Few events encapsulate the rich culture, history and heritage of the Indian subcontinent as colourfully as Diwali – the Hindu festival of lights that has transcended its religious/mythical origins and become a global phenomenon.
Diwali’s origins lie in the universal gratitude of people for another year’s harvest but its spiritual significance goes way beyond agricultural concerns, representing the triumph of light over darkness, knowledge over ignorance and good over evil. And you don’t need to be a Hindu to appreciate the value of those ideals in late 2023.
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Diwali will be marked on every continent over the next couple of weeks, and the colourful celebrations are also testimony to the increasing influence of India – culturally, politically and economically – in the modern world. For some drinks companies – long attracted by the potential of such a vast market – there’s a sense that India’s moment has arrived.
The reasons for such widespread optimism are well enough known: famously, India overtook China as the world’s most populous country in April this year but the demographic detail is even more promising than that stat suggests. Compared to China and western nations, India’s much younger median age, and its fast-growing working (and drinking) population, mark it out as a potential paradise for consumer goods businesses.
This is redoubled when you consider the vast numbers of Indian consumers predicted to join the country’s ‘middle classes’ in the years ahead, with their ever-expanding disposable incomes; fertile ground for brands of every ilk, from food retail to lifestyle brands, sporting goods companies to cosmetics firms.
But India is not some kind of repeat of the China of 20 years ago. While the luxury sector is poised for strong growth in the years ahead, it’s unlikely to acquire the same kind of scale, at least in the short to medium term. Then again – as the downturn in China following the corruption crackdown of the early 2010s illustrated – there’s something to be said for steady, unspectacular growth over the kind of ‘bubble’ that characterised Shanghai and Beijing in the early post-millennium years.
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By GlobalDataIndia has one other huge advantage over just about every other developing market on the planet: a good knowledge of – and close affiliation with – established western beverage alcohol categories. Beer, whisky, brandy, rum and, increasingly, gin and vodka are already huge parts of India’s drinks scene.
Westerners may sniff at IMFL ‘whiskies’ derived from molasses and teaspooned with Scotch, but there’s a benefit even from such ersatz products: you don’t need to explain and educate in order for your brand to gain consumer acceptance because people already have some understanding of what your product is and how to drink it.
India’s spirits market can present headaches…
There are considerable caveats, of course. Large swathes of the Indian population don’t drink at all – and some states are altogether ‘dry’ – and, even if all the rosiest economic forecasts prove correct, there will still be millions who can afford nothing more than the country liquor that still dominates the low-priced alcohol market in India today.
Then there are the financial and regulatory hurdles, and they’re considerable. Not only the crippling import tariffs and state-level taxes but the huge complications of negotiating such a fragmented and diverse marketplace where even the minimum age when you can buy alcohol varies from 18 to 25.
Free trade agreements of the type being negotiated (and, boy, is it taking some time) between the UK and India will help to reduce some of the barriers but the country remains one where the relationship between booze and the state is an uneasy one.
Alcohol is a huge source of revenue for local government coffers, and as such it can become highly politicised, especially when elections are beckoning. Anyone unsure of the challenges that all of this entails need only look at the travails that Pernod Ricard – a company, let’s not forget, with long experience of operating in India – has endured over the past year.
… but the longer-term rewards are clear
Yes, there are complications and challenges but the rewards are there for those who can work hard and smartly enough to exploit them. The long-term prognosis for India and beverage alcohol remains emphatically positive both for domestic and overseas players.
Competition will be fierce. In the past, some western drinks companies have been rather snooty about their Indian rivals – viewing them simply as purveyors of cheap hooch to an unquestioning consumer base governed by price rather than quality.
Anyone who has tasted any of the products from the new generation of quality Indian spirits – Radico Khaitan’s Rampur single malts, or Paul John from John Distilleries – will know that these are keen rivals for Scotch, Bourbon and Irish whiskey. And there’s a ceaseless conveyor belt of new releases, both from these companies and from a clutch of other distilleries springing up all over the country. There’s quality vodka, gin, rum and brandy – even agave spirit that offers a local take on the Tequila boom.
It’s a market that’s as dynamic and fast-moving as it is huge, complex and fragmented, and it offers a fascinating set of challenges for drinks companies in the years ahead. But those challenges shouldn’t be confined to the obvious need to build sales and brand awareness of western products in the marketplace; the smartest overseas businesses will surely look to establish their own, quality-focused production bases within the country itself.
Set up in a similar way to Diageo’s and Pernod Ricard’s whisky distilleries in China, with Eryuan and The Chuan respectively, these ventures should not be western operations parachuted in, but wholly Indian concerns aimed, primarily, to meet the demands of the local market.
In this way, companies can tap into the potential of this vast, complex and culturally rich country, while remaining in tune with the pride that consumers feel in enjoying high-quality ‘made in India’ products – whether that’s beer, wine, whisky, rum, brandy, gin or vodka. Like Diwali, India’s beverage alcohol scene in the years ahead is poised to be bright, rich and comprising a rainbow of colours – and opportunities.
Related Company Profiles
Diageo Plc
Pernod Ricard SA
Radico Khaitan Ltd