Drinks industry eyes India as the next China

India is one of the fastest-growing markets for drinks companies, with the premiumisation trend rapidly gathering momentum. While the drinks industry has previously focused on opportunities in China, its attention is increasingly being drawn to the lucrative proposition offered in India.  

Australian winemakers and brewers are among those keenly eyeing the market’s potential alongside global giants.

Data from Statista shows that in 2022 alcoholic drinks generated $US47,500 million in revenue in India, with the market forecast to grow by 8.86% per year (CAGR 2022–2025),

The Indian Council for Research on International Economic Relations has predicted that by 2030, 26% of Indian drinkers will trade up to higher-end brands, and 24% will migrate to different alcohol categories

The opportunity for the drinks industry in India has also been highlighted by a new IWSR report that explores the potential impact of India’s population overtaking China this year.

China’s population fell in 2022 for the first time since 1961. Data published by the National Bureau of Statistics of China showed the population of mainland China dropped by 850,000 in 2022, compared with 2021, to 1.412bn. UN statistics report that China’s population will be overtaken by India’s in 2023, and will continue on a declining trajectory going forward.

IWSR data shows China accounted for a fifth of worldwide alcohol volume consumption in 2021 and more than a quarter of value sales. The value of the market has jumped by over three-quarters to more than $300 billion in just a decade. During that time, IWSR data shows that premium-and-above wines and spirits have evolved from commanding just 5% share of China’s total wine & spirits market to 16%.

Pernod Ricard chairman Alexandre Ricard believes most of the alcoholic beverages industry growth in the next decade will be driven by India and China. Pernod Ricard expanded sales of its spirits by 25% in 2021, according to IWSR data.

“The legal drinking age population is growing on average by 20 million people a year with good GDP growth and strong urbanisation rates, which is the perfect cocktail for our spirits category,” Ricard told investors at the company’s 2022 Capital Market Day.

“International brands business growth is booming in India, on the penetration and the rising young middle-class affluent consumers. The kind of growth that India is seeing for international brands, it has never ever been seen before,” added Rajesh Mishra, chief operating officer, Pernod Ricard India.

This demand is driving a thriving bar scene in cities such as Delhi, with venues such as Sidecar (above) making it onto World’s 50 Best Bars list. 

Australian Vintage Limited chief executive Craig Garvin believes India, with a population of more than 1.4 billion and growing middle and wealthy classes, will be a $290 million export market for Australian wine within five years.

The company is currently working with local partners and making contacts. Garvin will also fly there in February to meet with potential distribution partners with an eye to cracking the Indian market.

“From there I’d like to think that we’ve got some relationships established in the next six months of which we then start longer term [distribution efforts],” he told the Sydney Morning Herald.

Australian Vintage is one of an increasing number of Australian wine companies turning to India as a potential market to replace China, which imposed of heavy tariffs on Australian wine in late 2020. About 800 Australia wine exporters affected, with the Chinese market shrinking by about 97%. Before tariffs were imposed, China was the largest export market for Australian winemakers, with sales passing $1.2 billion a year.

Despite having the world’s third largest alcoholic beverage market, wine is a relatively new category in India. It currently accounts for just 1 per cent of alcohol sales in India, with spirits and beer dominating the market.

IWSR reports that longer-term pre-pandemic trends show wine becoming more approachable and acceptable in Indian society.

“In both TV and film, young and discerning characters are drinking wine, most importantly without food, beginning to break a connection in many consumers’ minds,” reports IWSR research analyst Jason Holway. “These characters are both male and female, subtly questioning the conventional view that wine is more of a woman’s drink.”

The biggest brand currently in India is Pernod Ricard’s Jacobs Creek, which entered the market 21 years ago.

“In the past year, we’ve actually grown at 118%,” said Helen Strachan.

Australian Vintage will focus on two cities initially – Mumbai and Delhi – which have populations of 21.3 million and 43.3 million respectively.

