India Leads the Shift in Alcoholic Drinks Consumption Towards Developing Countries

In 2023, the global alcoholic drinks industry experienced a slight decline of 0.4%. This downturn was attributable to several factors, including inflationary pressures, market saturation in Western countries, an ageing consumer base in these markets, and a significant slowdown in economic growth in China. Following a period of robust growth, fuelled by post-pandemic “revenge spending”, both retail (off-trade) and hospitality (on-trade) sales decreased, indicating a shift away from this spending pattern. However, India emerged as a notable exception, showcasing strong growth and solidifying its position as a key market for the global alcoholic drinks industry, which is increasingly dominated by developing economies.

A young population, favourable macroeconomic factors and the fascination with whisky drive alcoholic drinks in India

In 2023, the Indian alcoholic drinks market surged to 6.7 billion litres, marking 7.5% year-on-year growth. This expansion was driven primarily by a young population and a burgeoning middle class with significant disposable income. India had a median age of 29.1 years in 2023, and a substantial population of Millennials (331 million) and Generation Z (383 million). This young demographic profile, coupled with a rapidly expanding middle class, has fuelled consumption in recent years. Furthermore, the entry of a significant number of individuals into the legal drinking age each year is predicted to sustain market growth over the next five years.

India’s economic growth also plays a crucial role. Despite global challenges, India’s real GDP expanded by 8.2% in 2023, significantly outpacing the 5.0% growth across Asia Pacific overall. This strong economic performance was underpinned by the release of pent-up demand, robust private and public sector spending, and increased foreign investment. At the same time, inflationary pressures, which particularly impacted alcoholic beverages and tobacco in 2022, moderated in 2023, due to base effects, weaker global commodity prices and softer private consumption.

Whisky’s appeal in India transcends traditional market demographics

India lags other populous nations in terms of total and per capita beer consumption, but reigns supreme as the world’s largest consumer of whisky, outstripping the combined consumption of the other top 10 whisky-consuming countries, which include the US, Japan, France and the UK. While India’s substantial population undoubtedly contributes to this dominance, its per capita whisky consumption is also remarkably high, second only to France and the US among the major whisky consuming countries. Except for India and Brazil, most major whisky-consuming nations are developed economies with an older demographic profile.

Lifestyle and cultural shifts will ensure India’s significance in the global alcoholic drinks market

India’s consumer landscape is undergoing a significant transformation, driven by demographic shifts, particularly rapid urbanisation and population growth. As Indian consumers increasingly seek better education and career opportunities, urban populations are projected to experience sustained growth. By 2028, 39% of India’s population are predicted to reside in urban areas, with these areas boasting higher per capita disposable income than rural areas. With real GDP growth expected to outpace inflation over the period to 2028, per capita disposable income in India is projected to increase by 36% in real terms between 2023 and 2028, fuelling a rise in consumer expenditure across various sectors.

Rapid urbanisation is contributing to a shift in perceptions, reducing the taboo associated with alcoholic drinks in smaller cities, while there is a move away from their primary association with intoxication in rural areas. Urban consumers are increasingly viewing alcoholic drinks as a social lubricant, with growing acceptance of their consumption within social settings. This shift in consumer attitudes, coupled with rising disposable incomes and a growing urban population, presents significant opportunities for the alcoholic drinks industry in India.

While the developed nations of Germany, Japan, the UK, Spain and France currently rank among the top 12 largest alcoholic beverage markets by volume consumption, the landscape is predicted to undergo significant shifts between 2023 and 2028. The emerging economies of Vietnam, the Philippines, Nigeria and Cambodia are poised to displace some of these developed markets in the top 12, while Mexico and South Africa are likely to solidify their positions as major players in the global alcoholic drinks industry, with India leading the charge.

Despite many positives, inflation and its associated challenges persist. India lacks uniform regulation, making it difficult for companies to set prices across states, absorb inflation and protect their profit margins. Likewise, Indian stakeholders are calling for consistency in various trade deals with regions like the UK, Australia and the EU, seeking to ensure equal opportunities for local players. Stakeholders are hopeful for positive developments on the ground, including favourable discussions regarding the regulatory landscape and a reduction in bureaucracy to further stimulate growth.

Watch this panel discussion, The Future of Mindful Drinking in Modern Markets, which explores the rapid rise and transformative potential of the "non and low" alcohol beverage category.