Indian whiskey brands have an opportunity to move up the ladder
Dr Lalit Khaitan, Chairman and Managing Director, Radico Khaitan Limited believes India is a price-sensitive country and IMFL, being cost effective, is immensely popular among liquor consumers in India. Additionally, the ‘Vocal for Local’ campaign will give Indian whiskey companies/brands an opportunity to revolutionise the space as they can take calculated steps by understanding better the post–COVID market as well as the Indian consumers’ palette and pocket
IBT: What is the total market size by segment for different alcohols in India and growth drivers for the market? How have supply and demand forces been impacted by the pandemic?
Dr Lalit Khaitan: According to Euromonitor International, during CY 2019, overall IMFL volumes increased to 335 million cases of 9 litres each. Primarily comprising whiskey, vodka, rum and brandy, IMFL sales volume is expected to recover sharply and grow at a CAGR of 5.9% during the CY 2020-24. During the same period, IMFL industry value is expected to grow by 5.7%. However, liquor industry body Confederation of Indian Alcoholic Beverage Companies (CIABC) said in April 2020 that there will be a 12-15% decline in overall hard spirits sales due to impact on consumer earnings and social distancing norms owing to the Coronavirus pandemic.
The young population base and its ever-rising consumption pattern is the primary reason for the growing demand of alcoholic beverages in the country. India is also demographically one of the youngest in the world with around 50% of its population below the age of 25 and around 65% below the age of 35. Since a majority of the alcohol volume is consumed by people between the ages of 18-40 years in the country, these demographic statistics are expected to drive growth of the alcoholic beverages market.
Another prominent factor, which has contributed to the huge market size is that over the past few years, there has been a tremendous change in lifestyles leading to alcohol consumption being more socially acceptable. India has witnessed a 55% rise in alcohol consumption over 2 decades (from 1992-2012), revealed a study by Paris-based Organization for Economic Cooperation and Development (OECD).
One of the significant factors to the growth is also the rising affluence of India’s middle class. With rising aspiration levels and increasing disposable incomes, this group of consumers is upgrading to premium segments, which are fast growing. The middle class is emerging in India and premiumisation is happening, which translates into industry uptick. Also, the accelerated growth of the liquor industry in India could also be attributed to the increased consumption of alcohol among women.
IBT: What makes India the largest consumer of whiskey in the world? Why is Indian Made Foreign Liquor (IMFL) so popular in the domestic market in comparison to scotch?
Dr Lalit Khaitan: India is a price-sensitive country and IMFL, being cost effective, is immensely popular among liquor consumers in India. Contributing almost 60% of sales volumes to the IMFL segment, whiskey undoubtedly dominates the Indian spirits industry. However, people’s preferences are slowly evolving and the pattern of alcohol consumption is also changing in the country, with Indians wanting to consume varied and quality spirits. People in the country are now developing a taste for scotch as well, but for it to be accepted as a go-to drink by a majority of alcohol consumers is unlikely at present.
Moreover, with Prime Minister Narendra Modi’s ‘Vocal for Local’ campaign, it is certain that IMFL will continue to witness higher demand with home grown brands having a definite edge over international ones in the Indian market.
With all the demographic changes in the market, several Indian brands have attempted to bring about a change with fresh and unique approaches to manufacturing, packaging, and marketing in the last decade. One such example is the success of Radico Khaitan’s Rampur Indian Single Malt Whisky and Jaisalmer Indian Craft Gin. These brands have had a runaway success in both Indian as well as international markets. It is a true testament to the world class quality and state-of-the-art packaging that they were awarded the most prestigious ranks including Double Gold at San Francisco World Wine & Spirits Awards 2017 (Rampur), Gold Medal at Monde Selection Belgium 2017 (Rampur), Best Gin Gold Medal 2020 by The Fifty Best, USA (Jaisalmer) and Best in Asia 2019 by The Gin Guide Awards, UK (Jaisalmer).
IBT: Origin whiskies like bourbon and Scotch have made a strong mark in the international market. What are the key factors behind their success and firmly established premium value proposition in the market?
Dr Lalit Khaitan: According to the Scotch Whisky Association, every second, 42 bottles of Scotch whiskey are shipped to 172 countries. That is how popular Scotch is! With its rich history, taste and culture, Scotch has always ruled the charts in the international market. People in most parts of the world are exposed to the authentic taste and explicit flavour of Scotch and nothing matches the quality of this traditional drink, which is in existence for the longest time now. Scotch has an exceptional appeal, especially with its strong sense of identity that dates back centuries.
According to IWSR Drinks Market Analysis, in 2015 almost a quarter (22.6%) of American Scotch whiskey drinkers were aged over 65 years, making them the largest age demographic for the category. However, there was a sudden change witnessed in the consumer category and by 2018, the biggest age group among Scotch consumers in the US were those between 25 and 34 years. This sudden turning point was majorly due to flavour innovation and positioning.
Aging makes Bourbon and Scotch what they are. As it goes in and out of the wooden casks, the liquid absorbs a lion’s share of the flavor. During the aging process, evaporation of the liquid accounts for about 4% a year, popularly known as ‘angel’s share’. What’s left behind over a period of time is more concentrated; woody flavors, the sweetness and all the things that makes a good bourbon and scotch. Without the aging, it is just a sharp, clear, grain-based spirit. The loss in volume and hence the rarity that this causes is a major factor that makes these products high valued.
