{"id":20622,"date":"2024-04-02T12:49:38","date_gmt":"2024-04-02T07:19:38","guid":{"rendered":"https:\/\/www.moneyworks4me.com\/investmentshastra\/?p=20622"},"modified":"2024-04-30T14:43:10","modified_gmt":"2024-04-30T09:13:10","slug":"exploring-indias-alcohol-industry","status":"publish","type":"post","link":"https:\/\/www.moneyworks4me.com\/investmentshastra\/exploring-indias-alcohol-industry\/","title":{"rendered":"Inside the Bottle: Exploring India’s Alcohol Industry"},"content":{"rendered":"

India is the third largest and one of the fastest growing alcoholic beverages markets globally. This growth is attributed to various factors, including rapid urbanisation, evolving consumer preferences, a burgeoning middle-class population with increased purchasing power and a more aware younger consumer profile. While there have been challenges with respect to supply chains and inflation, the industry is capitalising on the opportunities that are emerging. In this blog, we’ll dive into the present state of the Indian liquor industry, evaluate its potential for growth, look at its advantages and disadvantages, and explore the major companies influencing its path.<\/p>\n

The Indian Alcobev industry<\/a> is segmented into IMFL (Indian Made Foreign Liquor), IMIL (Indian Made Indian Liquor), Wine, Beer and imported alcohol. Whiskey dominates the Indian spirits industry by a very wide margin. Alcohol consumption is divided in three major product categories including spirits, beer and wine.<\/p>\n

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Industry Tailwinds  <\/strong><\/h2>\n

India is one of the fastest growing alcohol markets among the top economies in the world. Growth in urban population coupled with the increasing disposable income is projected to propel the market growth of alcohol. The recorded per capita consumption of pure alcohol in India has moved from 0.9 liter in 2000 to 3 liter in 2015 at a CAGR of more than 8%. India\u2019s percentage of drinking population is projected to be close to ~33% in FY 2021 and 39% in 2025.Volumes are dominated by spirit but wine is showing high growth rate.<\/p>\n

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Source: Sula DRHP<\/p>\n

Change in demographics as well as the change in lifestyle is another major factor expected to foster the market of alcohol. The legal drinking age in India varies from state to state (from 18 years to 25 years), further indicate that India is ideal for the high growth of the alcohol market. Both domestic and international players are vying for a larger slice of the pie. From traditional spirits like whiskey and rum to emerging segments such as craft beer and premium spirits, the industry showcases a remarkable diversity that caters to a wide spectrum of consumers.<\/p>\n

Key Players & their Financial Performance<\/strong><\/h2>\n

The liquor industry presents significant entry barriers, as companies must navigate through numerous regulatory requirements before they can begin selling alcohol.<\/p>\n

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Source: Sula DRHP<\/p>\n

United Spirit Limited<\/u><\/strong><\/h3>\n

Diageo India incorporated in India as United Spirits Ltd<\/a> (USL) is the country\u2019s leading beverage alcohol<\/u> company and a subsidiary of global leader Diageo PLC. The company manufactures, sells, and distributes a wide portfolio of premium brands such as Johnnie Walker, Black Dog, Black & White, VAT 69, Antiquity, Signature, Royal Challenge, McDowell\u2019s No.1, Smirnoff and Captain Morgan. Despite having strong brands and being present in India for a decade united spirit has shown stagnant growth in revenue and profit.<\/p>\n

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Over the past ten years, the USL has barely managed to generate returns that meet its cost of capital.<\/p>\n

Check out the 10 Year Xray<\/a><\/p>\n

United Breweries Limited<\/u><\/strong><\/h3>\n

United Breweries Limited<\/a> (UBL) is engaged in the business of manufacture and sale of beer and non-alcoholic beverages. <\/u>The Company markets its products under the flagship brands Kingfisher and Heineken. Some of the most popular brands in its portfolio include Kingfisher Premium, Kingfisher Ultra, Kingfisher Strong, Kingfisher Ultra Max, UB Export Lager, London Pilsner etc. The Company has a market share of 54% in the Indian beer market as of March 2022.<\/p>\n

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UBL is also facing challenges in maintaining a consistent Return on Equity over an extended period.<\/p>\n

Check out the 10 Year Xray<\/a><\/p>\n

Radico Khaitan<\/u><\/strong><\/h3>\n

Incorporated in the year 1943, Radico Khaitan<\/a> is one of the most recognised IMFL (Indian Made Foreign Liquor) brands in India. The company was initially known as Rampur Distillery Company and was focussed on distillation and bottling for branded players and canteen stores of armed forces. Some of the most popular brands in its portfolio include 8PM Whisky, Contessa Rum, Jaisalmer Indian Craft Gin, Magic Moments Vodka, Magic Moments Dazzle Vodka (Gold & Silver), Magic Moments Verve Vodka etc. Magic Moments leads the vodka Industry in India with over 58% market share whereas Morphues Brandy leads the premium brandy category with over 56% market share.<\/p>\n

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Check out the 10 Year Xray<\/a><\/p>\n

Sula Vineyards<\/u><\/strong><\/h3>\n

Incorporated in 2003, Sula Vineyards Limited<\/a> is India’s largest wine producer and seller. The company distributes wines under a bouquet of popular brands including RASA, Dindori, The source, Satori, Madera & Dia with its flagship brand “Sula” being the category creator<\/em><\/strong> of wine in India.<\/p>\n

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Check out the 10 Year Xray<\/a><\/p>\n

Industry Headwinds<\/em><\/strong><\/h2>\n

Even with favourable conditions, key industry players are finding it difficult to increase their revenue and cover their cost of capital due to tight controls on alcohol consumption and distribution, along with stringent regulations.<\/p>\n