The popular catchphrase "Let's catch up over drinks" appears to be losing its allure, especially among the current generation comprising millennials and GenZs. They seem less enthusiastic about drinking on dates and have different motivations for consuming alcoholic beverages – seeking experiences rather than just intoxication. This shift in drinking preferences bodes well for wine and beer manufacturers, according to a report by Kotak Institutional Equities.
The report stated, "We anticipate a faster growth in the share of low-alcohol beverages as consumers mature and social drinking gains prominence over intoxication." This pertains to the consumption of beer and wine.
India's alcoholic beverages market has primarily been dominated by spirits like whisky, brandy, and rum, among others. These spirits account for 51% of the total alcohol consumption by volume and a significant 76% by value. Following spirits, beer holds the second-largest share at 46% in terms of volume. On the other hand, wine currently occupies a relatively small percentage of the market.
Comparatively, India's per capita wine consumption is less than 100 ml, making up less than 1% of the overall alcohol consumption. This stands in stark contrast to the global average of approximately 13% for wine consumption. In developed countries, wine consumption is considerably higher, reaching as much as 30% in select European nations, where wines are frequently paired with meals.
However, as preferences evolve, there are expectations of market expansion in the wine segment. Kotak projects that the wine industry will witness a compounded annual growth rate (CAGR) of 10% in volumes over the next five years, indicating potential growth in this segment.
The trend of increasing wine consumption is being further fueled by the breaking of cultural taboos surrounding drinking, leading to more women embracing wine globally, constituting the largest group of wine drinkers. Women are drawn to wine due to its perception as a healthier and more sophisticated beverage for social gatherings, contributing significantly to the promotion of wine consumption among them. This emerging group of independent women is expected to play a vital role in driving the expansion of the wine category, as highlighted in the report.
Moreover, the love for wine is predicted to spread beyond select urban centers such as Mumbai, Bengaluru, Delhi NCR, Pune, and Hyderabad, which currently account for over 70% of wine sales. This presents an additional growth opportunity as the demand for wine is anticipated to increase in tier 1 and tier 2 cities as well, according to Kotak's expectations.
Although India has a relatively small number of wine drinkers, many of them are wine connoisseurs. Notably, apart from premium wines made from 100% grapes, there are also wines produced from molasses and sugar with an alcohol content of under 20%.
The 100% grape wine market is projected to outpace the overall category with a growth rate of 12.5%. According to Kotak, the fortified wine segment, which falls in the lower end of the popular segment, is experiencing a decline primarily due to its inferior quality and a shift in consumer preference towards 100% grape wines.
Several factors indicate that higher-end wines are expected to witness increased sales. The rise in the prominence of on-trade channels and occasions, along with rising disposable incomes, rapid urbanization, and the growing influence of social media on millennials, all contribute to this trend, as stated by Kotak.
Notably, wine drinking is now viewed as an 'aspirational' activity among Indian consumers, which is shaping their preferences in this regard.
Despite the aspiration and premiumization trends, Indian consumers are not necessarily leaning solely towards imported products either.
According to Kotak, apart from Pernod Ricard, none of the major global wine or alcoholic beverage manufacturers have gained significant prominence in the Indian wine sector.
Conversely, Indian wine players are making strides by introducing new products to their premium portfolios. For example, Sula launched The Source, Rasa, and Dindori in the last five fiscal years. Fratelli, in collaboration with Boisset, introduced J'NOON as its premium brand.
Grover Zampa has also entered the premium wine category with brands like Signet and La Reserve in collaboration with Chateau D'Etroyes. Additionally, it has introduced new blends like Syrah-Grenache to enhance its presence in the premium segment.
With the availability of more high-quality wines made
from locally grown grapes in Maharashtra and Karnataka, boosted by wine tourism
and other factors, the trend seems favorable for Indians who appear to be
gravitating towards more refined drinking experiences.
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