March 8, 2018

Breweries & Distilleries Industry Analysis

ALWAYS – INVEST IN WHAT YOU KNOW & WHAT YOU CAN UNDERSTAND. DEVELOP CURIOSITY AS A TRAIT

 

Must know facts:

  • The Indian spirits market was valued at Rs1.84 trillion in 2016, according to data from consumer research firm GlobalData. Whisky accounts for more than 60% of this figure. The country is not only the largest market for the spirit, it is also the largest global producer of whisky.
  • Per capita consumption, at 4 litres of beer a year, is a fraction of that in the west and many other emerging Asian economies, suggesting there is plenty of room to grow.
  • India consumes 48% of the world’s whisky. It is the fastest-growing market and the largest producer of the spirit.
  • In the past decade, multinationals like Diageo, Pernod Ricard, SABMiller, Heineken and Carlsberg have all bet on growth in India, given its young population, rising incomes, changing attitudes towards alcohol and taste for western spirits and beers.

 

Influencing Factors for price change:

  1. Do a sentiment check on changing cultural attitudes – Drinking in bars is “fast becoming part of the social milieu” in cities like Bangalore, Delhi and Mumbai though alcohol consumption is still stigmatized in poorer rural areas where traditional conservative beliefs prevail.
  2. BAR licensing parameters changes notified by the government from time to time.

 

Understanding the Industry:

The oldest brewery in India was set up in 1830 by Edward Dyer in Kasauli. Today, with over 30% of the Indian population consuming alcohol led mostly by the UTs and southern States, the industry boasts of being the third largest and fastest growing market for alcoholic beverages with a US$5 billion market valued in beer alone growing at a CAGR of 7% over the past 4 years.

The brewery and distillery industry is divided in to four major segments – Indian Made Foreign Liquor (IMFL), Foreign Liquor Bottled in India (BII), Country Liquor (CL) & Beer.

Whisky is decidedly the spirit of choice in India—we consume almost half the whisky produced worldwide. From the cheapest Indian-made foreign liquor (IMFL) variant—whisky makes for almost 90% of IMFL—to limited-edition single-malt Scotch, people are drinking more whisky today than ever. While gin is going through something of a resurgence, it is still whisky that racks up the numbers, with a more-than-healthy lead over every other alcoholic beverage.

Though the entire alcoholic beverage industry has grown steadily over the last decade, whisky is the flag-bearer in India. Part of the growth is because whisky has gone through an image makeover. It is not considered an old man’s drink anymore. Just like James Bond single-handedly legitimised the vodka martini and Carrie Bradshaw made Cosmopolitan the drink of choice for young women, Don Draper has made the Old Fashioned sexy again in the 21st century.

But drinking was stigmatised. Those who drank — mostly men — did so covertly, away from home. Bollywood films of the 1970s usually had at least one character succumbing to the temptations of alcohol and destroying themselves as a result. India’s few urban middle-class public bars — outside five-star hotels or private clubs — were dark retreats, whose grim ambience conveyed that drinking was far from a legitimate activity.

If anybody was drinking, he was considered to be a drunkard and somebody shunned by society. It became a very surreptitious activity.

 

Estimated Market Size:

Whisky consumption in India has more than doubled, from 80.2 million nine-litre cases in 2007 to 193.1 million nine-litre cases in 2016, according to the 2017-2021 forecast by the International Wine and Spirits Research (IWSR ), a leading source of data and analysis on the alcohol beverage market. In the same 10-year period, global whisky consumption rose from 242.8 million to 399.2 million nine-litre cases. Of the whisky consumed in India last year, 189.7 million nine-litre cases, or 98.24%, was Indian-made.

 

Road Ahead:

Alcohol has come out from the closet. It has become part of the new urban lifestyle, which says indulgence is OK. Alcohol is something that helps you open up — not as something devilish that will take control of you and destroy you. The whole conversation around alcohol has changed & that’s good. Today, attitudes towards alcohol have changed dramatically, especially among the young, affluent city-dwellers, and bars exist in many cities.

In a notoriously difficult country for business, the drinks industry faces special hurdles. India’s states each have their own regulatory controls on the production, marketing and distribution, and even pricing of alcohol. United Spirits, for example, says it needs 200,000 permissions, licences and approvals a year to operate its business. 

 

–    Article by Suman Adithya Rao (SEBI Certified Research Analyst, Management Graduate in Entrepreneurship & Small Business Management)
Looking for an investment advice – Click here!

 

Top Stocks in the industry:

United Spirits, United Brewerie, Radico Khaitan, Som Distillerie, Globus Spirits & many more.

(Please note above stocks are not recommendations, they are purely for information purpose only)

Information Sources / References: AIDA, The Economic Survey 2016–17, Agricultural and Processed Food Products Export Development Authority (APEDA), AIDA, Department of Commerce and Industry, Union Budget 2017–18, Press Information Bureau, Ministry of Statistics and Programme Implementation, Press Releases, Media Reports.

 

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Knowledge Seekers Paradise: PDF DOWNLOAD’s of HANDBOOKs released by Government of India:

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RBI Handbook 2018

RBI Handbook 2017-18

 

 

 

 

 

Government Schemes Announced in Budget 2018

Government Schemes Announced in Budget 2018

Government Schemes Announced – Budget 2018-19

 

 

 

 

 

 

Economic Survey 2018 – Volume 1 & 2

ECONOMIC SURVEY 2017-18 VOLUME 1 and 2

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