Rising Trend of Pre Mixed Alcoholic Drinks in the India Market
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Published: Mon, 5 Dec 2016
This report is to analyse new trend of pre mixed alcoholic drinks in Indian market. The research is based on United Breweries Group (India) leading brewery companies in India which hold almost 50% market share of the Indian alcohol industry. The organisation and the country chosen in this report is to explore the new trends and the factors which effecting the company as well as the Indian alcohol industry as alcohol industry in India is one of the major source of revenue of Indian government.
The report mainly focuses on the industry and new trends in India which is supported by relevant data and statistics and followed by pre and post conditions in the relevance of the chosen trends and scenario based on deductive method supported by consequences and possibilities of the chosen trends and finally conclusion is drawn on the basis of trend. This report is totally based on secondary data, relevant reports, journals, online documents, websites and with the help of lecturer Mr. Stephen McGrail.
Premixed Alcoholic Drinks
Trends definitions and identification
Premix alcoholic drinks is the blend of fruit flavours with low percentage of alcohol and the demand for these drinks is growing because of the changing customer preferences and convenience. The organizations are looking forward to bring some alterations in the alcohol products to provide consumers with a new taste and refresh their attitude towards alcohol.
The reasons that are responsible for new trend of pre mixed alcoholic drink in Indian market. The alcoholic industry India is steadily growing and the consumption is also increasing year by year because of many reasons mainly due to the cultural change in Indian society due to the influence of western culture, in other words westernisation of Indian culture, growing youth population and the emergence of night clubs and pubs has influenced this trend to evolve –
Westernisation of Indian culture: The Indian consumer has seen a tremendous change in its culture itself. The increasing urbanization due to increasing middle class in the country has led to westernization of Indian culture. The urban consumers become more exposed to western lifestyles, through overseas travel and the media and that changes their attitude towards alcohol. The demographic shift of the Indian population towards middle class has reflected the trend identified because of the changing tastes and preferences, consumer buying behaviour, and also the influence of the foreign brands penetrating into the Indian market has led to the emergence of westernization in the Indian culture.
Growing Youth Population: The youth population is the next generation of Indian culture which has different needs and demands. They like to try new things and wish to lead a luxurious life. This category usually evolved because of growing sectors in information technology, education, and the increasing number of business process outsourcing in the country. This category has different tastes and preferences compared with the traditional culture in India.
AGE PROFILE – URBAN
Total Population: 846 million.
Young adults and middle aged individuals higher proportion
AGE PROFILE – RURAL
Teenagers constitute higher proportion in rural India.
As a consequence of the high birth rate till 1990s, a large proportion of the India population is in the age group of 20-34. And his age group is the most appropriate target for the alcoholic drinks. And this population trend will give a boost to the growth of alcohol consumption in India
Emergence of Night clubs and Pubs in the metropolitan cities: Indian market is one of the most attractive consumer market in the world and various research have shown that a rise in the income level has direct positive effect on alcohol consumption and this leads to the increase in the night clubs, pubs and the introduction of alcohol in hotels and restaurants has led to the emergence of this trend as well. The youth population enjoys drinking Bacardi breezer which has little content of alcohol and is mixed with fruit flavours. The youth population in the cities in India enjoys going to night pubs and clubs and relish this drink.
This graphs shows the income and expenditure level of various states and regions of India
In order to determine the future of this trend, it is necessary to have a glance at the anticipations that will lead to sustainability of this trend and the assumptions are made for the situation of 5-10 years from now –
Increase in the variety of pre-mix drinks –
It is possible that the organization will invest more in introducing more flavours and different mix for the market. Also it will provide convenience for the customers to purchase the pre mix drink directly at the shop rather than buying the flavours individually as they normally do.
Government imposing high tax –
The government will impose high tax on the pre-mix drinks, because of the growing demand of these drinks. The foreign brands will include high import duties because of the intense competition in the market. The government regulations are one of the factors that will affect the expansion of these products in the Indian market.
People might consider it into the category of soft drinks –
There is a possibility that the consumers consider the drink as a regular drink because of the low content of alcohol and will drink it responsibly rather than getting intoxicated with more than two drinks. This might create a different image for the brand as it might not be treated as pure alcohol.
Cheap prices can lead to reduction in consumption of alcohol –
There is a possibility of these products to be sold at reasonable prices and so the price centred Indian customers may prefer buying more of pre-mix drinks rather than pure alcohol. This may lead to increasing demand for the drinks and less demand for alcohol such as whisky, vodka, to mention a few.
The methodology selected is the deductive framework model to identify the critically uncertain post conditions and their potential impact on various factors. Graph (1) demonstrates this paragraph specifically –
This matrix model below is generated to demonstrate the idea of the deductive framework and the two scenarios that have been identified most uncertain are the variety of pre-mix drinks and the consumption of alcohol. These post conditions have been chosen for developing the scenarios –
The scenarios are based on the post-conditions that have been highlighted above. The most critically uncertain post-conditions are generated with the help of two uncertain ones and the basis of their impact on the industry, organization, customer and stakeholder.
Scenario (1) Description:
Beer Rules –
This scenario is the situation where there is still more consumption of alcohol in the form of beer, whisky, vodka etc. and there are low variety of pre-mix drinks in the market. This means that the organizations are not yet ready to tap the flavours in the market as there may be less demand from the consumers consuming alcohol or there may be government restrictions over it, to sell it in the form of pre-mixture.
Scenario (2) description:
Flavours in Alcohol –
This scenario is the situation where there is high availability of variety of pre-mix drinks as well as there is high consumption of alcohol. This scenario is the reason for high demands at both the ends which can be due to increasing number of people consuming pre-mix as well as normal alcohol. The government might have relaxed its tax structure and the availability can be in abundance.
