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Oh Summer Beer

A summer beer can be just about any style, as long as it’s crisp and refreshing and makes you never want to go back inside again. They range from light and fruity to hoppy and complex, but the best summer beer is the one you come back to again and again as soon as the temperature crawls above 60 degrees.

The global beer market size reached US$ 640.2 billion in 2021. Looking forward, IMARC Group expects the market to reach US$ 750.3 billion by 2027, exhibiting at a CAGR of 2.7% during 2022-2027, according to a new report by IMARC Group.

Beer is a fermented alcoholic beverage that is made by brewing and fermenting starches derived from cereal grains. It is flavoured using hops that not only add a buttery flavour to the beverage, but also act as a natural preservative. Apart from this, other flavourings, such as herbs and fruits, are also added to attribute a specific flavour and fragrance to the drink. It is a rich source of niacin, folate, riboflavin, pyridoxine, potassium and magnesium.

Moderate consumption of beer is widely associated with numerous health benefits and aids in maintaining blood pressure levels, preventing kidney stone formations, and minimising the chances of developing cardiovascular disorders, including angina, stroke and heart attack. Owing to this, it is gaining widespread popularity across the globe.

Global Beer Market Trends:

One of the major factors influencing the global beer market is the rapid spread of the Coronavirus disease (Covid-19) and the consequent social distancing norms and lockdowns imposed in several countries as a control measure. The decrease in the number of social gatherings is projected to lead to a decline in the on-premise consumption and sales of beer in bars, restaurants, pubs and public events. However, this trend will to be offset by the demand for to-go packs as well as home delivery services, mainly through online platforms. Another factor driving the market is the widespread preference for specialty beer among individuals. These beers are brewed to a classic style by incorporating different flavours, such as honey, chocolate, ginger and sweet potatoes. This adds a distinct flavour and aroma, which further adds innovative and eccentric flavours to the drinks. The growing inclination toward craft beer is also accelerating the market growth. Since microbreweries produce portioned amounts of beer, they lay enhanced emphasis on the flavour, quality and brewing techniques as compared to large-scale commercialised breweries.

The potential for beer growth in India is strong as well. AB InBev, for example, began brewing Budweiser in the market back in 2010. In January 2021, Kirin Holdings announced an investment of $30 million in New Delhi-based B9 Beverages, the maker of the Indian craft beer Bira. IWSR anticipates beer consumption in India to return to pre-Covid-19 levels by the end of 2023, continuing on its growth path from there.

Expanding beyond beer

As consumers moved to the at-home occasion, the trend for convenience has helped to shape purchasing behaviours. In markets such as the US, the ready-to-drink (RTD) category, which includes hard seltzers, has been taking share from beer.
RTDs provide a growing opportunity for brewers to diversify their product portfolios. Indeed, Heineken entered the hard seltzer category in September 2020, with the launch of Pure Piraña in Mexico and New Zealand. In the US, Heineken partnered with AriZona to launch the AriZona SunRise Hard Seltzer in October 2020. AB InBev states that Bud Light Seltzer is their leading innovation in the US market, with over 75% of volume being incremental to their portfolio. In fact, 2021 was the first year in which a hard seltzer commercial (Bud Light Seltzer) aired during the Super Bowl.

Malt-based RTDs are currently dominant in the US owing to their taxation base, and brewers they are in prime position to take advantage. Elsewhere, the alcohol base of choice varies by country, driven by consumer preference and local alcohol tax structures.

Changes in purchasing behaviour propel e-commerce

As with the wider beverage alcohol industry, Covid-19 has propelled the value of the alcohol e-commerce channel. Heineken, for example, reported that Beerwulf, its direct-to-consumer platform in Europe, nearly doubled its revenues in 2020, while in the UK, its revenues tripled. Online sales of its home-draught systems grew as well.

Beer has traditionally under-traded online, primarily due to the channel offering lower margins. However, this will change as consumers continue to buy more groceries online and beer is included in the weekly shop. This is especially true in the US, where IWSR expects sales of online beer to grow rapidly as supermarket chains increasingly invest in the channel.
Online beer sales hold the greatest market share in countries including Japan, the UK and the US. From a lower base, online beer sales will also grow rapidly over the next five years in markets such as Israel and Nigeria.

