becoming more price-sensitive.
In the wake of the pandemic, China’s recovery has been slower than expected, with consumers cautiously rebuilding their confidence to spend. Despite this, the premiumisation trend persists, especially in categories like craft beer, which continues to gain popularity among younger consumers.
Conclusion
India’s beverage alcohol market is entering an exciting phase, with both domestic and international brands standing to benefit from the country’s rapid economic growth and evolving consumer preferences. While China remains a key value driver, India’s expanding middle class, rising incomes, and increasing openness to new experiences make it a market to watch closely in the years ahead. The twin forces of premiumisation and growing brand awareness, coupled with potential trade deals, could help propel India into the spotlight as a global leader in the beverage alcohol industry.
Source: IWSR