"There are only two real ways to get ahead today – sell liquor or drink it." : " There are only two real ways to get ahead today – sell liquor or drink it. " Liquor Market in India Index An overview Industry structure Characteristics Factors Process of making Alcohol Major Classification Markets Key players and share consumption on liquor multinational : Index An overview Industry structure Characteristics Factors Process of making Alcohol Major Classification Markets Key players and share consumption on liquor multinational Overview: Overview The Indian liquor industry is a high-risk industry, on account of the high taxes and innumerable regulations governing it. The international liquor industry, the Indian one too has seen players with strong brands, diversified portfolios and large operations achieve market leadership positions. The Indian liquor industry comprises the IMFL, foreign liquor bottled in India (BII), foreign liquor bottled in origin (BIO), country liquor, beer and wine segments. The Indian liquor market is concentrated in the southern part of the country, with this region accounting for about 60% of total IMFL sales and 45% of beer sales. The domestic industry is dominated by two large groups, the Vijay Mallya-controlled UB group and the Shaw Wallace group. Industry in the organized sector - an industrial license is required to start manufacture. Major brands (manufacturers) : Signature, Blue Riband (UB Group), Aristocrat ( Jagajit Industries), Smirnoff, Gilbeys Green Label, Malibu, Archer’s Peach Schnapps(International Distilleries India), Passport ( Seagrams ), VAT 69, Black & White, Black Dog (United Distillers India). Indian Liquor Industry with estimated market value of INR 340 bn is growing at 12-15% over the last two years. There are 325 distilleries in India, with an installed capacity of about 3.58 billion litres of liquor . India is the third largest market for alcoholic beverages in the world . INDUSTRY STRUCTURE: INDUSTRY STRUCTURE Market : 58 million cases . Past growth 15 % CAGR per annum. Brown spirits - particularly whisky, rum & brandy account for over 75 % of this market. South and North share 60% of market . Industry in the organized sector - an industrial license is required to start manufacture . South India is the largest consumer in the Indian liquor market, with Andhra Pradesh showing the highest consumption. The State-wise consumption of liquor is : Andhra Pradesh , Bengal , Assam , Bihar , Mumbai , Maharashtra , Delhi , Haryana , Punjab and Rajasthan . Retailers' Grip :- There are an estimated 25-27,000 licensed retail sales outlets in the country for alcoholic beverages. Retailers have a major role in popularizing and making available a brand, as they have a virtual monopoly over the distribution of liquor in each State. The absence of self-service counters also limits customer choice. There are also restrictions on the business hours of these outlets as also their location vis-à-vis schools, colleges and so on, apart from where they can procure their requirements. There are restrictions in selling through restaurants and hotels too. Characteristics of the Indian liquor Market : Characteristics of the Indian liquor Market Indian liquors are predominantly molasses-based, however, with a portion of the appropriate grain/fruit spirit being added to them. There is a shift in global demand from dark spirits (such as whisky, dark rum and brandy) towards white spirits (such as vodka, white rum and gin). consumption of spirits exceeds that of beer and wine due to their lower cost per unit of alcohol. Large liquor multinationals enjoy high margins. Preference for brown spirits (molasses flavour ) in Indian market. Liquor packed in 180, 375, 500, 750 and 1000 ML bottles - glass and plastic bottles. 