Market Research has shown that Indian consumers are 
normally
introduced to beer from the student level. They then graduate to rum
and whisky as they start earning money and, ultimately, to Scotch when
their purchasing power goes up.
The level
of product penetration is quite low in India, around 20 per cent in
urban areas. Demographic statistics show that 41 per cent of the country’s
population is above the age of 18, which is the legal drinking age and
50 to 70 million of these are men who are the target audience.
An estimated
10 million people consume alcohol in India, out of a population of one
billion. Owing to the deep-rooted religious and social disapproval of
alcohol consumption in India, prohibition was included as one of the
tenets of the constitution. However, states that imposed prohibition
had such a disastrous experience with it that it is no longer seen as
an option. The country’s social environment is undergoing gradual change,
especially among the younger generation, as people become more exposed
to Western lifestyle.
There are
two major market segments for spirits in India -- branded and unbranded.
The spirit sector is highly regulated. The government controls the 36,000
outlets through which liquor is sold and regulates the manufacture,
transport and advertising of alcoholic products.
Key
demand drivers:
Changing
consumer perception
As urban consumers become more exposed to the western lifestyle, through
overseas travel and the media, their attitude towards alcohol is relaxing.
The social fabric is undergoing a transformation as drinking has become
acceptable, mixed drinks have become more popular and social drinking
has acquired a certain legitimacy.
Increased
consumption of mixed drinks
To broad base consumption, companies are focusing on flavoured products
with a low alcohol content. The goal is to recruit new consumers. They
thus hope to build brands and steer away from price-based drinking.
Pre-mixed drinks have already proven to be popular in western countries.
In India, they are targeted largely at women in the hope of overcoming
the cultural bias towards alcohol consumption. Increased consumption
of mixed drinks is already contributing to demand and will hopefully
add a new layer at the bottom of the pyramid.
Companies
pushing lower-priced branded products
The aim here is to move up consumers of country liquor to the low-priced
whisky segment. As of now, the country liquor segment dwarfs the branded
drinks market. While the branded spirits sales are around 70 million
cases, country liquor alone sold more than 200 million cases.
Regulatory
changes
Changes
in the levels of excise duties and deregulation of distribution would
cause prices to drop and result in a steep rise in demand. Free movement
of alcoholic products across states would enable economies of scale.
Companies could reduce their production costs. Moreover, perhaps the
ban on advertising alcoholic products will be lifted one day. Manufacturers
claim that research has established that advertising only influences
consumers’ brand choice but does not convert non-users.
Presence
in key markets
The key
markets for whisky consumption are in the north and the south of India,
which together constitute around 68 per cent of the market. In the south
consumption has been growing at a scorching pace of over 150 per cent
per annum. It is important to have production facilities located in
each of the states with large markets because of the barriers in transporting
alcohol from one state to another. The key states are Andhra Pradesh,
Maharashtra and Punjab.
Adoption
of technology to control costs
Since
the market in India is made up of distinct pockets —28 different states
—it is very difficult to gain economies of scale. One of the key requirements,
therefore, is to set up efficient plants to control costs.
Strategic
options
The strategies
of the players for acquiring a distinct competitive advantage should
be cost leadership or differentiation. Either a cost focus or a differentiation
focus in the specific market segment selected.
