Rise of the Indian Liquor Brands

WHEN DELHI'S ADITYA AGGARWAL enrolled for a course in business economics and entrepreneurship in University of California, Los Angeles, in 2012, liquor business was the last thing on his mind. When he returned to India in 2019, he had behind him a good stint as a management consultant with PwC, but his client experience still had not exposed him to alcohol beverage (alcobev) business. Four years since, 29-year-old Aggarwal is founder and managing director of three-year-old Spaceman Spirits Lab (SSL), which sells premium Indian gin Samsara, with six flavours, in 12 states.

"When we started making gin in 2020, it was a craft project to make a few bottles and distribute it among friends and family members during the pandemic. But when we launched the product (manufactured at a leased facility in Goa), we got immense love, which we could not have imagined for a product like ours. That was the beginning," says Aggarwal. In December 2023, the company launched its second product, premium rum Sitara. Aggarwal says he will close FY24 at 3,00,000 gin bottles with merchandise value of roughly ₹68 crore. "That means ₹25-30 crore net revenue. We should be India’s second-largest gin brand by volume."

Next projects include collaboration with Mexican distillers for a Tequila brand and building own facility for single malt whisky. In March 2023, a leading Indian brandy maker, Tilak Nagar Industries, picked up a 10% stake in SSL, providing the start-up pan-India marketing support. For a company promoted by someone with no experience in alcobev manufacturing, it has been a dream run so far.

This is no accident. Premium and super-premium segments of the Indian alcobev industry (brands that cost more than ₹500 per 750 ml bottle in Delhi, which accounts for 21% of the $55-billion industry) is undergoing a massive transition. Multiple players, including first-generation entrepreneurs like Aggarwal, are launching differently-positioned super-premium products at price points thought impossible for India made liquor till a few years ago. Many of them are liquor distributors, contract manufacturers and distillers. Legacy players, too, are shifting towards premium products, be it whisky, gin, rum or vodka.

"The industry dynamics have changed. Today, you don’t need loads of money to enter the business. You don’t need to own a distillery or a bottling plant either. You need only customers. If you have a good product and can communicate directly with customers, you are in business," says an industry veteran.

Among the several launches that have caught attention in recent years was India’s first craft gin, Greater Than, by new entrant Nao Spirits in 2017. The second brand of Nao, Hapusa, claimed to be the only gin in the world made with Himalayan juniper, was simultaneously launched in Goa and U.K. in 2018. Another new-age firm, Third Eye Distillery, launched around the same time, has got global recognition for its flagship gin brand Stranger & Sons. Among established players, Radico Khaitan’s craft gin Jaisalmer is as costly and sought-after as any imported gin.

The trend is not confined to gin. Indian single malt whiskies, though introduced by established players with deep pockets, are competing with imported Scotch whiskies in India. Some are even getting global attention. These include Amrut Distilleries’ Amrut Single Malt; Indri Single Malt Whisky by Piccadily Industries; Paul John Single Malt by John Distilleries; and Rampur from Radico Khaitan. Premium liquor brands from Indian companies are gaining market share even at a slightly lower price level. For instance, Modi Illva India’s Rockford Reserve premium whisky claims to have overtaken global alcobev major Pernod Ricard’s Blenders Pride Reserve in sales in India. Every company, both domestic and foreign, is gaining from premiumisation.

"In FY23, year-on-year growth was 45%-plus for ₹1,000-plus segment, 21% for ₹500-1000 category and 12% for mass offerings below ₹500," says Vinod Giri, director general of Confederation of Indian Alcoholic Beverage Companies (CIABC). The industry grew 18% from $48 billion in FY22 to $55 billion in FY23. Imported products like Scotch whiskys dominate the ₹1,000 and above segment, though share of Indian products here rose from 18% in FY22 to 20% in FY23. CIABC says there was a 14% rise in sale of India Made Foreign Liquor (IMFL) to 385 million cases (nine litres each) in FY23. Whisky remained the largest segment with 63% share.

What is triggering this transition? Why are new players excited about a sector bound by multiple regulations that differ from state to state? Why are consumers willing to pay more for India made alcohol brands?

Emerging Players

A long-standing family friendship brought together New Delhi-based Ansh Khanna, who had some experience in the sector through his start-up Peak Spirits, and Samarth Prasad, an expert in hospitality and agro sectors, to launch Himmaleh Spirits. "Our common vision was to build India’s first truly artisanal craft distillery," says Khanna. In October 2023, the company launched its first product, Kumaon & I, a gin inspired by the founders’ "farm-to-bottle" philosophy. "At Himmaleh, we believe in Make In India, For The World," says Khanna. Kumaon & I is called India’s first provincial gin as all its 11 botanicals such as high-altitude black turmeric, timur berries and Himalayan juniper come from Uttarakhand’s Kumaon region. "The ingredients are selected as per the terroir. Some are grown at approximately 10,000 feet. Himalayan freshwater gives the gin a distinct flavour," says Khanna. Himmaleh, like most new entrants in gin, wants to tap small batch, handcrafted, region focused products. Also, entry barriers are lower in gin as its flavour depends on botanicals such as fruits, spices and other herbs that India is well-endowed with. Further, gin is a niche segment with annual sales of 1.9 million cases compared to whisky’s 242.5 million cases. Whisky-making requires bigger investments too which, perhaps, is the reason it is still a forte of mostly established business groups.