180 ML and 750 ML are fast moving. The market is highly competitive with many local and international players vying for a share in the market. The alcohol industry is very important from the Government’s revenue perspective. It generates an estimated Rs. 16,000 crores per annum. India is seeing an increasing trend of white spirits being adopted over brown spirits. Factors of liquor industry in india : Factors of liquor industry in india Capacity Restriction :-The industry is not allowed to expand without the prior approval of the Central government, as it among the few industries still under the licensing policy. High duty Structure :-The manufacture of IMFL is subject to government licensing, while levies on sales are a State subject. Prohibition :-The States earn a significant portion of the revenues from liquor. In some States, the duty is as high as 200%. Prohibition has played havoc with the profitability of many breweries and distilleries. Examples of States clamping prohibition in the past are Andhra Pradesh and Haryana. Gujarat is another total dry State. Ban on Advertising :- One major restriction throttling the industry is the ban on advertising. Some States have banned even surrogate advertising of, say, sodas and lemonades. The Black Market :-In any industry where there are restrictions, prohibitions and controls, a black market thrives. So too, in the liquor business. Fragmented Structure :- One fallout of the various restrictions is that, except for a few brands, the liquor market is fragmented. Distribution and Trading Restrictions :- Distribution controls take various forms like auctions, open-market system, government--controlled markets and the Army’s Canteen Stores Department. Raw Materials and Process of Making an Alcohol : Raw Materials and Process of Making an Alcohol In India, the bulk of alcohol is being produced from sugarcane molasses. Molasses is a thick viscous bye-product of the sugar industry, it is acidic in nature, rich in salts; dark brown in color and it also contains sugar and could not be crystallized. For manufacturing alcohol, the Molasses is diluted with water into a solution containing 15- 16% of sugar. This solution is then inoculated with yeast strain and is allowed to ferment at room temperature. The fermented wash is distilled in a series of distillation columns to obtain alcohol of adequate/ requisite strength and quality/ specification. This alcohol is used for various purposes, both potable and industrial. For manufacture of alcoholic beverages, the alcohol is, if required, matured and blended with malt alcohol (for manufacture of whisky) and diluted to requisite strength to obtain the desired type of liquor/ Indian Made Foreign Liquor (IMFL). Production of Alcohol drinks from non-molasses sources is very small in the country compared to the total production of Alcoholic drinks. Major Classification in Liquor Industry: Major Classification in Liquor Industry The Indian liquor industry is divided into three broad segments: Indian Made Foreign Liquor (IMFL) Country-made liquor Beer : IMFL Country-Made Brown Spirit White Spirit Whisky Rum and Tequila Brandy Herb and Bitter Gin Vodka Licensed Illicit In addition, large scale production of illicit brew in the unorganized sector . Alcohol produced by distilleries and sold to state government marketed as licensed Country liquor. Beer Larger Ale Stout Pilsner Dry Diet Ice Strong Major Classification Major Classification in Liquor Industry Contd.. Major Classification in Liquor Industry Contd.. : Major Classification in Liquor Industry Contd .. IMFL :- The Indian Made Foreign Liquor (IMFL) market is a key constituent of the liquor industry and comprises Whisky, Rum, Brandy, Gin and Vodka. IMFL accounts for nearly half the Indian spirits market however Beer dominates 90% of the non-IMFL market and wine and imported liquor account for the rest. Its main consumers are the middle and the high- income groups, primarily in the urban areas. The IMFL industry in India is estimated at over 160 million cases and is growing steadily. IMFL market in India is characterized by brown and white spirits. The industry has rapidly spread to even Tier II and Tier III cities with leading players offering their brands through licensed outlets. While many Indian and MNC players were present in the IMFL segment, the unorganized sector accounted for almost 100% of the country-made liquor segment... IMFL Manufactures :- Whiskey dominates the Indian IMFL segment with close to 60% market share and recently, India has emerged as the world’s largest market for whisky, selling 60 million cases. This number is even higher than the consumption in US market in terms of volumes. The whisky market is further classified into categories like medium (cheap), regular, prestige, premium, super deluxe whiskies, and Scotch whisky. The regular segment is the largest, constituting nearly half the volume of the total whisky market. Major Classification in Liquor Industry Contd..: Major Classification in Liquor Industry Contd .. Brandy comprises around 6% of the aggregate spirits