India’s alcobev industry is projected to reach a size of US$ 64 billion by 2027, growing at a CAGR of 6.54%, as projected in a research by ISWAI. It employs a significant number of people, with 7.9 million individuals working directly and indirectly in the sector. This accounts for 1.5% of the country’s total workforce. India is projected to be the fifth largest in terms of global revenues in the near-to-medium term, according to ISWAI.
The industry is experiencing steady local growth while steadily enhancing its global presence. In India’s alcobev export basket, whisky clearly stands out. Globally, whisky exports totalled over US$ 14.7 billion in the calendar year 2023. In parallel, India exported whisky worth $145 million in 2023, which accounted for nearly 40% of its total alcobev exports. Currently, the UAE is the largest importer of Indian whisky, followed by Haiti, Ghana, the Netherlands, and Singapore. Together, these countries account for 60% of India’s total whisky exports. This segment has been growing at a 5-year compound annual growth rate (CAGR) of 6.7%. However, Indian whisky brands are showing much more promise than the numbers or even the lack of good market diversification would indicate.
Source: DGCIS
According to a report by Drinks International, one-third of the fastest-growing spirits brands worldwide are Indian. Additionally, six of the top ten whisky brands globally hail from India, highlighting the country’s expanding influence in the international whiskey market.
While whisky dominates India’s domestic market as well as its production capacity, efforts to penetrate international markets require navigating varied regulations and consumer preferences abroad. In the current scenario, despite Indian whiskies performing well in taste tests, their exports have not shown significant growth. In this blog, we illustrate the challenges this presents in context of Australia, where India has recently signed an ECTA.
Top 5 export destinations for whisky
| Importers | Exported value in 2023 (US$ Mn) |
| United Arab Emirates | 57.3 |
| Haiti | 9.1 |
| Ghana | 7.3 |
| Netherlands | 7.1 |
| Singapore | 6.6 |
Source: ITC Trade Map
Challenges faced in the Australian market
India is building a strong brand equity as a producer of high-quality liquors like single malt whiskies such as Amrut and Rampur, and craft gins like Jaisalmer, Terai, and Stranger & Sons. However, Confederation of Indian Alcoholic Beverage Companies (CIABC) notes that factors such as strong domestic demand, stringent export requirements from Western nations, and challenges like high evaporation rates due to warm climates in India are impediments to export growth.
In CY 2023, Australia imported alcoholic beverages worth $1.5 billion globally. The top four import categories together made up over 66% of this total. Whisky was the largest import segnment, accounting for 21% of Australia’s total imports in the category. Australia imported the most whisky in value terms from the UK, amounting to US$ 164 million. In comparison, India’s whisky exports to Australia in FY 2023-24 were at just US$ 560,000.
The major issue, according to the industry is a non-tariff barrier. Under Australia’s rules, there is a mandate of two-year maturation period before labeling a spirit as whisky. Rum, which is also one of the fastest growing alcobev exports with a 5-Year CAGR of 16%, similarly has a 1-year maturation mandate. Indian companies counter that spirits mature faster in India due to its warmer climate. They argue that this maturation rule restricts their access to a market with a significant Indian population, which presents substantial growth opportunities. Additionally, they claim that maturing whiskey for two years in India results in a 10% loss due to evaporation because of dry climatic conditions.
Vinod Giri, Director-General of the Brewer’s Association of India, said, “The requirement for maturation periods in Australia poses a significant barrier for many Indian liquor products entering foreign markets. These regulations are not scientifically grounded and do not apply to Indian products, which mature faster due to local climatic conditions. There is optimism about the removal of these restrictions in future negotiations.”
Australia gained lower duty access for its high-end wines under the India-Australia interim trade deal under the Economic Cooperation and Partnership Agreement (ECTA). Under the trade pact with Australia, India agreed to reduce tariffs on Australian wines, starting with those priced at a minimum of US$5 per bottle, from 150% to 100% upon implementation, eventually reducing to 50% over 10 years. But Indian producers now await reciprocal access in the form of reductions in non-tariff barriers such as maturation rules.
A joint working group between India and Australia has been established for exploring the potential for a mutual recognition agreement (MRA), seven months after Australia obtained concessional duty access for its premium wines under the ECTA with India. The agreement aims to assist Indian whiskey producers in accessing the Australian market, which presents promising growth opportunities and hosts a substantial Indian community.
A side letter of the ECTA, signed by trade ministers from both countries, mandated that a working group evaluates market access issues for Indian spirits as well. It stipulates regular progress reviews through the subcommittee on trade in goods. Sanjeev Banga, President of International Business at Radico Khaitan Ltd. commented , ”The crux of the matter lies within the constraints imposed by nomenclature. Revising these through ongoing negotiations to even classify it as ‘Indian whisky’ would significantly enhance the overall situation.”
The Indian liquor industry is advocating for similar relaxations in the UK, where the minimum maturation period is three years. India’s interest is in expanding market access for rum and whiskey, Mutual Recognition Agreements (MRAs) would significantly help the situation. Easing maturation regulations in the UK, Canada and Australia could unlock significant markets due to substantial Indian diaspora presence in these countries.