The entrepreneurial spirit of small-batch players

Craft breweries, which tend to be more dependent on the on-premise, have propelled interest in the global beer category and revitalised its fortunes in many markets. IWSR believes that the entrepreneurial spirit of the sector will mean that craft brewery regeneration will be quick. In the US, for example, IWSR has seen the pandemic lead to a “buy local” approach amongst some consumers, which will benefit small-batch players.

Innovation in the no/low space reignites the category

No- and low-alcohol beer is a bright spot for the category, as moderation and wellness trends continue to resonate with consumers. IWSR data shows that, to date, most volume has come from no-alcohol rather than low-alcohol beer across 10 key markets.

Broadly, low-alcohol beer is giving way to no-alcohol offerings particularly in markets such as Australia, France and the UK. Spain, for example, is seeing a shift from low- to no-alcohol beers, as consumers seek healthier choices and view the newer 0.0% brands as more modern. In South Africa, investment from Heineken and the emergence of a craft segment has helped to generate interest in the no-alcohol category.

While no-alcohol beer has existed for decades, in markets like the US, no-alcohol beer has premiumised through the release of no-alcohol versions of non-lager styles, long the domain of no-alcohol beer. More recent no-alcohol styles, such as IPAs, stouts or porters, are starting to make a real impression, driven particularly by new challenger brands, many of which are not linked to traditional brewing. The recent no-alcohol extension of Guinness – despite some teething issues – will help to underline that no-alcohol beers are no longer the sole domain of lagers.

While several key beer players continue to steer the no/low beer category, the market is fragmented with a number of smaller brands vying to establish themselves as market leaders in this space. The segment is likely to become even more of a focus for smaller craft producers who are able to bring a diverse range of products to the market in future.

Himachal Pradesh new liquor policy aims to boost revenues, while curbing illicit trade

The Chief Minister Jai Ram Thakur, under whose chairmanship, the Cabinet met announced that the government intended to collect Rs. 2,131 crore revenue from state excise. This would be a jump of nearly Rs. 264 crore and a 14% jump in excise revenues over the previous financial year.

The policy includes renewal of retail excise vends for the financial year 2022-23 at the renewal fees of 4% of the value of unit/vend. The objective is to gain adequate enhancement in government revenue and curb the smuggling of country liquor from the neighbouring states by a reduction in its price.

Annually, Himachal Pradesh earns Rs. 1,800 to 1,900 crore from excise, which includes the sale and consumption of foreign liquor brands and country liquor sold in open markets, vends, bars and restaurants. Excise is one of the biggest source after the sale of power, mining (minerals) and tourism in the hill state.

Country Liquor prices reduced

The brands of Country Liquor will be cheaper as license fees has been reduced. This will help in providing good quality liquor at a cheaper rate to the consumers and they won’t be tempted towards purchase of illicit liquor and evasion of duty will also be checked.  In new excise policy, the 15% fixed quota of country liquor for manufacturers and bottlers to be supplied to the retail licensees has been abolished. This step will give the retail licensees to lift their quota from the suppliers of their choice and further assure supply of good quality country liquor at competitive prices. The MRP of country liquor will be cheaper by 16% of existing price.

The fixed annual license fee of bars has been rationalised by abolishing the area specific slabs of license fee. Now throughout the State there will be uniform license slabs based upon the room capacity in hotels.

Fixed license fee of bars in tribal areas reduced   

As Himachal Pradesh is known for its tourism, the government intends to provide better facility to the tourists visiting tribal areas and also provide relief to the hotel entrepreneurs, the rates of annual fixed license fee of bars in the tribal areas.

To keep a check on illicit trade and to monitor the manufacturing, operations of liquor, its dispatch to wholesalers and subsequent sale to retailers, it has been made mandatory for all the above stakeholders to install CCTV cameras at their establishments. The government also has imposed stringent penalties to ensure that irregularities detected by the department in liquor bottling plants, wholesale vends and retail vends are curbed. An effective end to end online Excise Administration System shall be setup in the State which shall include the facility of track and trace of liquor bottles besides other modules for real time monitoring.

