Alcohol beverage start-ups pour a stiff competition

The wines and drinks list at popular hangouts around the country — long dominated by big brands Kingfisher, Old Monk, Bombay Sapphire, Royal Stag, et al — is being shaken and stirred by new-age brews from a host of Indian start-ups.

As many as 42 alcohol beverage (alcobev) makers were launched in the last five years, even as the sector pulled in funding of $247 million during the period, peaking at $116 million in 2021.

Of the 200-plus alcobev companies in India, more than 80 were founded in the past decade alone, according to data intelligence platform Tracxn. Bira 91, Grover Zampa, and Fratelli wines are some of the poster children birthed during this period.

Banking on innovations, the alcobev start-ups are putting up a spirited fight for a share of the market ruled by old favourites bottled by large corporations. It’s all about understanding the gaps in the market, responding to evolving customer tastes, and zeroing in on price ranges that are accessible, they say.

Crafting success

Explaining how the newbies are breaking away from established practices in the alcohol manufacturing industry, Abhinav Jindal, founder and CEO of Kimaya Himalayan Beverages, the makers of BeeYoung beer, says, “The process of making a beverage has been sidelined and the production is in a very industrial fashion. In this scenario, what is helping is a very honest, authentic attempt at doing things... understanding the needs of a customer and solving for them have been the reasons for the growth [of the alcobev start-ups].”

Also read

Backing the small giant-killers

Athleticism unlocked: Matchup of esports and fitness

Start-ups cut out for meat delivery

He points out that an affordable premium gin did not exist in the Indian market until Nao Spirits entered the scene, and similar gaps remain in the affordable premium vodka, rum and single malt segments.

The growing demand for new-age brands also stems from changing consumer behaviour. In a country where alcohol consumption is on the rise, consumers are willing to experiment, looking for more options, and eager to try newer drinks.

As Ajay Shetty, CEO of Salud, a lifestyle beverage brand, says, “For the longest time, consumers went in for a set of brands and the only experimentation possible was when international brands came to India. Now, people seek out new brands and many are also proud of local Indian brands.”

Adding to the cocktail of enabling factors is the rise of e-commerce and other digital media.

“Start-ups are reshaping the spirits sector through e-commerce integration and social media engagement, facilitating direct brand-to-customer connections and online sales. Sustainable practices and other advancements are fostering environmentally conscious production, introducing varieties of flavours and ingredients,” says Neha Singh, co-founder of Tracxn.

She also highlights the importance accorded to customer preferences, in terms of tailoring products and marketing strategies to meet specific needs. Smart distilleries optimise production through brewery automation.

Social media has proved to be a potent means for alcobev start-ups to reach more consumers and build a niche following for their brands. Many founders acknowledge the power of social media in driving their brand narrative, given that alcohol advertising is restricted in traditional media.

Old meets new spirit

The rapid ascent of the newer players has forced legacy brands to rethink their old ways. Consequently, mergers and acquisitions are on the rise in the alcobev start-up segment as the biggies augment their portfolios with the young and energetic brands. Tilaknagar Industries, for instance, bought a 10 per cent stake in Spaceman Spirits Lab, makers of Samsara Gin, for ₹9.75 crore, and United Spirits Ltd (Diageo India) acquired a minority stake in craft gin maker Nao Spirits.

The slow but steady growth of alcobev start-ups is also fuelled by rising investor interest in the segment. Shetty says the returns from the funding deals that backed some of the successful start-ups are spurring more investors to jump onto the bandwagon. Seed-stage investors, small venture capital firms and high networth individuals are among those drawn to the alcobev start-up sector.

However, the challenges include the regulatory hurdles in the alcohol manufacturing and marketing space, and the capital-intensive nature of the business. Jindal unpacks the finer details, saying, “The start-up jingoism doesn’t extend to the alcobev space. Innovation, craft, authenticity are not the first words used, more so because the regulators and the government are sleeping when it comes to anything that can g change or upset the apple cart of established players. Since lobbying is so important, it becomes difficult for smaller start-ups to cut through the clutter and showcase something to customers and find appreciation.”