Impact of highway ban fades as liquor sales grow
After two consecutive years of decline, liquor sales in the country grew in double digits in 2018, the most since 2012, helped by the fading impact of a highway ban and increased stability following distribution changes in some states. Sales volumes of so-called Indian-Made Foreign Liquor (IMFL) rose 10% to 359 million cases, with demand increasing for all key segments — whisky, brandy, rum and vodka, industry executives said, citing excise department data.
The market had fallen 3% to 328 million cases in 2017, the worst year in more than a decade. India had seen a compounded annual growth rate of more than 12% during 2001-10.
IMFL brands such as Royal Stag, McDowell and Officer’s Choice account for over 70% of the market.
“The fact is that we are seeing a better industry growth than we have seen in the past. The comparatives have been a little soft because there have been regulatory issues and regulatory changes,” United Spirits managing director Anand Kripalu said during an investor call for December quarter earnings.
Supreme Court restrictions in 2017 on the sale of alcohol near state and national highways led to the closure of about a third or about 30,000 of the country’s liquor vends, causing a drop in demand for beer and spirits. The court subsequently clarified its ruling, easing conditions for liquor sales and allowing many outlets to reopen. However, since 2016, Kerala, Bihar and Tamil Nadu — which account for 20% of the country’s alcohol consumption — have put in place varying degrees of prohibition.
Apart from this, policy changes in West Bengal, Chhattisgarh and Jharkhand to allow liquor sales only through government-owned corporations, similar to states such as Delhi, Rajasthan, Kerala and Tamil Nadu, had added to the uncertainty.
Companies said premium products drove overall market growth — deluxe and above segments grew 19% while that of regular and below expanded 4%. United Spirits and Pernod Ricard get over 65% of sales from semi-premium and above segments now. “The volume contribution of the deluxe and above segments has reached an all-time high of 41%, indicating that rising consumer aspiration is resulting in consumers seeking better value from their choice of beverage,” said Ahmed Rahimtoola, marketing head at Allied Blenders, which sells Officers Choice, the world’s largest spirits brand.
A recent report by Nirmal Bang said the sector witnessed a sharp slowdown from growth in the “high teens” to as low as 4% during FY12-17 but it expects this trend to reverse.
“The sector, along with overall consumption trends, witnessed a somewhat stable trend in FY18 and a sharp improvement in FY19,” it said. “As argued earlier, we expect revenue trend for the sector to remain on a strong wicket and on overall basis we expect it to outperform food, tobacco and home and personal care by about 200-400 basis points during FY18-FY21.”