As per the policy the Renewal fee (non-refundable) for each vend/unit shall be paid @ 4% of the value of vend/unit (MVV) for 2022-23 while filing application for renewal. b) Renewal Fee of Country Fermented Liquor (Lugdi/Jhol) Vends Sr. No. Value of vend Renewal Fee (i) Upto Rs. 1.00 Lakh Rs. 20,000 (ii) Above Rs. 1.00 Lakh upto Rs. 10 Lakh Rs. 25,000 (iii) Above Rs. 10.00 Lakh Rs. 30,000.

The policy said that the Zonal Collectors/District Incharges shall not be allowed to proceed with the conditional renewal of any vends/units. Sub-vends shall be granted to a retail licensee within the State subject to payment of annual license fee of Rs. 8,00,000 or 10% of the vend value whichever is lower subject to the minimum of Rs. 4,00,000. Whereas, keeping in view the issue of smuggling of liquor into the State, the sub-vends shall be granted within a distance of 100 meter from the State border on the payment of annual license fee of Rs. 3,00,000. The sub-vends shall be approved and
granted by the Collector of the Zone concerned.

Fixed License Fee

The fixed license fee on annual basis (including renewal fee) for various Licenses of Foreign Liquor, Country Liquor and Beer per license for the year 2022-23 have been changed.

Type of license Fixed license fee per annum

L-1 (Wholesale vend of IMFS/Foreign liquor/Beer/Wine)Minimum license fee of ₹20,00,000/- for lifting upto 3.00 lakh proof litres. Beyond 3.00 lakh proof litres an additional ₹3.00 per proof litre
L-1A (Storage of Foreign Liquor in Bond)₹2,00,000/- excluding such other fee as may be prescribed
L-1B (i) Wholesale vend of Foreign Liquor to L-1 vend only₹4.25 per P. L. on Foreign Spirit and ₹1.50 per B.L. of RTD Beverages subject to minimum of ₹4,00,000/-
Exclusively for Beer₹1.50 per B.L. subject to minimum of ₹4,00,000/-.
L-1BB (wholesale vend of imported foreign liquor) from outside India to L-1 & L-2 as well as to the Club and Bar license holders.Annual fixed license fee ₹5,50,000/-
L-1BIO (License for space holder in Custom Bonded Warehouse for wholesale of imported BIO brands to L1BB)Annual fixed license fee ₹10,50,000/-
L-1C (Wholesale vend of foreign liquor by distiller or bottler only).₹6,00,000/-
L-1E for export of IMFS for non-manufacturer wholesale licensee for interState sale₹3.00 per proof litre subject to minimum of Rs. 10.75 lakh per annum.

The much-awaited Resvera Lounge is now Open!

Nasik is recognized as the “Wine Capital of India” and is situated in the Western Ghats, on the banks of the River Godavari. Its climate and scenic beauty attract a lot of tourists from around the country as well as overseas. People visit Nashik for a tranquil experience which is perfect for families and friends to spend time with good food and wine. The socialising aspect is a vital part of the wine tour and tasting. Apart from weekend groups, there is also a strong interest among overseas travellers in following wine trails in India. Their goal is to taste Indian wine after having tasted wines from established regions around the world for years. The vineyards offer more than wine tasting. They also provide the opportunity to meet the winemakers and learn about the winemaking process.

Resvera Lounge with unique Jamun wines in its bouquet is opening its doors for a similar experience and to boost Wine Tourism in Maharashtra.

Jamun fruit forms the core of Resvera Wine, a fruit wine made with a focus on creating a delicious flavour. Creating a wine that is consumed and enjoyed 365 days a year is an ultimate goal. This makes it a wholesome gift for each and every wine lover around the world. Resvera is committed to responsible winemaking and produces magical juice from organically sourced Jamun fruit from the Jungles of Maharashtra. Resvera is also responsible for empowering the tribal community of regions where the Jamun fruit is extracted, giving them an opportunity to earn a living. A fusion of Jamun fruit combined with divine smoothness, Resvera creates a rich, luxurious taste that enhances your alluring lifestyle.