IBT: What can be done to enhance the export potential of Indian whiskeys? What are the unique origin characteristics of Indian whiskies that set them apart in the international market? How can they be branded better as a GI?
Dr Lalit Khaitan: Indian whiskey is being received extremely well in the domestic as well as the international market. Indian brands are also making single malts now, which have a huge demand in the international market. Single malt is regarded as the finest of the lot; so it’s just a matter of time that Indian whiskeys start enjoying a good demand abroad as export has already started. At present, the key markets in terms of highest export are Europe, US and UK.
India’s climate offers a speedy maturation. This trait accelerates the ageing process thus, Indian whiskies tend to be much younger than their Gaelic counterparts. There is no strict definition of whiskey in India and it is often broadly conceptualised. Traditionally, in India, majority of whiskey brands were a spirit distilled from molasses but the trend of grain based whiskey is picking up pace and growing exponentially marking a huge success in domestic as well as in International market.
In case of Indian whiskies, it is not only the blend and price factor that are the selling points but also the entire look and feel of it – including the packaging and designing. India can export only grain-based whiskies and in the last 2 decades, it is moving towards higher consumption of grain based Premium Whiskies which is corroborated by the growth rate of the premium segment in the country. With this evolving trend, the potential for exports of Indian whiskies – with a combination of blend and superior packaging is getting accepted more and more.
IBT: How well are Indian whiskey brands competing with Scotch in the domestic market?
Dr Lalit Khaitan: India is among the top 3 consumers of alcoholic beverages and we cater to a large population within our country itself. We are getting into the business of Indian Single Malt which is likely to give a cut-throat competition to scotch for consumers of that segment and category. Moreover, the Indian consumer is evolving and they love to experiment and prefer varieties over the age-old consumption pattern.
Liquor consumers are spoilt for choice with the introduction, experimentation and reinvention of various flavours and forms, particularly in the premium segment with superior blends and packaging that compare with international standards. Drinkers (mostly the youth) are not limiting themselves to consuming liquor in the the old-style and are not wary of trying something new and that is keeping the business going.
This is the only reason that the Indian IMFL market is growing at a health rate compared to the global market and this is even more exemplified by the double digit growth of the premium segments.
IBT: Given the challenges posed by the pandemic scenario, how are leading players responding to the evolving business environment?
Dr Lalit Khaitan: Since COVID has impacted every sector and business globally, marketing strategies will be worked upon from a totally different point of view, keeping in mind the new normal scenario. Business dynamics have changed over the last few months and so has the consumer spending pattern. The focus will now be in line with the current market trends and how much and how frequently people are willing to spend on liquor; so different SKUs are likely to come into place depending upon the category and segment.
Another paradigm shift that is proving to be revolutionary in this time for the industry is the the adoption of digitalisation. As the world is moving towards digitalisation, the otherwise conventional liquor industry is also reinventing itself with digitised processes and operations for smooth running of businesses.
IBT: How can foreign brands/firms be encouraged to set up independent factories or joint ventures with Indian brands?
Dr Lalit Khaitan: India has always welcomed foreign brands with open arms as it is a business-friendly country and gives equal opportunity to its friends from across the globe, as much as it loves to explore opportunities in the international market. The validation of this comes from the success trajectories of foreign companies in the country. However, with the PM’s Made-in-India push amid the pandemic, Indian companies will now have an edge in terms of moving up the ladder on quality and product offerings with greater choice to the Indian consumer.
Additionally, the ‘Vocal for Local’ campaign will give Indian companies/brands an opportunity to revolutionise the space as they can take calculated steps by understanding better the post–COVID market as well as the Indian consumers’ palette and pocket, since people are now looking for value for money for quality spirits due to the impact on earnings as a result of the pandemic.
A veteran with over 50 years of experience, Dr. Lalit Khaitan is one of the pioneers in the Indian spirits industry. He provides the overall strategic direction to Radico Khaitan. He has been instrumental in improving quality standards and enhancing customer satisfaction, leading to substantial revenue growth and increased market shares. In the process, he has succeeded in transforming Radico Khaitan from a bottler to a leading IMFL player in India. His unique management style has helped maintain Radico as an ethical and transparent organisation with highest corporate governance standards.
Dr. Khaitan has been widely recognised for his contribution to the liquor industry. He has been associated with a number of developmental projects, has represented India with several international delegations, and is involved in social & educational activities across India. He is currently:
Chairman, U.P. Committee of PHD Chamber of Commerce and Industry
Senior Member, Managing Committee, ASSOCHAM
Member, Managing Committee, All India Distillers Association
Member, Managing Committee, U.P. Distillers Association
Member of the Standing Committee of PHD Chamber
Chairman, Northern Region Development Council, ASSOCHAM
He has received the lifetime achievement award from the Confederation of Indian Alcoholic Beverage Companies in 2005 and by Alcobev in 2008. Most recently he has been awarded the ‘Legend of the Industry’ at Spiritz 2014.