India: Liquor companies toast revived consumer demand in January-March

India’s liquor companies said consumer demand revived in the January-March quarter on a low base in the wake of demonetisation in November 2016, the fading impact of last year’s highway ban and increased stability following distribution changes in some states, the Economic Times reported on April 11.

Supreme Court restrictions last year on the sale of alcohol near state and national highways led to the closure of about a third or about 30,000 of the country’s liquor vends, causing a drop in demand for beer and spirits.

The court subsequently clarified its ruling, easing conditions for liquor sales and allowing many outlets to reopen. “The slowdown witnessed due to the highway ban is now a thing of the past,” said Ahmed Rahimtoola, marketing head at Allied Blenders, which sells Officer’s Choice, the world’s largest spirits brand. “Almost 90% outlets have reopened and things are back to normal.”

Alcoholic beverage sales in the country declined for the second consecutive year in calendar 2017 with spirit shrinking 3% and beer volumes falling nearly 10%.

Market leader Diageo-controlled United Spirits posted a 2% decline in the nine months ended December while United Breweries saw sales volume rise 6%.

Danish brewer Carlsberg posted a 2% decline in volume in India in 2017, a sharp reversal from 16% growth a year ago.

“Consumer demand has gradually picked up this year and the Indianmade foreign liquor or IMFL industry should register mid-single-digit growth in FY19 against 2% growth in FY18,” Rahimtoola said.

In the March quarter last year, several companies destocked channels as there wasn’t enough clarity on the highway ban implementation, hurting sales further after demonetisation.

Besides the bounce from that low base, premiumisation has been a secular trend across categories, companies said.

“The impact of the highway ban is expected to subside further although the accessibility of beer still remains a challenge,” said Ben Verhaert, president, India, AB InBev, which sells Budweiser, Hoegaarden and Corona.

“Since October last year, we are witnessing a surge in consumer demand and look forward to further leverage the positive trend towards premiumisation coupled with product and packaging innovations that will help us further expand our reach in major markets across the country.”

Since 2016, Kerala, Bihar and Tamil Nadu — which account for 20% of the country’s alcohol consumption — have put in place varying degrees of prohibition. Apart from this, policy changes in West Bengal, Chhattisgarh and Jharkhand to allow liquor sales only through government-owned corporations, similar to states such as Delhi, Rajasthan, Kerala and Tamil Nadu, added to the uncertainty. This led to companies not pushing products aggressively in states that are expected to change their route-to-market to minimise the credit risk of dealers and distributors.

During an investors call in January, USL had said it expected all these markets to stabilise and strong performance coming back in each of these spaces post April.

“The adverse impact of the highway ban has gradually reduced, with demand moving to the balance stores.

With stability returning from some of the route-tomarket changes, we see a more positive outlook for growth,” said Anand Kripalu, MD, Diageo India.

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