market and close to 18 % of the IMFL market. This growth rate in this segment is slower as compared to other segments on account of a shift in preferences towards other products as it is perceived to have medicinal properties. Major Classification in Liquor Industry Contd..: Major Classification in Liquor Industry Contd .. Rum comprises approximately 5% of the aggregate spirits market and 18% of the IMFL market. It is also amongst the fastest growing segment in the IMFL market. Vodka comprises 0.3% of the aggregate spirits market and 1% of the IMFL market. It is amongst the fastest growing categories in the IMFL segment on account of increasing acceptance by the youth. Wine very recently that wine has begun to be produced on a significant scale in India. Its production takes place in both the organized and the household sectors. Sparkling wine is also manufactured in India. However, this is intended for the export market and the volumes involved are small. Additional Information :- The IMFL industry can be broadly classified into products based on Extra Neutral Alcohol (ENA) and Rectified Spirit (RS). ENA-based products, which are of better quality and have a longer shelf life The IMFL market is categorized primarily into whisky, brandy, rum, vodka and gin, with market share heavily skewed towards whisky. Major Classification in Liquor Industry Contd..: Major Classification in Liquor Industry Contd .. Country –Made Liquor:- The Country Liquor market is basically a regional market and there exist a large number of small manufacturers spread across various States. Country-made liquor comprises alcoholic beverages made by local breweries. Country liquor, the cheapest form of alcoholic beverages, could soon give consumers a different kind of Kick. Major Classification in Liquor Industry Contd..: Major Classification in Liquor Industry Contd .. India's country liquor (or arrack) industry, a commoditised and often chaotic business, is estimated at Rs 22,000 crore, with annualized volume sales of over 200 million cases. The Bureau of Indian Standards (BIS) is in the process of setting fresh manufacturing norms for country liquor. Country liquor, however, has remained almost stagnant in absolute size as consumers upgrade to IMFL on the back of economic expansion, and with more States banning the segment citing social risk. Country liquor continues to go strong in northern States like Uttar Pradesh, Haryana and Punjab, while Maharashtra is one of the bigger States in the west . Beer :- Market Size A 70 million cases market. Market growing at 10-12 % per annum South and west zones account for bulk (> 75 %) of this market Major beer consuming centers - Maharashtra (Mumbai). Karnataka (Bangalore); Tamilnadu (Chennai). Beer in India is categorized into mild/diet beer (5-8% alcohol), lager beer (8-13%), strong beer (13-14%) and draught beer, as fresh keg beer . Beer, along with hard liquor, accounts for a major portion of the government’s total excise revenues . Major Classification in Liquor Industry Contd..: Major Classification in Liquor Industry Contd .. Industry Structure :- Minimum economic size : 5000 kilo liters; 15000 kilo liters for NRI proposals. Around 40 units in organized sector, mostly regional players. 4 large breweries have 84% of the market. Licensing required except for smaller units employing under 50 persons or not using power Cap on additional capacities (frequently circumvented under pretext of modernization). Beer packed in 650,750 & 1000 ml glass bottles; usage of (330 ml) cans minimal. Preference in the Indian market for strong beer. Promotions and sponsorships (sports, musical events) to promote brands . In the last four years, the strong beer market has been growing at over 15%, while that of lager beer has been sluggish at 5 – 6% . Trade :- States’ prohibition policies govern trade sales for beer. Multi layer trade channel structure. Beer sold through the same outlets as IMFL. Institutional sales of beer to star hotels, large restaurants, bars/ pubs . Major Classification in Liquor Industry Contd..: Major Classification in Liquor Industry Contd .. Major beer brands (manufacturers) - King Fisher, Kalyani Black Label (UB Group), Golden Eagle (Mohan Meakins), Haywards (Shaw Wallace), London Pilsner (Associated Breweries and Distilleries) Foreign brands - Stroh’s, Fosters. Other Form of Alcohol :- Ethanol is also a form of an alcohol. It is used as an automotive fuel