Indian spirits market braces for a mixed bag in 2024, smaller cos may sparkle

: The Indian spirits market, which navigated through a complex year due to tax hikes, state elections, and policy shifts in 2023, is expected to see a flat growth in 2024. While major players are likely to find solace in the premium segment, smaller regional companies are poised to steal the spotlight with faster growth compared with their larger counterparts.

The hangover from 2023 challenges could linger amid sharp tax increases in states like Karnataka and the dampening effect of elections across nine states. Despite an initial surge in Punjab following a new excise policy, the market has now hit a plateau. The impact of the festive season remains to be fully realised, with analysts expecting a tepid 5 6% growth Smaller brands could brew growth, while giants might focus on "value up trading" and pushing premium options.

The real action is expected to come from smaller regional players. Spirits consultancy IWSR forecasts a 4% volume growth for the entire segment. However, this outpaces the 1% growth across the globe. The Indian beer and wine markets are expected to grow 3% and 10%, respectively, till 2027. Affordability, improved retail experiences, and increased experimentation with new products are driving cautious optimism in the market.

The growing comfort of younger consumers in public drinking spaces could add as a key factor of growth, said Jason Holway, senior market analyst at drinks consultancy IWSR. In 2022, spirits volumes climbed 2%, beer rose by 38%, RTDs surged 40% and wine increased by 19%, according to IWSR figures; and, in all cases, value rose ahead of volume.

Smaller companies are not out of the game though. Vinod Giri, ddirector general of industry body Confederation of Indian Alcoholic Beverage Companies (CIABC), said growth projections should include the contributions of smaller and newer players, who are expected to play a significant role in 2024. “To begin with, 2022 was a great year for the industry with a sales growth of 14% and hence some natural calming down was seen in 2023.

Furthermore, steep tax rise and price increase in a major market like Karnataka, and elections in nine states in 2023 did disrupt the market. Taking all these in to consideration we expect the market to grow by around 5 6% this year. Of course a lot depends on how the current festive season pans out," he said.

Smaller regional players are seen as a driving force behind this growth. Giri estimates that mid sized and smaller companies will see 5 6% growth over the next five years, largely driven by mid sized and smaller companies. For example, NeuWorld Spirits, a New Delhi based company launched in 2022, expects growth in its premium spirits portfolio.

The company owned by TRDP Group makes Mario biscuits and Raj Niwas pan masala expects that in the coming fiscal year FY25, its premium spirits portfolio of IMFL whisky, rum and vodka should have an average growth of around 25 30%, said Poonam Chandel, the company's managing director. While India's spirit consumption pales in comparison to global averages, it is the largest consumer of brown spirits like whisky.

Rising incomes, increased awareness, and a plethora of new product choices are leading to a shift in consumer behavior. "The industry can offer much more and consumers want much more as well. This growing appetite for experimentation could translate into a brighter future for the Indian spirits market, beyond the projected flatline of 2024," Giri said.

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