The liquor industry in India has grown significantly over the past decade and is currently valued at Rs. 8,500 crore. Major players include United Breweries, Shaw Wallace, and Jagjit Industries. The industry faces a strict legal environment with bans on advertising and state-level licensing. Consumer demand has shifted from country liquor to IMFL. Substitutes like soft drinks and health drinks pose a threat. Suppliers have bargaining power over raw materials. Rivalry within the industry is intense as companies compete on packaging, pricing, and promotions. Future growth is predicted with the commercial production of ethanol blending.

1. Liquor Industry
Presented to:
Prof. V.P Mishra
&
PGDM -2

2. Content
• Introduction
• Performance of the industry
• List of major players of the sector.
• Legal environment
• Social environment
• Economic environment
• Porter‟s 5 forces model

3. Introduction
• Indian Liquor Industry is divided into 2 broad
categories
 Indian Made Foreign Liquor (IMFL)
 Country Made Liquor
• Indian Liquor Industry with market value of INR 8500
Crore against INR 900 Crore in 1999 & is growing at
12-15% P.A over last 2 yrs.
• Shift from country liquor to IMFL because of rising
per capita.
http://www.livemint.com/articles/2011/11/23210054/B
oom-time-for-country-liquor.html

4. Industry Structure
Alcoholic beverages (8500 Crore)
IMFL Country Liquor
Rs 6150 Crore Rs 2350 Crore
Brown Spirits White Spirits
Licensed Illicit
Whisky Vodka
Brandy Gin
Rum
http://www.livemint.com/articles/2011/11/23210054/
Boom-time-for-country-liquor.html

5. Major Competitors
Manufacturer Brands
United Breweries (UB) Group( Bangalore) King Fisher, Kalyani Black
Label, Signature, Blue
Riband
Shaw Wallace (Calcutta) Haywards
Jagajit Industries (Kapurthala, Punjab) Aristocrat
Mohan Meakins (Solan, Himachal Pradesh) Golden Eagle
Associated Breweries & Distilleries (Mumbai) London Pilsner, Smirnoff,
Gilbeys Green Label,
Malibu, Archer‟s
Peach Schnapps

6. Macro Economic Environment
• Legal
• Social
• Economic

7. Legal Environment
• Ban on direct advertising
• Excise regulations and Licenses
• „Regulated‟ industry - movement, prices of intermediate
goods (molasses, ethanol) tightly controlled - state
governments exert considerable influence.
• Subject to licensing under Industrial (Development and
Regulation) Act, 1956
• Cap on licensed capacity; special license for expansion
• Plethora of duties and taxes from bottling to sales stage;
varying from state to state.

8. Custom & Duties
• Sales tax, Bottling Fee, Litre Fee, Vend Fee, Privilege
Fee, Import/ export Pass duty
• Other taxes levied are: Excise Duty : Liquor from
spirits - Rs. 45/- bulk litre; Premium Malt Whisky -
Rs. 60/- bulk/ litre; Litre Fee - Rs. 20/- bulk litre; Sales
tax : 60%; cess 5%
• Import duty on whisky, rum, gin & vodka, liqueur -
230 %
www.crisil.com

9. Social Environment
• Increase in disposable income
• Changing lifestyles of middle class
• Western culture influence
• Changing Trends – Youngsters, Parties and Celebrations
• Minimum age
 Beer - from 18 to 21
 Hard liquor - from 21 to 25
• In India 40-50 % of all males and 1% of all females
consumed alcohol last yr.
• 62% drinkers classified as light, 29% as moderate drinkers
and 9% as hard drinker.
http://www.livemint.com/articles

10. Prohibition in India
• Soon after independence, prohibition was imposed in
the erstwhile state of Bombay.
• The first large-scale movement against alcohol began
in the 1970s, when rural women in various parts of the
country protested against the sale of liquor in their
villages.
• Information and Broadcasting ministry of India banned
the ads.
• Even after the ban, liquor companies continued to
advertise their drinks in the form of surrogate
advertisements.

