Indian-made Foreign Liquor Ingredients Market Assessment, By Type, By Liquor Type, By Region, Opportunities and Forecast, FY2017-FY2031

Indian-made foreign liquor ingredients market size was valued at USD 12.8 billion in FY2023, which is expected to grow to USD 25.2 billion in FY2031, with a CAGR of 8.8% during the forecast period between FY2024 and FY2031. The Indian-made foreign liquor (IMFL) ingredient market is experiencing a transformative phase, driven by evolving consumer preferences, economic growth, and changing regulations. As disposable incomes rise and urbanization accelerates, the demand for IMFL continues to grow, especially in the premium and semi-premium segments.

Moreover, the market is shifting towards grain-based liquors, diversifying from the traditionally popular molasses-based variants. Consumers are increasingly drawn to premium products, influenced by exposure to international trends and a desire for a sophisticated drinking experience. However, manufacturers are responding by innovating and introducing a wide array of IMFL options to meet this demand, leveraging advancements in production technologies. Additionally, the expanding network of bars, pubs, government-licensed outlets, and private retail chains enhances accessibility, further stimulating the market. As the industry embraces sustainability and healthier ingredients due to global influences, the IMFL ingredient market is poised for continued growth.

Increasing Consumption of Premium Liquor is Rising Demand

The rapid urbanization in India significantly increases disposable incomes and empowers consumers to ascend to premium segments within the Indian-made foreign liquor (IMFL) industry. The escalation is further propelled by the exposure of Indian consumers to international markets and their desire to align with global trends. The aspiration for a more sophisticated drinking experience drives a surge in demand for premium IMFL, creating a favorable market for higher-end domestic offerings. Notably, the influence of international travel and exposure to global products reshapes preferences, prompting the industry to adapt and diversify its offerings to cater to these evolving tastes. In response to this demand, beverage companies strategically invest in marketing and branding initiatives, pivotal in attracting consumers and effectively conveying the value and exclusivity of semi-premium and premium products.

For instance, the consumption of Indian-made foreign liquor (IMFL) witnessed a notable increase of 17.97%, rising from 1,999.25 lakh bulk liters (LBL) during the 2020-21 period to reach 2,358.60 LBL by the end of 2021-22. This increase in consumption of India-made Foreign Liquor drives the market.

Increased Accessibility to Further Strengthen the Market

In recent years, significant shifts in societal attitudes and lifestyles have led to a notable increase in the social acceptance of alcohol consumption. The acceptance now encompasses drinking in family settings and social gatherings among males, females, and younger individuals. The market has responded to this shift with a proliferation of IMFL and many brands. These products are readily accessible through government-licensed outlets, government shops, private licensed retail chains, and restaurants, pubs, and bars. Additionally, there has been a substantial growth in the number of bars and pubs to accommodate this evolving trend.

For instance, CEO of First Fiddle restaurants, known for brands like Warehouse Cafe, Tamasha, Lord of The Drinks, and Flying Saucer Cafe, mentioned, "Our focus is on cities like Ranchi, Surat, and Bhopal to expand our presence. Moreover, we are strategically targeting popular tourist destinations such as Goa, Jaipur, and Jim Corbett. We recognize a significant potential in smaller cities, and currently, space is not a limiting factor." This expansion of pubs and bars into tier-2 cities is further expected to improve the demand for Indian-made foreign liquor ingredient in the country.

Whiskey Holds the Highest Share Among the Indian-made Foreign Liquors

India produces thirteen globally top-selling whiskey brands, encompassing a spectrum from affordable options to blends and single malts in the most exclusive category. In 2021, whiskey emerged as the dominant segment, making up 65.4% of sales volume and a substantial 74.2% of the market value. The whiskey category, constituting two-thirds of the IMFL market, experienced a remarkable 17% growth. Whiskey's dominance in the Indian market results from its cultural significance, perceived value, diverse offerings, and effective marketing strategies by domestic and international whiskey producers.

With a volume market share of 19.1%, Brandy stands as the second most consumed beverage in the Indian market. Brandy holds a significant share in the Indian market since some consumers believe moderate brandy consumption has potential health benefits, including aiding digestion and providing warmth during colder months.

Impact of COVID-19

The Indian-made Foreign Liquor (IMFL) ingredients market in India experienced significant disruptions in its supply chain due to the global impact of the COVID-19 pandemic. These disruptions led to challenges such as scarcities of crucial materials such as yeast, crop & molasses, and intricate logistical issues, ultimately impeding the production and distribution of IMFL ingredients. Additionally, pandemic-induced lockdowns and movement restrictions across the country resulted in reduced consumption of IMFL due to the shutdown of bars and retail stores across the country, affecting the utilization and adoption of IMFL ingredients in various regions of India. Economic uncertainty and increased health consciousness brought by the pandemic played a role in influencing consumer purchasing behavior, thereby impacting the strength of the IMFL ingredients market in India.

Impact of Russia-Ukraine War

While a substantial portion of India's population relies on agriculture for consumption, ensuring food affordability remains a significant challenge. The disruptions in the supply chain due to the Russia-Ukraine war has exacerbated this issue in the country. Ukraine is ranked in the top five global barley producers, contributing 18 percent of global barley exports in 2022. Although Indian brewers primarily procure barley domestically, the prices in India increased coordinated with global prices due to the disruption in the global supply chain. Along with Barley, other grains prices, such as wheat and corn used in manufacturing IMFL, witnessed cost increase due to the ongoing Russian-Ukraine war.

Key Players Landscape and Outlook

Major manufacturers in the Indian-made Foreign Liquor (IMFL) Ingredients market are innovating and developing novel products to optimize the brewing process for enhanced operational efficiency.

For instance, Novozymes South Asia Private Limited introduced heat resistant Termamyl SC DS into starch liquefaction during August 2022, which significantly reduced the overall brewhouse mashing process time by 43%. Additionally, there was a 0.5% enhancement in extract, leading to improved efficiency in the brewhouse.