by itself and can be mixed with gasoline to form what has been called "gasohol" FUEL ETHANOL- the most common blends contain 10% ethanol and 85% ethanol mixed with gasoline. Over 1 billion gallons of ethanol are blended with gasoline every year in the United States . Healthy growth in overall volumes in IMFL and Beer segment :- The IMFL as well as the beer segments of the Indian liquor industry have demonstrated a healthy CAGR of about 8-10% over the last three to four years. The growth has not been uniform across different price segments as the liquor market is highly price-sensitive. For instance, since 1999, while there has been a marginal de-growth in the regular whisky segment Different Markets in Liquor Industry.: Different Markets in Liquor Industry . Government Market :- In this market the state government is the wholesale distributor of liquor and they purchase directly from the company. Auction Market :- In this type of market, the state is split into many smaller geographical segments. The government auctions the right to distribute and retail liquor in those areas for a specific period, to private entities. This auction is based on the minimum guaranteed tariff payment to the government over the specified period. Open Market :- In an Open market, there is no government intervention in the pricing and distribution of liquor. Free Markets :-Those states where wholesale and retail is licensed, e.g. Arunachal Pradesh, Assam, Goa, Jammu & Kashmir, Maharashtra, Meghalaya , Pondicherry, Sikkim, Tripura and West Bengal. Prohibition Markets :-In prohibition markets,there is a government intervention in th epricing and distribution of liquor, e.g. Gujarat, Manipur, Mizoram, Nagaland. Key Players in Liquor Industry in India: Key Players in Liquor Industry in India Major National Players :- United spirits with about 59 % of market share in IMFL is the undisputed leader. Radico Khaitan who entered the IMFL space some 8 years back has already cornered 12 % market share and gaining. Other players include Mohan Meakin (9%), Jagatjit (8.5%), etc. Key Players in Liquor Industry in India contt..: Key Players in Liquor Industry in India contt .. About Companies :- United Spirits Limited (USL) - T he INR 5700 crore spirits arm of the UB Group – is India’s largest and the world’s 2nd largest spirits company. USL was earlier McDowell and Company Limited. USL has a portfolio of more than 140 brands, of which 19 are millionaire brands* (selling more than a million cases a year) and enjoys a strong 59% market share for its first line brands in India. The company is known to be an innovator in the industry and has several firsts to its credit such as the first pre-mixed gin, the first Tetrapack in the spirits industry in India. United Spirits represents the merged entities of the erstwhile McDowell & Co. Limited, Phipson Distillery Limited, United Spirits Limited, Herbertsons Limited, Triumph Distillers and Vintners Private Limited, Baramati Grape Industries Limited, United Distillers India Limited, McDowell International Brands Limited and Shaw Wallace Distilleries Limited. United Spirits’ brands have won the most prestigious of awards across flavors, ranging from the Mondial to International Wine and Spirit Competition (IWSC) to International Taste and Quality Institute (ITQI); a total of 108 awards and certificates (as of June 2009). Vijay Mallya-led UB Group said it has become the world's second largest liquor maker after Diageo with sales of over 100 million cases in the last 12 months and is certain to be the number one by next fiscal. Key Players in Liquor Industry in India contt..: Key Players in Liquor Industry in India contt .. Radico Khaitan :- An Introduction to Radico Khaitan demands an introduction to the Rampur Distillery, which was established in 1943. It made a name for itself by supplying quality spirits to leading liquor companies. Major Brands of Ub Group :- Key Players in Liquor Industry in India contt..: Key Players in Liquor Industry in India contt .. Today’s it is one of the leading manufacturers of rectified spirit, extra neutral alcohol and high quality liquor. With production close to 45 million liters per annum, it is also one of the largest distilleries in India. It state-of-the-art equipment has enabled it to achieve optimum levels of operational efficiency. A trendsetter in the industry, it pioneered the industry wide drive for conservation of fuels by replacing