IMFL segment: Premium products share expected to hit 35-36 pc in 3-4 years, says industry

New Delhi: Premiumisation in India's alcoholic beverages market is expected to continue over the next few years, with the share of premium products in the Indian-made foreign liquor (IMFL) segment likely to rise to 35-36 per cent, according to industry body ISWAI.

The India-UK Free Trade Agreement, which became effective from July this year, is supporting premiumisation in the domestic spirits market by making bulk Scotch imports more affordable for Indian manufacturers, ISWAI CEO Sanjit Padhi told.

"A majority, 79 per cent, of Scotch imported into this country from the UK is bulk Scotch, which goes into IMFL (as an input for blending). So, it is going to benefit the consumer not only in quality but in price also," he said.


The biggest impact of lower import duties will not necessarily be on lower retail prices, but on improvement in product quality and value proposition for consumers, he said.

With access to higher-quality Scotch at lower input costs, IMFL makers can enhance their blends, introduce more premium offerings and encourage consumers to trade up to better products.

"Premiumisation has moved from around 29 per cent three-four years back to over 32 per cent now. We expect it to move to 35-36 per cent in the next three-four years," Padhi said.

"Consumers are not buying more, but when they buy, they are buying the next higher-level product," he said, adding that the trend also helps improve revenue realisation for state governments.

International Spirits and Wines Association of India (ISWAI) represents the imported premium portfolio of spirits and wine brands in India.

Padhi said stable and long-term excise policies, modern retail outlets and tax rationalisation are among the key factors that can accelerate premiumisation in the country.

"Better quality outlets allow consumers to come in, look at various products and understand that there are better products available at slightly higher price points," he said.

He argued that rational tax structures on alcobev can encourage consumers to upgrade to premium offerings while also helping states improve revenue efficiency.

In some states, tax interventions that reduced the price gap between premium and mass-market products have already led to a better product mix and higher revenue collection, he added.

Padhi said premiumisation is now spreading beyond whisky into emerging categories such as gin, tequila and Irish whisky.

"Premiumisation is happening in gin. Premiumisation has started happening in other categories like Irish whisky. Irish whisky has become double the volume in the last three years and is close to 800,000 cases," he said.

He noted that consumers in smaller cities are increasingly experimenting with newer categories and premium products, a trend that was largely confined to metropolitan markets a decade ago.

He said the India-UK FTA and other similar agreements, by reducing tariffs on imported spirits, could support premiumisation and innovation, although their impact on overall consumption volumes may remain limited.

"The premiumisation trend will continue. Accessibility to premium international products will improve and consumers will have more choices," he said.

ISWAI on Wednesday came out with a report which said India's alcoholic beverage market is witnessing a shift from volume-led growth to value-driven expansion, with premiumisation emerging as a key growth driver.

"The market was valued at Rs 6.2 lakh crore (about USD 71 billion) in 2025, equivalent to around 1.8 per cent of nominal GDP," it said.

Total beverage alcohol volumes reached approximately 8,435 lakh cases, growing at a 4.9 per cent CAGR between 2022 and 2025.

"While volumes are expected to moderate to around 3.9 per cent CAGR through 2030, the composition of growth is changing materially," it said.

Economic growth, new employment opportunities, domestic manufacturing and smart-city development are creating new consumption centres beyond the traditional metros, it said.

Demographics are adding another layer. The drinking-age consumer base is expected to expand, with estimates pointing to at least 20 million people entering the legal drinking age each year. At the same time, increasing participation of women in the workforce and wider social and economic participation are contributing to a more diverse consumer landscape.