After experiencing rapid growth from 2001 to 2012, Indian spirits industry growth

decelerated significantly to low single digit levels in 2013. The Indian

consumption story was affected by falling disposable incomes and impact on
spirits industry was even worse as state governments resorted to higher excise
duties to shore up state revenues. However, with revival in the economy, the
trend in the spirits sector too is expected to reverse. According to research firm
IWSR, which tracks spirits/ IMFL industry, volume growth in the Indian spirits
market is expected to be at 18.8% CAGR during 2014-19 (Source: TR Business).
Amongst a multitude of demographic and socioeconomic factors driving growth,
India's young demographic profile and low level of alcohol penetration are key
growth drivers for the sector. In 2020, India will have one of the youngest
populations in the world with average age at 29, compared to 37 in China, 45 in
Western Europe and 48 in Japan.

India remains one of the most under-penetrated markets, indicating ample scope
to grow further. Per capita (15+ years) alcohol consumption In Bulk litres is as

follows:
The Indian Spirits industry consists of two distinctive markets differentiated on
the basis of target audience, product characteristics and distribution network:
1. Indian Made Indian Liquor (IMIL)
2. Indian Made Foreign Liquor (IMFL)
On the basis of reported volumes, share of IMIL and IMFL in the spirits industry is
43% and 57% respectively.

IMIL Industry
The IMIL market has witnessed healthy traction in volumes with 8.7% CAGR over
FY2008-09 to FY2012-13 to reach ~230mn cases. This market has high degree of
underreporting; hence the actual market could be much higher.
IMIL is evolving from a restricted quota-based, commoditized market to a
consumer driven brand based industry. The main attractiveness of this market
lies in its sizable base, comprising SEC-D and below which could translate into
~40% of total population (excluding Below Poverty Line). The growth in this
segment is expected to be driven by growing consumer base, rising rural
incomes and consumption, conversion from illicit/ toddy to IMIL with increasing
awareness about health and quality, conducive regulatory policies and aided by
growth in population. WHO, in 2005, estimated the illicit and unreported
segmentat ~3.3x the reported market. Though this percentage may have
reduced since then, it would still be sizable representing a large opportunity for
the IMIL industry. The State Governments are expected to play an important role
in this conversion. While they are developing the organized IMIL market to
prevent hooch tragedies, the excise revenue potential is also significant.
IMFL Industry
After experiencing rapid growth during 2001 to 2011 period, growth in IMFL
industry has slowed down to 7.3% CAGR over 2009-2013. The market at present
is dominated by strong national brands at low price points. The 300+ million
cases market is undergoing a transformation with newer entrants, challenging
the traditional labels and more so in the higher price points. There are high
potential niche opportunities that are emerging in the space.