Mumbai, Jan. 10 - Indian alcoholic drinks makers had plenty to cheer over the holidays as revellers downed more drinks, while foreign firms angled for a spot at the table.
In a country that still frowns on drinking, about 220 million cases of beer and branded liquor were sold last year and annual sales of alcoholic beverages are growing by about 20 percent annually.
That has already drawn the likes of top drinks maker Diageo, Pernod Ricard, LVMH's Moet Hennessey and SABMiller, with Anheuser-Busch Cos. Inc. and Danish brewer Carlsberg also firming up entry plans.
More than half of India's 1.1 billion population is below the age of 25 years and incomes are rising, but strict government controls on advertising, manufacturing capacities, distribution, retail and pricing pose a big challenge to firms seeking growth.
In addition, UB Group's United Spirits Ltd. has more than half of India's spirits market, while United Breweries Ltd., with joint venture partner Scottish & Newcastle, has nearly half the beer market with well-known brands.
Some firms like Diageo have adopted a twin strategy to straddle the larger market for mid-priced products, as well.
"We are in the premium business, but we are using that in combination with cheaper born-in-India brands," said Asif Adil, head of Diageo India, which has a joint venture with Radico Khaitan Ltd. to make mid-priced spirits locally.
FROTHY MARKET
Then there is wine, which makes up only a fraction of the $1.8-billion alcoholic drinks market, but is growing nearly three times as fast as whisky or rum, the traditional favourites.
"Among newer consumers entering the market, there is a discernible interest in relatively healthier options," said Sonal Shah, senior director - agribusiness fund management at Yes Bank.
"Wine has the added advantage of being a lifestyle product."
India's top three wine makers have more than two-thirds of the market of more than 5 million bottles, valued at $60 million, and they are seeing bigger demand even for pricey sparkling wine.
Years ago, Indian brands were poorly packaged and vinegarish to taste. Now, Indians are quaffing the local Sula Vineyards Brut and Champagne Indage Ltd.'s Ivy Brut, priced at least four times lower than foreign brands like Krug and Moet Chandon.
Sula Brut had sales of about 3,000 cases in December, nearly double the quantity it sold in the same month the previous year.
"The price tag on international champagne tends to dissuade Indian consumers, while Indian sparkling wines also are (good) quality," said Rajeev Samant who heads Sula, whose label with a smiling sun is seen at top restaurants and small bars alike.
High import tariffs, a sore point with the European Union, amount to as much as 550 percent on imported spirits and 264 percent on imported wines, with states imposing different duties.
Per capita consumption of beer, at 0.7 litre, is among the lowest in the Asia Pacific, and imported beer brands have less than 0.5 percent of a market forecast to grow nearly 20 percent annually to 1.2 million litres by 2010, or worth $22 billion.
Foreign firms are fighting to compete. LVMH's Veuve Clicquot owns 20 percent in winemaker Grover, while Diageo is looking for a vineyard in India and SABMiller has bought local breweries.
In the meantime, local firms are eyeing overseas buys.
India's top brewer and spirits maker, the UB group, in July bought French sparkling wine maker Bouvet-Ladubay and is scouting for more buys, including Scottish spirits maker Whyte & Mackay.