11. Legitimate business & their surrogate advertisements
Brands Surrogate advertisements
McDowell’s malt whisky McDowell’s Soda/water
Radico Khaitan’s 8 pm whisky Radico Khaitan’s water
Hayward’s 5000 Beer Hayward’s water/soda
Derby Special Derby special soda
Bacardi Liquor Bacardi Blast CDs & Cassettes
Bagpiper liquor Bagpipers soda and cassettes
Kingfisher Beer Kingfisher bottled drinking water
Royal Challenger whisky Royal Challenger golf accessories &
mineral water & cricket team
White Mischief Liquor White Mischief holidays
Smirnoff Vodka Smirnoff cassettes & CDs

12. Economic Environment
• It is a well developed - Rs 8,200- 8500 Crores industry
in India
• Past growth 12 % CAGR per annum
• Brown spirits - particularly whisky, rum & brandy
account for over 75 % of this market
• South and North share 60% of market
• Market size – 20 million cases in 1999 to 84 million
cases in 2011
http://articles.economictimes.indiatimes.com/2010-
09-

13. Porters 5 forces model

14. Threat of New Entrants
•There are huge complexities and high regulations to get entry in this
industry.
•The new players need to satisfy the licensing and need to get approvals
by the states and central government.
•For international players, the key is find the right partners and links who
understand the Indian market and legislations.

15. Contd..
• With liquor makers, both local and foreign, becoming active,
competition is intense.
• UB-Carlsberg, South African Breweries and some others are awaiting
clearance following government stalemate on account of the Supreme
Court judgment, the judgment has created a confusion whether the
proposals related to FDIs and the issuing of licenses for the liquor
industry will be addressed by the Central or the State governments.
• A lot of mergers and acquisitions in the international arena have begun
to impact the joint ventures.
http://articles.economictimes.indiatimes.com/2010-09-

16. Threat of Substitutes
•Today with the advancements and up gradation in the standard of living,
people are becoming more health conscious and a large chunk of the
population has become aware of the fact that Liquor is harmful for
health.
•For this a lot of people have shifted their demand from Liquor to juices
& other health drinks.
Major substitutes for Liquor are:
• Soft Drinks
• Non-alcoholic drinks
• Coke
• Pepsi
• Other Health drinks

17. • There has been a decline in the sale of liquor in India by 2.5% in
the year 2010 which clearly indicates the impact of substitutes and
awareness amongst the consumers.

18. Bargaining Power of Customers
• The Liquor industry has witnessed the consumers always at a weaker
end.
• There is not much bargaining power in the hands of the consumers in
Indian liquor industry as the prices are set by the forces of demand &
supply and the demand for liquor here is high as compared to the
supply.
• Hence, the producers are at a beneficiary end and charge higher prices.
• In India, a liquor brand is identified and is appreciated only on the basis
of it‟s higher price.
• It is an interesting fact that Companies use “High Price” as one of it‟s
promotional strategy to attract the consumers.
http://articles.economictimes.indiatimes.com/2010-09-

19. Bargaining Power of suppliers
•The key raw material for IMFL players is Molasses which is a by
product of sugar. Molasses is distilled & processed to form rectified spirit
called Ethanol.
•The players which have primary distillation facilities in their Plants
directly consume molasses, rest all have to purchase Ethanol.
•As molasses demand arises only from ethanol demand, the demand
supply scenario for ethanol determines the raw material prices for the
IMFL Players.
www.crisil.com

20. Continued..
• Ethanol demand is expected to rise in future, when the commercial
blending of ethanol with petrol (for producing Gasohol) will take off.
• In Long term -Molasses supply is going to increase as more sugar
manufacturers are expected to set up primary distilling facilities and as new
sugar factories are expected to come up in the form of integrated plants
with cogeneration & distilling facilities
• The suppliers are able to play easily with the prices of these raw materials
hence charging higher prices from the Liquor producers.
www.crisil.com

21. Predictions regarding Raw Materials
• It is predicted by the analysts that after the commercial production
of “Gasohol” the prices of Molasses is likely to increase.
www.crisil.com

22. Rivalry within the industry & their Market Share
The top five competitors in Liquor industry are:
United Breweries (UB) Group( Bangalore) 48%
Shaw Wallace (Calcutta) 36%
Jagjit Industries (Kapurthala, Punjab) 6 %
Mohan Meakins (Solan, Himachal Pradesh) 5.5%
Associated Breweries & Distilleries (Mumbai) 4.5%
www.oppapers.com

23. Rivalry
• Major players create competition on the basis of:
– Looks of the liquor bottle
– Pricing the product much higher
– Innovative promotional campaign
• Beer sales in India are forecasted to grow at CAGR of 17.2 % by
2012
• Future plans for the industry depicts strong growth for the Indian
beer market as the major players like kingfisher have been quoted
saying that they have significant expansion plans for the next few
years.
• The industry is looking forward for merger of United Breweries
and SABMiller‟s possible future acquisitions .