The consequences of the scenarios pose opportunities for the organization to penetrate the market with a unique blend of alcohol and flavour where they can create a new demand and increase the percentage share in the alcohol consumption in the market. There will be increasing demand for the foreign brands to penetrate the market because of the scenarios.
The possibilities of the scenarios are that the culture and the population of India might take time to get used to these drinks. Also the government may impose heavy taxes and increase barriers for the competitors to enter the market which can terminate the entrance of new flavours and reach the end consumers.
India is one of the largest producers of alcohol in the world and there is constant increase in production in last 15 years. But one of the best performances of alcohol industry in India is in between 1993 to 1996 when production increase more than doubled to 800 million litres.
Liquor manufactured in India is categorised as
Country liquor and
Indian made foreign liquor (IMLF).
IMLF includes wines, whisky, rum, vodka, gin and brandy. Between 2005 to 2009 the Indian alcoholic drinks market grew at strong rate and still market is growing and expected to grow steadily. The total revenues generated by Indian alcoholic drinks market is $13.9 billion in 2009, which represent the annual growth rate of 12.5% in year 2005-2009. In 2009 the Indian alcoholic market reaches a value of $13,902.7 million.
CAGR: Compound Annual Growth Rate
In 2009 the production reached 2.5 billion litres with the growth rate of 9.1% which is less than previous year 2008 by 2 %. The alcoholic drink market increases due to high growth in sales of beer, cider and flavoured alcoholic beverages, spirits and wine. The spirits is the largest segment of alcoholic market in Indian market as it holds the most important place in alcoholic industry. It generated total revenue of $9.7 billion, which almost covers 70 % of the overall market value. Whereas sales of beer etc generated revenue of $ 3.9 billion in 2009 which accounts for 28.2% of overall market value.
In past, the policies of Indian government was discourages the consumption of alcoholic beverages. Even alcoholic drinks are banned in many states of India but lifted after time period but still banned in two states Gujarat and Mizoram. Still heavy tax burden is imposed on alcoholic drinks as this is the major source of revenue for state governments. Major production is across all over India but mainly in all metro cities and Haryana, Punjab, Uttar Pradesh, Kerala and Andhra Pradesh. And in terms of consumption southern region of India and Andhra Pradesh, Punjab and few more cities are top consumer of alcoholic drinks. Consumption in Youngster is recorded more in Delhi, Mumbai and other metro cities of India while women tends to drink more in Assam, Arunachal Pradesh and Sikkim in north east India and Madhya Pradesh, Goa etc in rest of the country.
It is forecasted by industry experts that Indian alcoholic drinks market reaches the market value around $22,313.1 million in 2014, which accounts 60.3% increase since 2009, with the increase of 47.4% since 2009 in terms of volume which is 3,685.6 million litres.
Specific Organisation: UB group
United Breweries Group is the conglomerate of various companies with the major focus on the brewery (beer) and alcoholic beverages industry which is owned by Dr. Vijay Mallya. UB group is engaged in the manufacturing, purchase and sale of beer and UB group is the largest producer of beer in India, controls over 60% of the total productions of beer with the brand name KINGFISHER and it accounts for nearly 27.9% of market share in terms of volume, which is now sold in 52 countries worldwide. UB group accounts more than 40% share of Indian brewery market and owns 79 distilleries and bottling unit across the world. But UB group is only deal in beer because the spirit market is captured by its subsidiary United Spirits Ltd and it is the largest spirit company in India and in top three spirit companies in the world. It the most popular brand worldwide.
Its brand portfolio includes more than 140 brands like Dalmore, Black dog, Antiquity, Royal Challenge, Romanov etc. The company also established its manufacturing, bottling plant and distribution centres all over India and company also exports to 18 countries.
United Breweries Limited generated revenue in financial year 2009 was $405.9 million with the growth of 2 4.6% and the total net income was $9.3 million in 2009.
Revenue generated by United Spirits Limited was $ 1,140.6 million in year 2009 with the growth rate of 17.7% but the company beared the net loss of $83.6 million.
United Breweries Group owns Mendocino Breweries Company in United States and recently UB group takeover the main rivals in spirit business Shaw-Wallace.
Trends influence on industry
The trend influenced the industry as companies are launching new varieties of alcoholic drinks because of the growing demand among the young generation and companies are opening more retail stores across all over the country. And there is a risk as Indian government will impose heavy taxes on breweries companies as it is the major source of revenue.
Expected influence on customer
Expected Influence on organisation
The trend has influenced organisation to provide new products and services to customers by new product development and meet the customer satisfaction. UB group products are distributed across 64000 retail outlets in India and now planning to open more and recently launch “Spritiz & More” co. Retail outlets, and outlets are designed by “Foley Designs”. And these stores give opportunity for consumer interaction from advisory board of company to guide customers and also started retailing of other brands. Company partners make their retail stores more attractive to attract youth population. (UB GROUP BUSINESS, 2010).
Expected influence on other stakeholders:
The stake holders in the organization have shown great interest in investing as they have clear overview of mission and vision of the company. And stakeholder should invest more as because of the continuous growth in net income in 2009 the net income of the company is Rs.20751.3 million which is higher than previous year and the dividend paid during the year 2009-2010 is much higher as show in the figure.
Source: Annual Report 2009-2010
United Breweries Limited C:UsersRishiDesktopUntitled.png
And Board Of Director also announced a dividend of 36% for the year ended March 31,2010. The trend also influenced the stakeholders to invests more because of the rapidly growth rate of the company.
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