India’s Beer Market to Fizz Thanks to Youth, Culture Change: BMI
India’s Beer Market to Fizz Thanks to Youth, Culture Change: BMI
(Bloomberg) -- When it comes to drinking beer, India’s days as a lightweight may be coming to an end.
That’s the view of BMI Research, which sees “huge potential” for growth and investment in India’s underdeveloped beer market thanks to young and increasingly affluent consumers, low base effects and changing cultural attitudes. Growing momentum in the country’s nascent craft beer industry adds further support to its outlook.
“Attitudes toward alcohol are changing, especially among young urban-dwellers who are gaining a taste for western beer and spirits,” BMI said in a Jan. 5 note.
Per capita beer consumption in India last year was 4.6 liters (9.7 pints), a mere drop compared with the Asia average of 57 liters, according to BMI. India still ranks among the lowest globally in beer consumption partly because regulatory restrictions have limited multinational brewers’ expansion opportunities, BMI said. Obstacles include licensing restrictions, high taxes and advertising bans.
“Despite this, we believe India holds significant long-term growth potential as a beer-drinking culture,” BMI said.
It sees the four key drivers as:
- Young, growing middle class: This burgeoning demographic will spend more on beer, which has premium associations in India because spirits are cheaper and more widely accessible for the general population.
- Low base effect: In volume terms, beer sales will expand at a compound annual growth rate of 7.5 percent between 2017 and 2021, according to BMI.
- Changing cultural attitudes: Drinking in bars is “fast becoming part of the social milieu” in cities like Delhi, Mumbai and Bangalore, though alcohol consumption is still stigmatized in poorer rural areas where traditional conservative beliefs prevail, BMI said.
- Craft brews: With more than 80 operating microbreweries versus just two in 2008, sales of craft beer are rising 20 percent on-year, BMI said, citing the All India Brewing Association. The note highlighted Bira 91 as a “star performer” with sales surging from 150,000 cases in 2015, its launch year, to an anticipated 700,000 cases in 2016.
Still, it isn’t easy to buy beer in much of India as outlets aren’t very easily accessible and permits are needed in some states. And beer is expensive compared to spirits because alcoholic drinks are taxed by volume in India, BMI said. Operating costs are also high due to unreliable transportation and frequent power cuts, so the industry continues to face plenty of challenges.
BMI cited the case of United Spirits, which it said needs 200,000 permissions, licenses and approvals every year to operate its business. “The red tape reflects India’s objectives of discouraging drinking as enshrined in the constitution (tee-totalism was advocated by Gandhi),” it said.
Bihar imposed a complete ban on sale of any kind of liquor last year, becoming the fourth dry state in the country after Nagaland, Manipur and Gujarat.
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Will Davies in Hong Kong at wdavies13@bloomberg.net
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Christopher Anstey at canstey@bloomberg.net