This wine’s enticing aroma makes it a perfect pairing with most meals. Take a swirl, breathe the scent into your veins, and taste the magical purple liquid that makes you want to drink more. Resvera Winery creates its wines with a holistic philosophy and believes in giving back to nature.

The taste of Jamun is the biggest USP of the product, since it is a crowd-pleaser, and offers something special that complements the Indian palate very well. Jamun fruit would also be a USP due to its health benefits. It is a rich source of nutrients, is anti-diabetic, and purifies the blood. The brand’s intention wasn’t to become an alcohol brand, but rather to give people a delicious experience. “An elegant and tastefully-done lounge is set beautifully in the midst of the grape city. With Resvera Lounge, we aim to bring a world of contrasts and paint the town with Jamun. A lounge thoughtfully created to give you a one of a kind experience that offers a beautiful ambience. When the sun goes down and the city lights go up, sip on the World’s First Jamun Wine complemented by exquisite food,” says Komal Piyush Somani, Co-founder & Director, Resvera Winery.

“Nashik has been recognised as the Wine Capital of India, and the history of wine in India traces back to as many as 5000 years. Under the one district one product scheme, Govt of India recognised wine as the main product for Nashik. indigenous fruits like Jamun, Mulberry, Jackfruit, Indian Gooseberry, Apple, and Mango have their mention in Scriptures like Rigveda, these fruits have proven health benefits.

There is a need to make these native Indian fruits popular and have a global footprint of the same in the present times. Resvera is processing some of these native Indian fruits and making wine from these fruits. We need to promote these made-in-India wines of fruits that are native to our country” said Nikhil Khode, Co-founder & and Head of Production. “The opening of the Resvera Lounge will make sure that Nashik is a testimony to the age-old traditions of making wine from not only grapes but other native fruits of India which are well understood to the Indian pallet,” continued.

Lastly, Dr Neeraj Agarwal – Director, added, “Every glass of wine enjoyed by the Resvera lovers at this new Lounge will also result in the plantation of few Jamun Trees in the reserved areas. So far Resvera team and all the tribal people associated with Resvera have planted more than 1 lakh trees in the last six years. Creation of this beautiful Resvera lounge is to give a different experience of fruit wines to the wine lovers and our first offering is world’s first Jamun wine.”

With the inauguration of the tasting room at The Cobble Street, Gangapur-Savargaon Road, Nashik, Resvera aims at enhancing the wine experience for its audience. The tasting room reflects the same philosophy that governs Resvera Wines. They are also keen to partner with players in other parts of the country to start such dedicated Wine Lounge of Resvera.

The war in Ukraine could impact how much your favourite beer costs

Some beer prices are climbing as most parts of the process cost more – from aluminum cans to transportation.

The Ukraine accounts for about 20% of beer’s usage of barley. It’s one of the top five global producers of barley. So brewers, particularly at a global level, will be watching the supply and price of barley.

Molson Coors, which brews Milwaukee’s Miller Beer, and other major brewers have so far been able to absorb the higher costs.

For Craft Beers it’s really hard to absorb price increases in raw materials without passing that along to the customer.

According to a new RaboResearch report (Rabobank), malting barley prices in western Europe are currently 50% above levels seen a year ago. This is anticipated to have a major impact on maltsters, for whom barley inputs make up 65% of costs.

For brewers, the impact is less severe as barley accounts for only 5% of costs. But RaboResearch indicates there is a risk that protectionism could derail the entire value chain, such as in the case that western Europe were to stop exporting malting barley or other grains to countries outside the EU and brewers might not get the right quantity or quality of malt.

21 Mar 2022 – Russia’s invasion of Ukraine has triggered a prominent domino effect on the prices of agricultural commodities, with analysts forecasting critical impacts on both supply and demand of food products. While energy prices are rising as a result of international sanctions on Russia, costs for grains, packaging and logistics are anticipated to surge on.

