Beer gets its buzz going as spirits market sobers up

Mumbai: India's spirits market is losing its kick as higher prices and state tax changes push consumers toward beer, which is gaining momentum across some of the country's biggest markets for alcoholic drinks.

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 growth has been low largely because overall demand has remained subdued. 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," said Amar Sinha, managing director, Allied Blenders. "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."

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.

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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.

'Bull Run on Beer'

"The first quarter of this fiscal, which is the peak season for beer, has been good for the industry. Beer sales have grown by over 17% nationally over the same period last year. July trends too are not different," said Vinod Giri of the Brewers Association of India, which represents United Breweries, AB InBev and Carlsberg.

"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, he said.

The strong growth comes even as the industry continues to face pressure on profitability.

Kartikeya Sharma, president of AB InBev India, said 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.

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Karnataka has since joined the trend, with beer growing more than 50% over the past three months, he said.

"Karnataka jumped onto the bandwagon with probably the most pivotal policy written that I think in history books would be the time beer took off from an inflection point with this alcohol and bottle policy," Sharma said.

Sharma said stronger beer sales were spread across several markets, with Telangana also showing healthy growth after a significant decline last year. West Bengal, Haryana and Uttar Pradesh have been more subdued.

Lager Lovers

Brewers also pointed to unusually dry conditions in August as a factor supporting beer consumption.

"So now we just need to hold on to this momentum and it could be one of the better single year industry growth that the category has seen in a very long time," he said.

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.

For fiscal 2025, both spirits and beer volumes grew about 4%. The latest quarter, however, shows a widening gap between the two categories as consumers respond to relative prices and state excise policies.

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"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.