Rabobank Predicts Strong Market Growth For Premium Spirits in India

While the world spirits markets suffered heavily due to the recession, emerging markets were relatively resilient and rebounded quickly. A high proportion of young people in the population, rising disposable income, increasing acceptance of alcohol as a social drink and a low level of per capita consumption means that there is a strong case to be made for India’s spirits consumption growth far exceeding that of the developed world.

March 12 2012 --- Rabobank expects the Indian spirits market to grow at a 12 percent CAGR by volume in the next 5 years, making it one of the most attractive spirits markets in world.

While the world spirits markets suffered heavily due to the recession, emerging markets were relatively resilient and rebounded quickly. A high proportion of young people in the population, rising disposable income, increasing acceptance of alcohol as a social drink and a low level of per capita consumption means that there is a strong case to be made for India’s spirits consumption growth far exceeding that of the developed world.

A new Rabobank Food & Agribusiness Research and Advisory report explores some of the benefits and pitfalls for western companies when entering the Indian spirits market.

India is the second largest market for spirits in the world by volume and has been growing at a CAGR of about 11 percent for the past 10 years. This makes India an attractive destination for Western spirits companies, but developing routes to the market in India can be challenging.

One strategy for Western spirits companies is to partner with a local IMFL manufacturer initially, either through joint venture or acquisition, before going solo.

Rabobank’s Vice President India Finance, Nitin Kalani,“Most of the multinational spirit players are eager to strengthen their presence in India. However, brining their international brands into India is an uphill task given the heavy and complicated tax structure and the stringent government regulations. This makes their brands expensive in the market dominated by economy and standard brands and their brands are not available uniformly across the different Indian states. As an alternative, multinationals are on the lookout to acquire or partner with Indian players who have brands which are placed in the premium segment. However, there are limited choices.”

Investments in India may need to focus on capturing the growth potential that India provides in the short term to create a platform which will later be used to introduce an international premium portfolio.