RaboResearch indicates there is a risk that protectionism could derail the entire value chain, such as in the case that western Europe were to stop exporting malting barley outside the EU. Russia produces around 13% of global barley, while Ukraine accounts for 5% (2020/21 crop). Together, these countries account for 30% of global barley exports, a significant amount.

Although the Black Sea region is a major producer of barley, very few maltsters in the rest of the world depend on its crop, as the barley produced and exported from the region is mainly feed barley.

Although some maltsters in China might use Ukrainian barley, malt plants in the rest of the world are mostly sourcing from other regions. Ukraine and Russia are major barley export nations, accounting for 28% of global barley exports in 2020.

Most Black Sea region barley flows find their way to countries without a strong beer culture. In 2019/20, 64% of Russian barley was exported to the Middle East and 9% to North Africa.

Energy costs have also risen because of the conflict. While prices of oil and natural gas have almost doubled over the past 12 months, there are many points in the value chain where higher energy costs will impact the cost of beer.

Energy is used to turn barley into malt, but RaboResearch estimates that this accounts for just 1% of the cost price of beer. The energy used in the brewing process represents 3% of overall costs. Malting barley prices in western Europe are currently 50% above levels seen a year ago.

But the largest impact is seen in the cost of packaging materials (~25%), which have a major energy component. RaboResearch estimates that the total cost price of beer has risen by 15% as a result of rising energy costs.

“The discussion about the possibility of beverage companies introducing returnable packaging has resurfaced in recent years as part of broader discussions about sustainability. We wonder if, in light of rising fuel prices, the idea might be starting to gain momentum,” states RaboResearch.

Although sea freight is much more energy efficient than road transport, some brewers might be tempted to follow AB InBev’s example to brew Stella Artois near its US consumers. While localising production can save on fuel costs, the diseconomies of scale of a smaller location could offset these benefits.

Although many brewers have focussed on international brands and the premium end of their product offering in recent years, a broad portfolio of products and channels is desirable to offset current risks, concludes RaboResearch.

Russia, the world’s fifth largest country in terms of overall beer drinking, was one of the few major markets around the world where beer consumption actually rose during the pandemic-hit year of 2020. It also grew by a further 3.3% during 2021.

That is why the decisions from Carlsberg and Heineken to pull out completely from Russia will have been difficult.

For Carlsberg, in particular, this is a big deal. The Danish group owns Baltika, Russia’s biggest brewer, which has a market share of just shy of 30%. Carlsberg, which last year made 10% of its total sales and 6% of its operating profits in Russia, had already said that it will stop selling its flagship brand there and will not make any new investments in the country.

Rise of Premium vodka spritz RTDs

As the RTD trend continues, a number of premium vodka brands are launching their first canned products focussing on the spritz serve.

Spritz itself has become a malleable term in recent years. Once referring to a combination of soda or sparkling water to wine or vodka, it has more recently been adopted by brands such as Aperol for their popular soda water, prosecco and bitter aperitif serve. In the wake of its success over recent years, other brands, and indeed bars, have adopted the name for their own wine, water, and spirit serves.

In the US, the world’s leading RTD market, RTD innovation is picking up pace as consumers continue to demand lighter but flavourful serves like hard seltzers. Demand is especially growing for spirit-based RTDs in the US, which are expected to grow at a volume CAGR of 33% by 2025. Within this segment, vodka and tequila bases are dominant, together accounting for more than 50% of new spirit-based RTD launches between 2019 and the first half of 2021.

As sales of hard seltzers continue to show double-digit growth in the US, growth is picking up in other markets as well, as the hard seltzer category becomes more globally recognised. To capitalise on this trend, some of the largest vodka brands have chosen the ‘spritz’ name for their sparkling water, spirit, and fruit flavour combinations.

Ketel One was one of the first to offer an RTD spritz with the launch of its canned range of Botanical Vodka Spritzes in September 2020. They were aimed at variety of occasions – from moments of relaxation with family, to spending a safe and socially-distanced day at the pool or park, stated Bob Nolet, Ketel One’s master distiller.

