How tier-2 cities are a promising market for the alco-bev Industry in India – ET BrandEquity

Representative imageIndia’s alcobev industry is one of the nation’s fastest growing sectors in terms of market size. Currently valued at about USD 55 billion, projections suggest that the industry will touch USD 64 billion by 2030. Spurred by rising disposable income, especially among millennials and GenZers, the influence of Western culture, as well as the rise of dynamic local brands serving fascinating tastes and flavours, the Indian alcoholic drinks scene is set to witness transformations that will propel exponential growth in the years to come.

From spirits to wines, beer, and an array of RTDs, the popularity of alcobev has soared in recent years. New bars are springing up every day across India’s major cities even as new distilleries and breweries open their doors every other day. The trend is such that alcobev lovers are now beginning to crave locally-produced alcobev products, further sparking growth in the sector. However, while the emphasis has been on tier-1 cities, it is important to unravel the potentials that tier-2 cities hold for the industry.

State-based analysis of alcohol consumption and tier-2 case studiesAlthough the spotlight has been focused on big, urban cities in India, recent analysis has shown that there’s more alcohol consumption in rural India than in urban centres. Overall, 1.6 percent of women aged 15 and above in rural India consume alcohol compared to 0.6 percent urban women within the same age group. Among men, it is 19.9 percent in rural India compared to 19.5 percent respectively, says a recent report.

Beyond that, current events among tier-2 cities are showing resilience and growth in both population and industrialisation. Already, the attention is shifting towards cities like Kochi, Lucknow, Indore, Bhubaneswar, Nagpur, Thiruvananthapuram, and Jaipur as the next best destinations for investments, especially in real estate. Naturally, such trends attract urban high-net-worth individuals and boost overall economic growth, leading to increased disposable income for residents, all of which can trigger growth in the alcobev market.

Cities like Kochi in Kerala, for instance, are known for their preference for Indian-made foreign liquor (IMFL) and less expensive local brands, which make up nearly 3.3 Crore cases per year in the whole of Kerala compared to roughly 55,000 cases of imported products. This reveals a huge market for local producers and, if latest trends are anything to go by, the growth in the alcobev market is imminent. This is coupled with the fact that the state has one of the highest per capita incomes in India and is a popular tourist destination.

Opportunities also exist for premium spirits, although with slow adoption at the moment, better infrastructure and improved retail walk-in experience can make a big difference. In the same vein, tier-2 cities like Goa and Nagpur are giving the tier-1 cities a run for their money when it comes to the alcobev industry. Only recently, an MOU was signed between a major international brand and the Maharashtra Government to establish a EURO 200 Million 60,000-litre-per-day Malt Spirit distillery in Nagpur, slated to become one of the country’s biggest distilleries.

The Northeast region is currently witnessing a surge in the emergence of alcobev brands, both local and foreign. Assam’s Guwahati has assumed the role of the star-city in all of Northeast India, boasting the largest alcobev retail store in all of Northeast, Central, and East India regions. This area has a long history of affiliation with alcoholic beverages, and traces of that can still be seen in its rich rice-based beer, wines and spirits, as well as the use of alcohol for certain rituals. As of 2020, Assam’s alcohol drinking population between ages 15 and 54 stood at 26.3 percent for women and 59.4 percent for men.

Leveraging the rising consciousness among alcobev consumers in the region, especially in states like Assam, Meghalaya, and Arunachal, there is a rising influx of alcobev brands from all across the world, culminating in a healthy blend of both local and foreign flavours competing for the waiting palettes of the consumers.

Coimbatore in Tamil Nadu is another city to watch out for, considering the high volume of retail liquor outlets in the state, presently at 6.8 outlets per lakh of population. This gives cities like Coimbatore a lot of leverage, considering its fast-rising profile of impressive entrepreneurial spirit and upwards of 25,000 micro, small, and medium enterprises (MSMEs).

A new dawn for India’s alcobev market

Currently among the fastest growing alcobev markets in the world, the sector accounts for 2 percent of the nation’s nominal GDP. It is also the world’s third largest alcobev market with an estimated 970 crore litres annually. Therefore, it is possible to imagine what the industry will become when other cities in the tier-2 category come on stream and assume their full potential in this segment.

The author, Vicky Chand, is director and CEO, Radiant Manufacturers. The views expressed in this article are those of the author and do not necessarily represent those of ET HospitalityWorld.

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• Published On Aug 2, 2024 at 04:40 PM IST

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