When TRDP (Tej Ram Dharam Paul) Group, the maker of Mario biscuits and Raj Niwas pan masala, decided to diversify into alcohol two years ago, they wanted to start with whisky. As its NeuWorld Spirits completes one year of operations, its premium whisky brands, Downing Street and Royal Tribe, have exceeded sales targets and secured a market share of 4-6% in respective price categories, says managing director Poonam Chandel. The industry veteran says both are expected to grow 22-25% in existing markets of Delhi, Chandigarh, Haryana, Punjab, Himachal Pradesh, Uttar Pradesh and Rajasthan next fiscal. "We are launching premium vodka in first quarter of 2024, followed by a craft gin in early Q2. Additional plans include introduction of a fusion malt brand and a super-premium whisky in 2024. The launch of brandy and rum is expected either in Q3 of current year or Q1 of the following year," says Chandel. She credits the quality of the blend for success of her products.

TRDP is just one example. Around 12 years ago, the (Umesh) Modi group decided to close down its legacy country liquor business and reposition itself as a branded premium player in IMFL. A new company, Modi Illva, a joint venture of Modi group and Italian alcohol major Illva, developed a whisky brand Rockford for the premium segment. A decade later, the company claims 20% market share in this segment, earlier a near monopoly of Pernod Ricard’s Blenders Pride. "This segment is about 12 million cases. Blenders has 55% share. In 10 years, I have grown from 0% to 20% with Rockford Classic and Rockford Reserve," says Abhishek Modi, managing. director, Modi Illva India Pvt. Ltd.

Modi says Indian consumers are discerning and want premium products. "Rockford Reserve costs ₹1,000 a bottle in Delhi. No Indian brand would have gone above this earlier. That has been proven wrong in case of single malts and gins today. Technically, Indian premium products selling at super premium prices are accepted today," says Modi. The company, which already has some vodka brands, plans to enter single malt whisky. It also plans to introduce a brand that can compete with imported rums. "We will close FY24 at about ₹1,700 crore turnover. We have grown at a CAGR of 65-70% in last 11 years," says Modi. The size of the segment where Modi Illva is present was four million cases a decade back. Now, it is 12 million cases. “In next 10 years, if it keeps growing at the same rate, it can become 36 million. If the industry is growing, there is always space for new players,” he says.

Finally, Indian Single Malt

For a family-run group that had been in alcohol distribution and distillery business for decades, Piccadily Industries rediscovered itself in 2018 when it decided to produce high-end spirits to European Union (EU) and Scottish standards. It launched Indri single malt whisky three years later. Along with India’s first single malt whisky, Amrut from Amrut Distilleries, launched a decade ago, Indri has been winning awards and customers across the world. This is also true of other contemporary Indian single malt brands such as GianChand of DeVANS Modern Breweries, Rampur of Radico Khaitan and Paul John of John Distilleries.

Industry data shows that Indian single malts overtook imported global single malt brands such as Glenfiddich, Macallan and Lagavulin in volumes last year for the first time. “Coming from nowhere a couple of years ago, Indian single malts may account for 52% of single malts sold in India in 2023. These are also exported,” says CIABC’s Giri. “Considering that Scotch whiskies have at least 200 years legacy, Indian single malts have picked up well. Many experts all over the world are saying that after Japanese whiskeys, the last big phenomenon, high-end Indian malt whiskies are the new global phenomenon,” he says. In India, about 6,75,000 cases of single malts were sold last year, with Indian companies alone selling 3,45,000 cases. Ever since the success of handfuls of Indian single malts, almost every serious player in the industry has set its eyes on the segment. India’s two biggest players in the alcobev sector, global giants Diageo and Pernod Ricard have launched India made single malt whiskies, Godawan and Longitude 77, respectively.

The surge in demand for premium brands is also reflecting in finances of Indian alcohol companies that are reinventing themselves. Radico Khaitan is a hot stock. Tilak Nagar, in deep financial trouble, is now profitable and growing. Jagatjit Industries has turned around.

"It confirms our understanding that we have a strong, resilient and robust domestic industry. A shrinking world, and increasing exposure to social media, is leading to evolved consumer preferences and awareness of niche categories like single malt, aged rum and whisky, tequila, etc," says Nita Kapoor, CEO, International Spirits And Wines Association of India (ISWAI). "Domestic and global players are, therefore, driving the industry’s evolution. Equipped with advanced manufacturing technologies and product expertise, these entities craft high-quality products that cater to nuanced tastes of consumers," she adds.