coal with bio gas from effluent treatment and generating steam for utilisation in distillation columns. The company has also secured a coveted collaboration with one of the most respected names in the international Wine Sales viz : M/s Ernest & Julio Gallo(E & J). Today, it is one of the oldest and largest liquor manufacturers in the country with a tempting brand portfolio that spans every socio- economic group. The company has recently tied up with 25 bottling units in strategic parts of the country: Punjab, Rajasthan, Kerala, Maharashtra, Goa Madhya Pradesh, Karnataka and Andhra Pradesh, Chattisgargh , Himachal Pradesh, Jammu, Bihar, W.B , Assam, Orrisa , Arunachal Pradesh, Jharkhand, Pondicherry, Tamil Nadu. Key Players in Liquor Industry in India contt..: Key Players in Liquor Industry in India contt .. Major Brands of Radico Kaitan :- Mohan Meakin :- is a large group of companies started with Asia's first brewery incorporated in 1855 (but established much earlier) by Edward Dyer Edward Dyer at Kasauli in the Himalayan Mountains in India. Key Players in Liquor Industry in India contt..: Key Players in Liquor Industry in India contt .. Established in Calcutta in 1886, Shaw Wallace bears a legacy that is drenched in the spirit of India for the last 116 years. 6 distilleries and 5 breweries from the vanguards of the house, with 6 more units on the drawing board. The technology and stringent quality control synonyms with concern of customer satisfaction. Mohan Meakins, one of the oldest liquor companies in India, is in joint venture talks with a number of Indian and foreign brewers, including SABMiller and Ramesh Vangal , an old Seagram hand. Mohan Meakins controls 10% of the Indian beer market estimated at 115m cases. Old Monk rum the largest selling spirit brand in India. Mohan Meakins has an All India presence in the brewing business with breweries in UP, Maharashtra and Chennai. Flagship brand Golden Eagle has sales of over 9m cases. Major Brands of Mohan Meakin :- Key Players in Liquor Industry in India contt..: Key Players in Liquor Industry in India contt .. Jagatjit :- Jagatjit Industries Limited, one of the largest IMFL players in the country was set up in the year 1944, in the erstwhile State of Kapurthala . JIL manufactures the entire range of alcoholic beverages i.e. Whisky, Rum, Gin and Vodka. Their USP is to provide superior brands to the customers at an affordable price. The company is committed to adopt latest technology for an effective management on environment. Major Brands of Jagajit :- Young India high on liquor consumption : Young India high on liquor consumption Upwardly mobile young population with a propensity to spend is guzzling booze like never before. Consumption of beer has jumped 51% from 70 million cases in 2002 to 105 million cases in 2006 while consumption of Indian made foreign liquor (IMFL) grew 53% to 115 million cases during the period. A free media and increasing exposure to western influences have lifted the stigma off liquor consumption, while rising income is stoking the shift from country liquor to more refined varieties. Alcohol consumption tends to begin at age 16-18 in India and peak at 30-35. IMFL will account for about 45-50%, owing to the higher aspiration levels of the new generation. Radico Khaitan, a relatively new entrant, has quickly captured 10%. Indian consumers to consume alcohol for maximum potency rather than as a means of socializing. alcohol demand will aggregate 40 million cases over FY05-10, it added. The country has one of the youngest population, with around 50% citizens below 25 years who consume liquor in India . Multinational Intake on Liquor Industry: Multinational Intake on Liquor Industry Most of the large MNCs such as Diageo and Allied Domecq already have a presence in India through joint- ventures. Their leading brands are only available through the BIO route. The MNCs also view the Indian market as a potentially large and high-growth market, and players like Fosters, Strohs , SAB and Scottish & Newcastle have entered over the last few years. The MNCs have to slug it out with the local barons, which lead the industry. Established local companies, such as United Breweries (UB group), and Shaw Wallace Company (SWC). the MNCs have slowly gained a 10 per cent share in the whisky market. The MNCs looked forward to good business after the removal of QRs but the Government nullified it by slapping new taxes ..