The new raft of launches, led by brands including Cîroc, Grey Goose, and Svedka, have a similar aim; of providing guilt-free, portable, easy summer refreshment, as large-scale outdoor events return, and consumers look to make the most of their first summer of significantly reduced restrictions.

In a notable shift from what has gone before however, all of the new wave of products put flavour first, offering trending tropical, tea, and fruit combinations, still at a lower ABV. With them, brands are hoping to capitalise on the mood of cautious hedonism – alongside the ongoing health and wellness trends – that look to define the summer.

Diageo and brand partner Sean ‘Diddy’ Combs, for example, have launched the brand’s first RTD line, Ciroc Vodka Spritz, as a permanent addition to the brand. The line offers four premium spritz flavours – Watermelon Kiwi, Sunset Citrus, Pineapple Passion and Colada.

Constellation Brands has launched a vodka and tea-based canned line under the Svedka brand. The Tea Spritz line is described as a spirit-based hard seltzer and combines real tea, sparkling water, and natural tropical fruit flavours, and includes three variants; Orange Mango, Pineapple Guava – both of which include turmeric – and Raspberry Kiwi.

Others will likely join in on this new twist on existing RTD trends, as more brands look to claim a part of the market unique from hard seltzers, but that share their many selling points, for themselves.

Two years on from the onset of Covid-19, the global beverage alcohol marketplace continues to exhibit subtle regional variations, characterised by shifts across beer, spirits and RTDs.

It’s a highly detailed picture that defies easy generalisations, as the IWSR’s recent analysis of global beverage alcohol category share 2010-21 shows, with beer demonstrating good resilience in volume terms across many markets – but losing ground steadily to spirits when it comes to value. However, the scene has been disrupted by the remarkably rapid growth of RTDs since 2019, stealing share from all rival categories, but especially from beer.

Volume trends

Beer was severely impacted by the pandemic due to its relatively high on-trade exposure, but has still managed to grow volume share since 2016 in most regions. On a servings-adjusted basis, global beer volumes moved up at a CAGR of +0.2% between 2016 and 2019. However, this was mostly driven by large-scale volume declines for low-priced baijiu in China and vodka in Russia.

The same factors led to a volume decline for spirits at a CAGR of -3.1% between 2016 and 2019 – magnified by public health policies in China and Russia aimed at reducing consumption of low-end spirits. In Russia, for example, this has led many consumers to switch to lower-ABV products such as beer or wine.

Look beyond these trends and it’s apparent that beer is tending to expand its market share in emerging markets, but is declining in mature markets, where spirits and RTDs are generally faring better.

As such, in North America, spirits volumes (on a servings-adjusted basis) rose at a CAGR of +3% between 2016 and 2021, but beer volumes fell at a CAGR of -1.7%. Meanwhile, RTDs surged forward, recording a CAGR of +33.3%.

In Europe, another mature market, the picture is more nuanced: while beer declined at a CAGR of -0.8% between 2016 and 2021, spirits fell too, by -0.6%; however, RTDs rose by +2.9%.

Figures for the emerging region of Africa are skewed by the impact of Covid-19. Pre-pandemic growth for beer, however, was positive, with a CAGR of +3.6%, but was outstripped by the performances of spirits (+4.7%) and RTDs (+7%), 2010 to 2019.

Value trends

The contrast between beer and spirits is more pronounced in value terms, with beer losing share to spirits in every region, thanks largely to premiumisation trends in spirits from 2016.

Beer’s global value share declined from 46% to 39% between 2010 and 2019, and fell further to 37% in 2021. Meanwhile, the value share of spirits has increased from 29% to 38%, and then to 40%, over the same timescale.

Here too there are local exceptions, such as beer gaining share in some emerging APAC markets, and the structural decline in low-end vodka in Russia, leading to migration into beer, wine and RTDs. Beer also staged a recovery in South America in 2021, following lockdowns and enforced on-trade closures in 2020.

The premiumisation trend – “less but better” – for spirits is reflected in a marked increase in price per serve for spirits, particularly from 2016, at a time when beer prices remained largely flat. In terms of average price per serving, spirits moved up at a CAGR of +7.3% between 2016 and 2021. While this value surge is partly explained by volume declines in low-end spirits (baijiu, vodka), it also stems from large-scale investments from brand owners to premiumise their portfolios across mature and emerging markets.