The opportunities to reach out to the customer directly via social media have also helped by providing a level-playing field for everyone. This was never the case in an industry which has to depend on surrogate adver- tising through brand extensions. Innovations are happening here, too.

New Marketing Avenues

"We are not going to do anything sub-par. We will do brand extensions which are relevant and as aspirational as the communication for the brand. For Downing Street, our Scotch whisky, the brand extension is gourmet coffee," says NeuWorld’s Poonam Chandel. "Downing Street Coffee has found success in institutional sales. We are working to enhance its popularity in B2C market, too," she says. For the other whisky brand Royal Tribe, Chandel has created ‘Royal Tribe Trecks and Trails’ in partnership with companies that conduct treks and trails in Himachal Pradesh, Ladakh and Uttarakhand. All brand extensions will be unique and have a business model. "We will promote them independent of alcohol also."

Spaceman Spirits’ Aggarwal says their customers are mostly millennials and Genz. "Running social media campaigns and being visible in content shared by creators will lead to discovery of our brands," he says. "As a luxury brand, we create an ‘out of the world’ setting whenever we promote our products on social media. It adds to mystery and mystique of the brands. We do events and are big on social media. But our USP is taste. "ISWAI’s Kapoor acknowledges the importance of targeting the young customer. "India has a young demographic which likes exploring and experimenting. A vibrant and youthful India (50% is 29 and less), with a consistently growing economy, is fuelling prosperity and consumerism, especially among GenZ. The Indian alcobev market is dominated by brown spirits (whisky, brandy and rum). These consumers now appreciate quality over quantity, be it homegrown or international brands," she says.

Government’s Role

Of all factors supporting growth of premium alcobev products, the least appreciated could be the push by the Central government. The country has come a long way from days when alcohol was not even considered worth discussing during free trade agreement (FTA) talks. For example, a representative of the industry was part of the official team that went to Australia to conclude the FTA in 2023. Alcohol is also a key component of the ongoing India-UK FTA negotiations. In fact, one of the main reasons for the delay in finalising the FTA is disagreement over conditions under which duty free or imports at reduced duty should be permitted.

CIABC expects that if maturation conditions (U.K. for instance, wants three-year maturation before an alcohol can qualify as whisky) are removed, India can tap a very large export opportunity. "We can’t sell our products in most western markets because of maturation conditions. Most of our exports are to Middle East, some East Asian countries, a little bit to U.S., and Africa. If we have to upgrade, we have to look at Europe, U.K., Australia, Canada," says CIABC’s Giri. He says exports can rise from $108 million to $500 million if three-year maturation stipulation is removed. "A country like Mexico, which is very similar to India, exports about $6 billion, France exports about $20 billion. Our target is very modest," says Giri.

That is not all. India is also emerging as a manufacturing hub in global value chains. Experts say industry friendly policies can attract both global and homegrown Indian alcoholic beverage companies to develop India as their manufacturing base.

Though Central government policies are industry-friendly, state regulations (each state has own laws and regulations) are among the biggest hurdles to growth of the sector. "State regulations are not designed for exports but for local production. Same applies to exports. We are now working with APEDA and central government to sort out issues," says Giri.

The Future

Olson Pereira, an award winning bartender, returned to India during the pandemic after several international stints. Once here, he found a gap in availability of world-class cold brew coffee liqueur in Indian bars. Till a few years ago, this would have been a problem only for cocktail and coffee connoisseurs. The fact that Pereira co-founded a company, Indie Brews and Spirits Pvt. Ltd, to solve the problem a year ago shows the pace of evolution of the country’s alcobev industry.

Quaffine, the first cold brew coffee liqueur from Pereira’s company, is crafted from 100% Arabica beans grown at 3,500 feet in Chikmagalur, Karnataka. It has only three natural ingredients, coffee, sugar and neutral spirit. The product, available in Goa at the moment, redefines the coffee liqueur landscape, says Pereira.

"Quaffine is an embodiment of our passion for coffee and spirits. Every step of crafting this liqueur has been an art form, right from selecting the finest beans to perfecting the cold brewing method. The result is a harmonious blend of flavours that resonate with coffee enthusiasts and connoisseurs alike," he says. Indie Brews has got orders from elsewhere, though Pereira is aware of his limitations. Ramping up production, without compromising quality, is a problem Pereira may soon have to face.

U.K.-based alcohol beverage market intelligence firm IWSR has cited India’s booming economy, rising incomes, market recovery and growth post-pandemic and strong consumer confidence as growth triggers for the Indian alcohol industry in coming years. It says premiumisation is evident though there is a negative shift in spending behaviour in key alcohol markets it tracks.

The analysis is in sync with the enthusiasm seen within the industry to innovate, differentiate and strengthen its customer connect.