Overview: State-level tax increases have altered consumer behavior in the Indian alcohol sector, driving beer volumes up 17% while spirits declined 1%. Whisky, comprising nearly two-thirds of the spirits market, saw demand weaken for mass-priced brands during the June quarter.
The Full Story
Volumes of spirits, which exclude fermented alcoholic beverages, climbed 2% in the June quarter, while beer volumes surged 17%, according to officials citing excise data. Whisky, which makes up nearly two-thirds of the spirits market, declined 1% as demand for mass-priced brands weakened. Brandy and vodka sales expanded, but were not enough to offset the decline in whisky.
The slowdown comes as state-level tax changes have made spirits more expensive compared to beer. Maharashtra, Karnataka, Odisha and West Bengal have raised taxes on Indian-made foreign liquor, or IMFL, while keeping beer prices unchanged or, in some cases, reducing them. This has helped beer gain ground, particularly in Maharashtra and Karnataka, among the top liquor consuming markets. The category has also benefited from the summer season and below-normal monsoon rains.
“The growth has been low largely because overall demand has remained subdued,” said Amar Sinha, managing director, Allied Blenders. “Maharashtra’s IMFL market also did not grow, while the lower-priced segment in Karnataka was impacted by price disparity and did not see growth.” Seasonal factors, particularly Shravan in the North, also weighed on consumption in August, further moderating demand. We expect the market to start picking up from September as these temporary factors ease.
Brewers Association of India representative Vinod Giri noted that beer sales have grown by over 17% nationally over the same period last year. July trends too are not different, he said. “This has ridden mainly on favourable excise policy interventions encouraging milder alcoholic beverages in many states,” Giri said. Beer sales in Maharashtra and Karnataka have expanded 42% and 35%, respectively.
Kartikeya Sharma, president of AB InBev India, stated that Maharashtra started the bull run on beer after the state increased taxes on spirits. “Maharashtra grew about 40-45 % last year, even year to date it’s growing 40%,” Sharma said. Karnataka has since joined the trend, with beer growing more than 50% over the past three months. Telangana also showed healthy growth after a significant decline last year.
What This Means
The pressure on spirits is particularly significant because India’s alcohol market remains heavily skewed toward lower-priced products. The country has more than 1.4 billion people, but its drinking population is estimated at around 300 million, with nearly half consuming low-cost or unbranded liquor. The mass-premium segment, once a key growth driver for whisky, rum and brandy, has come under pressure from rising costs and local competition.
“When you then look at IMFL value, whether you’re talking about premium or value, mid prestige, upper prestige, lower prestige. I think that’s where state by state the conversation changes because in some cases there are excise policy reforms or changes, and that could create a vacuum temporarily,” said Neeraj Kumar, India managing director, Suntory. The latest quarter shows a widening gap between the two categories as consumers respond to relative prices and state excise policies.
Consumer Takeaway
This market shift offers drinkers a clear choice based on relative pricing and regional policy. Beer sales in Maharashtra and Karnataka have expanded significantly, while West Bengal, Haryana and Uttar Pradesh have been more subdued. The industry continues to face pressure on profitability as state excise policies encourage milder alcoholic beverages in many states.
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