Regional value trends

The latter phenomenon is also apparent from an analysis of category value pools by region: as value per serve has grown rapidly, the value pool commanded by spirits has expanded around the world.

This is especially evident in Asia Pacific, where remarkable growth for spirits has taken share from all other categories except RTDs and, on a regional basis, has led to an erosion of Europe’s value share of the global spirits category. While beer’s value share in APAC declined from 40% to 30% between 2010 and 2019 (and fell further to 28% in 2021), spirits increased its share from 45% to 59% – and reached 62% by the end of 2021.

Category value pool analysis also highlights the astonishingly rapid rise of RTDs, especially in North America, where RTDs more than doubled in value between 2010 and 2019, reaching a 5% value share figure in the region – and then doubled again between 2019 and 2021, reaching 11%.

The rise and rise of RTDs

This remarkable momentum is only partly explained by Covid-19 magnifying pre-existing trends, and there are clear signs that the phenomenon is not merely confined to the US.

On a global basis, RTDs have been growing at around 10% per year (+10% CAGR for the top 20 markets, 2010 to 2021), with a rapid acceleration just before and during the pandemic virtually everywhere. While this shift has been most evident in the US, which recorded a volume CAGR of +34% between 2016 and 2021, consumption is rising fast in a number of other countries, including Canada (+26.1% CAGR, 2016 to 2021) and Japan (+10.6%) – and the majority of the top 20 beverage alcohol markets have witnessed accelerating growth for RTDs between 2016 and 2021.

The SWA has released the 2021 global export figures for Scotch Whisky

Global exports of Scotch Whisky grew to £4.51bn during 2021, according to figures released recently by the Scotch Whisky Association (SWA), as the industry continues to recover from the impact of the Covid-19 pandemic and US tariffs.

In 2021, the value of Scotch Whisky exports was up 19% by value, to £4.51bn. The number of 70cl bottles exported also grew by 21% to the equivalent of 1.38bn.

Growth in 2021 was driven in particular by consumers in Asia Pacific and Latin America, with value increases of 21% and 71% respectively. Key emerging markets for Scotch Whisky – like India, Brazil, and China – grew strongly. Exports grew by 8% in the United States – the industry largest market by value – despite the first quarter of 2021 impacted by the 25% tariff on Single Malt Scotch Whisky. Exports to the European Union grew by 8% in the first year since the UK left the transition period.

Despite the return to growth in 2021, the value of Scotch Whisky exports has not recovered to pre-pandemic levels, with exports remaining 8% lower than 2019.

Commenting on the figures, Chief Executive of the Scotch Whisky Association Mark Kent said, “The global footprint of the industry in 2021 is a clear sign that the Scotch Whisky industry is on the road to recovery.

“Value and volume are both up as consumers return to bars and restaurants, people return to travel and tourism, and we all return to a degree of normality after a period of enormous uncertainty for consumers and business.

“Scotch Whisky growth in global markets means more jobs and investment across Scotland and the UK supply chain. The industry has continued to invest in its production sites, tourist attractions and workforce to ensure that Scotch Whisky remains at the heart of a dynamic international spirits market and attracts new consumers around the world.

“But this this is no time for complacency. The industry continues to face global challenges, including ongoing trade disruption, growing supply chain costs and inflationary pressures, and undoubtedly there is some road to run before exports return to pre-pandemic levels.

“The UK and Scottish governments should do all they can to support the industry’s continued recovery by making the most of global opportunities, including the ongoing UK-India trade talks, ensuring fairness in the UK duty system, and investing in a more sustainable future as the industry works to reach net-zero by 2040.”

Summary

Export value of Scotch Whisky in 2021 was £4.51bn, up £705m compared with 2020, but down £403m compared to 2019.

Export volume of Scotch Whisky in 2021 was 1.38bn 70cl bottles (equivalent), up 238m 70cl bottles compared with 2020 and up 73m compared to 2019.

