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Chivas Brothers, Retail News, ET Retail

The question is not whether India will be the biggest market (for scotch) but when: Chivas BrothersChivas Brothers, the scotch whiskey business of French distiller Pernod Ricard, said lower whisky import duties through a free trade agreement (FTA) with the UK can accelerate India to be among the world’s biggest scotch consuming countries.

Despite India being the largest whiskey drinking nation globally, the share of scotch within the country is just 2% due to the 150% import duty on imported liquor. Both countries are in talks for a bilateral free trade agreement, hoping to conclude the FTA by the end of this year.

“The question is not whether India will be the biggest market but when. The consumer pool is there, the premiumization trend is there and so the FTA will just fast track this to happen,” said Jean-Etienne Gourgues, the chairman and chief executive of Chivas Brothers, which sells Royal Salute, Glenlivet and Ballantine’s. “It is necessary as well for the UK to have a direct type of discussion with India without the 28 other countries as it used to be with the European Union. This gives us a better opportunity because there are two countries to align together instead of 28. The odds have never been so high.”

The distiller counts India among one of its three “must-win” countries globally along with the US and China. The rapidly growing middle class, which can afford premium-and-above, is about 150 million, and nearly 17 million people will be added to the legal drinking age annually in India for the next three to five years.

According to IWSR Drinks Market Analysis, scotch will add 1.6 million cases up to 2025 with a CAGR of 7.4%. However, nearly nine in every 10 purchases of scotch in India are in the standard segment, indicating the price sensitivity even in the premium tipple category.

“It will benefit Indian consumers because it will give the opportunity for better, higher-quality Scotch whisky products to be sold at a more affordable price. So that also benefits Indian consumers. One key direction is that all the bulk that we are supplying to enter the composition of the Indian whiskies like Blenders Pride or Royal Stag, for instance, would be able to supply an even higher quality of the whisky,” added Gourgues.

India is Pernod’s largest market by volume and the third-biggest contributor to sales and profit globally. While India has a population of nearly 1.2 billion, the drinking population is considerably smaller and nearly half can only afford very cheap unbranded liquor.

The world’s second-biggest distiller, gets a significant chunk from premium and semi-premium brands, mainly Blenders Pride, Royal Stag and Imperial Blue, and controls about a fourth of the overall whiskey market in India.

“We are really focussed as an organisation on quality premiumization and value and this is where we want to differentiate ourselves from our competition. Some competition will be chasing volume, but we are not chasing volume and want people to premiumise,” said Thibault Cuny, managing director, Pernod Ricard South Asia.

The company has been increasingly facing competition from Diageo, Beam Suntory and homegrown players such as Amrut and John Distillers in the pricier segment. For instance, market leader Diageo has shifted focus to its prestige and above business that now accounts for over 75% of its overall sales, up from 45-50% five years ago, indicating a strong focus on premium segments.

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