“You don’t need to conquer the whole of China or the whole of India … in Mumbai, in Delhi, there’s a million millionaires,” Garvin (above) said.

Affluent segment drives China sales

However, premiumisation in the Chinese market still gives it a distinct advantage for drinks companies. The performance of the economy and the subsequent development of the urban upper-middle class adult population have turbocharged growth.

This population segment grew by an estimated 22 million people between 2019 and 2022, according to IWSR data, and has the most impact on the value growth of the country’s drinks industry. Within the wine category, for example, 30% of the urban upper-middle class imported wine drinkers are young affluent ‘engaged explorers’ and ‘status seekers’. These segments account for more than 60% of the spend in China.

“Demographics, by their nature, are quite slow-moving metrics,” notes Richard Halstead, COO Consumer Insights, IWSR Drinks Market Analysis.

Halstead refers to data from the United Nations to reinforce his point: China’s working age population will remain at around 1 billion for the remainder of this decade, and will remain above 900 million until the 2040s. In 2030, the largest single five-year age cohort will be those between the ages of 40 and 45.

“This age bracket typically aligns with the peak earning years – a positive sign amidst the news of China’s declining population,” Halstead adds.

Shirley Zhu, IWSR’S Research Director for Greater China, remains optimistic that there are “still opportunities in China, even if the ‘demographic dividends’ are disappearing”. This optimism is supported by the fact that incomes are still rising, especially in Central and Western China, and the fact that household savings went up in 2022.

India presents long-term opportunity

With China a closed door to Australian exporters, wine companies are working to cut a slice of the Indian wine market, which is projected to grow by 8% per annum to 2024.

In 2021, Australia was India’s largest source of wine imports, with Australian exports increasing by 81% on the previous year.

Between September 2021 and September 2022, Australian wine producers exported 3.6 million litres of wine to India at a total value of $16.2 million. The market is dominated by still reds followed by still whites with shiraz blends, chardonnay and shiraz most popular, respectively.

Fourth Wave Wine is one Australian exporter with strong ambitions for growth within the Asia region, and establishing a presence in India is key to those ambitions.

In 2022, the Newcastle-based company launched its Elephant in the Room pinot noir and chardonnay in India, trialling a smaller 375ml bottle to cater to lower consumption rates. The price was targeted at customers looking for an affordable alternative to high-end varieties.

Peter Ham, Asia Export Manager for Fourth Wave Wine, said Australia’s early position as India’s key exporter provided a unique opportunity to grow with the market.

“One or two Australian wine brands have paved the way for Australian wines in the Indian market, and there is an opportunity for innovative Australian brands to consolidate Australia’s position as the leading imported category in India,” said Ham.

“Wine consumption rates are still very low per capita, but given the size of the population, India certainly represents a good opportunity in the future as more consumers enter the wine category.”

Coopers enters Indian beer market

Coopers is a pioneer in the Indian beer market, following the South Australian brewery securing a new distributor.

Austrade introduced Coopers to VBev, which is one of India’s largest importers and distributors of wine, spirits and beer. Coopers had previously made a limited foray into India in 2008, focusing on the hotel channel.

“Coopers is the only Australian craft beer in the Indian market,” said John Southwell, Trade and Investment Commissioner, Austrade India.

“VBev’s nationwide network means Coopers’ craft beers will become more widely available to Indian consumers.

“There are not many imported craft beers as many international beer brands have set up their own breweries in India. We expect Coopers beers to do well in India, especially in states where there is less tax on beer.”

Beer accounts for a third of the Indian alcoholic beverages market, in volume terms. Euromonitor projects the total volume of beer will increase at a 6% CAGR to reach 2.9 billion litres in 2025.

India is home to around 440 million millennials. This demographic is driving an increase in craft beer sales as they seek fresh flavours including from India’s growing list of microbreweries, particularly in urban areas. This has contributed to continued growth of India’s craft beer industry.

Pictured main: Copitas in the Four Seasons Hotel, Bengaluru.

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