Sector to watch out for:
“Coca-Cola is pilot testing select brands like Lemon-Dou from its global portfolio of low alcoholic ready-to-drink beverages in a few states in India," the company told Mint in an email.
The alcohol industry in India is buzzing with excitement, presenting a massive market potential, particularly among the youthful demographic with evolving tastes. According to Statista, the revenue in the Alcoholic Drinks market is projected to reach US$46.6 billion in 2023, with an expected annual growth rate of 7.33% (CAGR 2023-2028). Recent consumption trends in India reveal a dynamic and broad-based growth: in 2022, spirits volumes rose by 12%, beer by 38%, Ready to drink (RTDs) by 40%, and wine by 19%, with value outpacing volume in all categories, as per IWSR figures.
A trend of premiumisation has gripped the market as the newer demographic is open to more experiences and is willing to shell out for the same. Flavored RTDs, premium rums, and expensive whiskeys aren’t alien to the new Indian alcohol enthusiasts. Brands have caught up to this, and headlines like the ones mentioned below aren’t uncommon:
The Indian market is attractive, not just to international and local behemoths who can sell mass appealing items, but it has allowed startups to offer crafted experiences, newer drink options, and establish their own niches.
A recent regulatory push might also help the industry’s profit margins as the GST rates on molasses have been slashed from 28% to 5%. Molasses is one of the most common ingredients in making a lot of beverages.
In an attempt to quantify the impact, we have taken a simple recipe off of a brewing enthusiast website. The average cost of molasses that we could ascertain on observation of an wholesale website varied somewhere around 19.5 rs per kg pre-tax and this leads to 25rs per kg inclusive of old GST rate and it drops to 20.5 due after the reduction in rates, the impact can be seen in the table below:
The overall reduction is around 6% even at an incredibly small scale. It is important to note that this is a conservative estimate, as trade discounts and comprehensive supply chain management capabilities are likely to amplify the actual impact.
In conclusion, the Indian alcohol market presents both challenges and opportunities, heavily influenced by government policies. The reduced GST rates on molasses not only contribute to cost savings but also empower manufacturers to innovate, develop new products, and enhance their marketing strategies. This snapshot of the industry provides a glimpse into the multifaceted dynamics at play and underscores the potential for growth and innovation in this exciting sector.
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