Analysis

just the Facts - Diageo and India

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Earlier today (25 September), Diageo confirmed that it is seeking to buy a stake in UB Group's United Spirits division in India. Here's a look at the Indian alcoholic drinks landscape and Diageo's current position in it.

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India

  • India is a young country and is getting younger every year: More than 60% of the population is below 30 years of age
  • The emerging middle class – which accounts for around 13% of the population - is projected to increase to more than 60% of the population in the next 15 years due to the rapid growth in income
  • Around 19m new consumers enter Legal Drinking Age (LDA) every year and 4.3m of those are entering the Total Beverage Alcohol (TBA) category
  • For Diageo, the relevant base of urban consumers entering LDA is 1.4m per year. This is forecast to grow substantially over the next ten years
  • The Indian branded spirits market has grown at a rate of over 20% since 2005 to reach around GBP2.7bn (US$4.38bn) last year
  • The country's TBA market is expected to grow at a 10% CAGR for the next five years
  • The domestic spirits market is dominated by locally-produced brands in the following categories: Whisky (60%), rum (20%) and brandy (15%). Scotch whisky contributes to about 1% of the overall spirits market, while imported vodka accounts for about 3%

Diageo in India

  • The company sells around 1m cases of spirits per year in India
  • It has approximately 300 employees
  • According to 2010 data from The IWSR, Diageo's market share of Scotch whisky in India stands at 27%. Combined with travel retail in the country, that share is 32%. Smirnoff accounts for 10% of the total vodka market
  • Scotch and vodka are the fastest growing spirits categories in India, driven by the rises in both disposable incomes and LDA+ consumers
  • Diageo's presence in Scotch in India is led by Johnnie Walker Blue, Gold and Malts in the 'super deluxe' sub-segment, Johnnie Walker Black Label in the 'deluxe' sub-segment, Johnnie Walker Red Label in the 'standard Scotch' sub-segment and VAT69, Black and White and Haig in the 'secondary Scotch' sub-segment
  • The company is positioning its Reserve Brands portfolio – including Johnnie Walker Gold Label, Blue Label and Talisker Scotches and Cîroc and Ketel One vodkas – to benefit from the rise of the emerging middle class

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