India’s spirits industry experienced a slowdown with a mere 2.2% growth in the quarter ending September, marking a stark contrast to the robust 7-15% growth witnessed in the past two years. Industry insiders attribute this downturn to a combination of factors, including diminished sales of mass-priced products, increased taxes, and elevated pricing pressures.

According to the latest data from the excise department, the demand for whisky, gin, and vodka collectively increased by 3-13% in terms of volume. However, the rum and brandy category saw a decline in sales during the same period, according to industry executives.

Dilip Banthiya, the Chief Financial Officer at Radico Khaitan, highlighted the impact of increased duties in certain states like Karnataka, where duties surged by 20%, leading to a notable impact on demand at that price point. Additionally, he noted a downward trend in Uttar Pradesh.

Whisky retained its position as the dominant segment, constituting two-thirds of the overall spirits demand and growing by 3.2%. On the other hand, brandy and rum experienced a 0.7% and 0.3% decline, respectively. Vodka recorded a noteworthy growth of 13.1%, while gin sales increased by 10.6%.

Mass-priced whiskey faced a setback with a 4.5% decline in sales, underscoring pressure on this segment. In contrast, premium products, especially whiskey, witnessed growth ranging from 4% to 18%.

Bikram Basu, the Chief Strategy and Marketing Officer at Allied Blenders and Distillers, remarked on the industry’s normalization after a period of strong post-Covid growth. Consumers are increasingly leaning towards better quality products and recognized brands.

While the spirits market expanded by 10% in the first half of the year and 7% in the quarter ending June, the industry faces challenges as the festive season approaches. United Spirits Limited (USL), the maker of Johnnie Walker and Smirnoff, reported a soft demand in September, with October showing no significant improvement. The company attributed this to a slowdown in discretionary spending and a less buoyant festival pickup compared to previous years.

Hina Nagarajan, Managing Director at Diageo-controlled USL, expressed cautious optimism, anticipating a potential pickup in demand during the upcoming festival season, including Diwali and Christmas. Despite the current challenges, industry players remain hopeful, investing and activating strategies for future growth.