As the world drinks less, India's smaller cities are raising a glass to premium spirits

The global alcohol industry is confronting a sobering reality. Total beverage alcohol volumes have fallen around 2% across major markets as Millennials and Gen Z consumers increasingly embrace moderation and healthier lifestyles. Yet India is painting a different picture. While overall volume is growing nationally, there is a distinct shift in consumer habits toward premiumisation, moderation, and "sober curious" lifestyles. And surprisingly, it is India's smaller cities that are emerging as an unlikely growth engine for premium spirits.

From Jaipur and Lucknow to Chandigarh and Kolkata, rising incomes, changing lifestyles and a growing appetite for premium brands are creating new pockets of demand beyond the country's traditional metropolitan strongholds, Siddharth Suri, managing director of Moët Hennessy India told Fortune India.

"These are the cities which are showing strong double-digit growth for the alcohol industry," Suri said. "The biggest thing according to me is aspiration and the hunger, which I feel is much more in a slightly smaller city compared to the big metros."

India is increasingly standing out in the global alcohol landscape. India is now the world's third-largest wines and spirits market at 428 million standard cases and the only one among the top three markets that continues to grow, expanding about 4%. The United States and China, the other two largest markets, are witnessing declines.

Within premium and above spirits, India is among the fastest-growing markets globally, growing about 10% on a base of 2.6 million standard cases, while several mature markets remain largely flat. 

Even as geopolitical tensions and supply chain disruptions create short-term challenges for the global alcohol industry, Suri said the company remains relatively insulated because of its diversified sourcing and inventory management systems. Products are sourced from multiple locations including Scotland, France and Singapore, allowing the company to navigate disruptions in logistics and shipping routes.

While higher freight and packaging costs, including rising glass prices, can put temporary pressure on margins, Suri said such challenges are cyclical. "There will be some pressures on cost and supply chain. There will be certain logistic costs which will be temporary and then once things normalise, it will come back," he said. "It's all about being flexible, being agile, being dynamic." He added that while selective price increases may be necessary across the industry to offset inflationary pressures, India's strong premiumisation trend and consumers' willingness to trade up continue to provide a supportive backdrop for growth.

For luxury wines and spirits company Moët Hennessy, the shift is reinforcing its decision to sharpen focus on premium whisky, a category that dominates India's drinking culture.

India's whisky opportunity

India is already the world's largest whisky market, consuming 269 million cases annually, compared with about 75 million cases in the United States. Suri said nearly 76% of India's premium and above opportunity is driven by whisky consumption, making the category central to Moët Hennessy's growth strategy.

"We are looking at this category to build scale and drive volume because it is not just about value for whisky today. It's value after you achieve a certain scale with volume," he said.

To capitalise, Glenmorangie, the renowned Highland single malt Scotch whisky distillery, has rolled out The Lasanta 15 Years Old in India, which has completed its evolved age-led range of 12-, 15-, and 18-year-old expressions.

The company is now prioritising its single malt portfolio led by Glenmorangie and Ardbeg, while premium vodka brand Belvedere remains another focus area. India is already among Glenmorangie's top five markets globally and continues to gain strategic importance for the brand.

According to Suri, whisky currently contributes about 35% of Moët Hennessy India's portfolio and is growing at a healthy double-digit pace.

The broader premium wine and spirits business has also seen strong momentum. Moët Hennessy India has recorded very strong double-digit growth over the last three years, with business expanding 45% since 2022.

Suri believes the premiumisation trend still has significant room to run. "People want to drink better," he said. "People want to drink something that really resonates with them."

Premiumisation beyond metros

While metros remain important, Suri believes the next wave of growth will increasingly come from select affluent pockets within Tier-2 markets where consumers are spending more on luxury and lifestyle experiences.

He points to the rapid evolution of retail and hospitality infrastructure in these cities, including larger premium liquor stores, cocktail bars and upscale dining destinations. "You are seeing huge stores in Kolkata, you are seeing big stores in Jaipur, you are seeing amazing cocktail bars coming in these smaller cities," he said.

The company plans to continue building scale in metropolitan markets while selectively expanding into high-income clusters across smaller cities over the next two to three years.

The opportunity is also being supported by favourable demographics. Nearly 15 million consumers enter the legal drinking age every year in India, while about 65% of the country's population is below 35 years. Unlike mature alcohol markets facing demographic stagnation and consumption moderation, India continues to benefit from rising affluence and a young consumer base.

"India has a very sustainable GDP growth and the youngest population in the world. You have a huge chunk of people coming into the legal drinking age," Suri said. "India is pretty insulated there and I think the opportunity is huge."

The company is also witnessing evolving consumption patterns, including growing cocktail culture, home entertaining and interest in craft spirits with strong heritage and storytelling.

Why MHI favoured exiting the wine business

Put together, these shifts are influencing Moët Hennessy's portfolio choices. Moët Hennessy had invested in a winery in Nashik more than a decade ago, betting that India's wine culture would mature rapidly. While the company remains committed to the Chandon brand and will continue distributing it in the country, Suri said the growth trajectory of sparkling wines fell short of expectations. "We had invested ahead of the curve," he said, noting that consumer adoption of wine and sparkling wine has been slower than categories such as whisky, vodka and tequila.

The company was sitting on excess inventory and chose to divest the winery in what Suri described as a financial and business-led decision. The move allows Moët Hennessy to sharpen its focus on premium spirits, particularly whisky, where demand is expanding faster and consumer familiarity is far stronger. "That gives us a lot more focus on the spirits, on the category that is growing," he said.

For now, Suri sees India's premiumisation story as far from over. Premium wine and spirits in India have witnessed "very strong double-digit growth" over the past few years, with 30%-plus growth in the premium category. He says the category is projected to double in the next three to four years.

"Everybody wants to upgrade," he said. "A person who's been drinking a blended Scotch will want to move to an entry single malt. Then from 12 years to 15 years, from 15 years to 18 years. The premium business is here to stay."