Business - India;Liquor industry raising a toast to slowdown

M Padmakshan

MUMBAI: Here’s one industry that’s on a high even in the times of slowdown. The liquor industry has not only bucked the financial crisis affecting most other sectors, but has managed to post a higher growth rate of 18-20%, against its normal growth rate of 10-12%.

It is no wonder that industry players are raising a toast. “My industry is recession proof,” said Vijay Mallya, who controls 70% of the spirits market through his UB Group.

UB has reason to cheer. The April-October sales figures show a 18% rise over the corresponding period last year. Sales grew by 13% in the same period last year. Vijay Rekhi, who heads United Spirits, the spirits behemoth of UB Group, said: “This is an unprecedented growth.”

It has been seen that in times of gloom, alcohol consumption goes up. This boosts sales of the Indian Made Foreign Liquor (IMFL) segment which offers hundreds of brands in various ranges of price, style and quality to consumers. Industry sources peg current average monthly sales figure at 13-14 million cases, a rise of 17% over the average monthly sales figure for last year.

The spirits industry has a penchant for reading recession as boom. This view has its origin in the bootlegging boom during the Great Depression of the 1930s, which was necessitated by an increased demand for alcohol that could not be catered to by legal channels.

But this consumption trend is not unique to recession. A similar pattern is seen during the times of boom too, when tipplers drink in celebration of the good times. The last few years of boom have seen the spirits industry growing from 90 million cases to 160 million cases, with an average rate of growth of 12%. This year the industry saw the pace of growth moving upwards to over 18%.

Deepak Roy, director of Kishore Chhabria-led ABD (Allied Blenders & Distillers) which manufactures Officer’s Choice whisky said: “We are set to cross 9 million cases of Officer’s Choice whisky this year. There is a 17% growth this year for the brand against the 12% growth last year.”

Raju Vaziraney, chief operating officer (COO) of Radico Khaitan, the second-largest spirits company in India that owns 8 PM whisky brand, said that onsite drinking has come down to 10-15%, while offsite drinking has gone up by about 20%. Offsite drinking constitutes almost 80% of total liquor sales. Offsite drinking is preferred over onsite drinking because the latter is costlier.

In the liquor industry parlance, onsite drinking refers to drinking at bars and restaurants, while offsite drinking refers to people drinking at home. Usually, 80% of the sales are for offsite drinking and this is where the sales have gone up considerably. This has helped to boost overall sales by 15-18% despite a decrease in sales at bars and restaurants.

Zoraster Zend, owner of Peekay Wines, Mumbai, one of the largest distributors of spirits and wines in the country, confirms the rise in sales. “The sales are definitely higher. We, however, have not quantified it so far,” he said.