The rising affluence of India’s middle class will drive growth of as much as 10 per cent a year in the $33 billion spirits market, according to one of the nation’s oldest distillers.
After three years of stagnation when the industry faced sales restrictions, Indians are drinking more and spending on premium alcohol, said Abhishek Khaitan, the managing director of Radico Khaitan Ltd., a market leader in vodka with its Magic Moments brand. The trend will likely continue as urban dual-income families in the nation of 1.3 billion follow peers in the U.S. and Singapore when it comes to eating and drinking out, he said.
India’s spirit sector -- which includes whiskey, brandy, rum and vodka -- is estimated to expand 25 per cent to Rs 2.92 trillion ($41 billion) by 2022, according to Euromonitor International. The country is among the world’s most attractive alcohol markets and should increase its share of global consumption from about 2 per cent given high single-digit to low-teen growth, according to a report from brokerage Nirmal Bang.
“There’s a cultural change happening,” Khaitan said. “Most importantly, the middle class is emerging in India and premiumization is happening.”
The Indian distiller, founded in 1943, started selling branded products about two decades back. The company introduced its Magic Moments vodka brand in 2006, added more premium products and new flavors. These along with its branded whiskey, rum and other spirits have spurred profitability. Profits jumped more than 52 per cent last year.
Given the local market’s potential, offshore companies have come calling, Khaitan said, though he isn’t interested in selling. “My passion is liquor,” he said.
Khaitan also discussed consumption trends and plans to make Radico debt-free.
Khaitan expects growth of about 8 per cent to 10 per cent for the spirits industry over the next three to four years.
He expects vodka consumption to pick up in India and its share to triple over the next decade from about 3 per cent, spurring demand for Magic Moments. Vodka accounts for close to 30 per cent of the global spirits market, he said.
Over the past three years, the company has focused on free cash flow and reduced its debt to Rs 3.7 billion as of Sept. 30, he said. It plans to have no working capital debt over the next year and a half and become a debt-free company.
Shares of the company declined 1.7 per cent to Rs 406.05, falling for a second day, and paring this year’s gains to 39 per cent.