India’s alcoholic beverage industry is transforming as premiumization emerges as the key growth engine, points out the International Spirits and Wines Association of India (ISWAI). This is driven predominantly by India’s demography, rising disposable incomes, global exposures, and evolving consumer preferences.

Valued at $52.4 billion, the alcobev sector accounted for nearly 2 percent of the nation’s GDP in FY21, with an estimated tax revenue contribution of ₹3.4 lakh crore annually. While the spirits industry grew at a CAGR of 2.6% from 2019 to 2023, the premium segment saw double-digit growth, capturing nearly 49% of the market in CY 2023, up from 42% in CY 2019.

The sales volumes of Scotch whisky doubled in just three years, between CY 2023 and CY 2020. According to ISWAI, single malt whisky, a prime segment in the premium category, witnessed a 150% increase in sales.

A significant factor contributing to premiumization in India is the transformation of the retail experience. In larger states, the emergence and expansion of high-end, large-format liquor retail stores offer a range of imported and domestic brands, providing consumers with opportunities to explore and experiment.

State governments like Andhra Pradesh, Goa, Karnataka, Maharashtra, West Bengal, and Uttarakhand have implemented policy reforms accelerating the growth of premium retail segments.

In Andhra Pradesh, new policies led to a 28% growth in premium segment sales year-on-year in October 2024, ISWAI pointed out. The state plans to establish 12 premium liquor stores, designed as a distinct category for superior consumer experience.

Similarly, Goa’s decision to eliminate additional excise duties on popular Bottled-in-Origin (BIO) brands in FY21 saw sales nearly triple from 54,000 to 1,27,000 cases, with further tax rationalization in FY24, boosting the segment.

Karnataka rationalized its taxation for the premium segment, driving a 37% increase in volumes during September and October 2024 compared to the same period in 2023, ISWAI reported.

In Maharashtra, the duty reduction from 300% to 150% resulted in lowering BIO prices by over 40%, driving market demand and resulting in a 422% volume increase of the BIO segment from 132,000 to 632,000 cases. This generated approximately ₹550 crore in additional revenue to the State.

West Bengal had significant tax cuts in November 2021, reducing maximum retail prices by 7– 40%, which led to a 49% increase in volumes and a 61% increase in premium category sales within a year. These changes also bolstered state revenues by 31%, rising from ₹4,055 crore to ₹5,317 crore.

Sanjit Padhi, CEO, of ISWAI, said, “The progressive policies of various state governments strike a balance between maximizing tax revenues and driving a culture of responsible and safe consumption. The large-format and high-end stores, offer a curated selection of domestic and international brands, transforming the consumer buying experience. These outlets provide safer and more inclusive environments for young and elderly consumers.”

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