On average, 44 bottles of Scotch Whisky are exported every second (up from 36 bottles per second in 2020).

Top 10 Markets

The largest export destinations for Scotch Whisky (defined by value) in 2021 were:

USA:£ 790m8.4% (£729m in 2020)
France:£ 387m2.8% (£376m in 2020)
Taiwan:£226m24.3% (£182m in 2020)
Singapore:£212m-14.3% (£247m in 2020)
China:£198m84.9% (£107m in 2020)
Latvia:£156m-11.8% (£176m in 2020)
Germany:£148m6.4% (£139m in 2020)
India:£146m42.9% (£102m in 2020)
Japan:£133m16.2% (£114m in 2020)
Spain:£118m7.9% (£109m in 2020)

The largest export destinations for Scotch Whisky (defined by volume, 70cl bottles equivalent) in 2021 were:

France:176m bottles-0.1% (176m bottles in 2020)
India:136m bottles44.3% (95m bottles in 2020)
United States:126m bottles12.6% (112 m bottles in 2020)
Brazil:82m bottles80.5% (45 m bottles in 2020)
Japan:56m bottles25.9% (45 m bottles in 2020)
Spain:48m bottles32.0% (36 m bottles in 2020)
Mexico:48m bottles13.0% (42 m bottles in 2020)
Germany:46m bottles7.2% (43 m bottles in 2020)
Poland:45m bottles19.4% (37 m bottles in 2020)
Russia:42m bottles40.7% (30 m bottles in 2020)

Regional data

In 2021, Scotch Whisky exports by global region (defined by value) were (% change vs 2020):

European Union:£1360m8.2% (30% of global exports)
Asia Pacific:£1210m21.4% (27% of global exports)
North America:£1000m11.2% (22% of global exports)
Central and South America:£443m70.7% (10% of global exports)
Middle East and N Africa:£187m55.0% (4% of global exports)
Africa:£157m14.6% (3% of global exports)
Western Europe (ex.EU):£98m6.0% (2% of global exports)
Eastern Europe (ex.EU):£47m33.8% (1% of global exports)

Diageo India reports continued growth momentum, thanks to premiumisation

In the unaudited third quarter, Diageo India has registered an increase in net sales of 15.9%, reflecting a strong quarter driven by resilient consumer demand in the off-trade channel, continued premiumisation and recovery of the on-trade channel. Underlying net sales increased 14.3%, excluding the one-off sale of bulk scotch.

Diageo India said that the Prestige & Above segment net sales grew 20.0%, with strong double-digit growth in our scotch portfolio. However, Popular segment net sales declined 1.7%, while priority states were flat. The Gross margin was 44.1%, down 49bps on a reported basis, driven by input cost inflation, partially offset by favourable product mix and productivity savings. Adjusting the one-off sale of bulk scotch, underlying gross margin was 44.3%, down 31bps.

Ms Hina Nagarajan, CEO, commenting on the quarter and nine months ended 31 Dec. 2021 said, “We have delivered a strong quarter, continuing the growth momentum amidst rising inflation. The broad-based growth in the Prestige & Above segment demonstrates the strength of our portfolio, and the continued agility and resilience of the team. We launched the second limited edition of Epitome Reserve Craft Whiskey, a Peated Indian Single Malt. We continued to expand distribution of the renovated Black Dog Scotch, Signature Whiskey and our innovation offering of Royal Challenge American Pride Whiskey.

We also launched ‘In.thebar.com’ this quarter, our digital platform to drive focussed consumer engagement and celebrations.

Healthy operating cash flow has enabled us to reach debt free status as on Dec.31st 2021. CRISIL upgraded its rating on United Spirits Limited’s long-term bank facilities to ‘AAA / Stable’ while reaffirming its ‘A1+’ rating on the short-term bank facilities.

External operating environment in the near-term will remain challenging, including potential impact from Covid-19 and rising cost inflation. We continue to work with agility and remain focussed on strengthening our portfolio while driving productivity across the value chain. We remain confident in the market potential and continue to stay focussed on our strategic priorities to drive long-term value creation for all our stakeholders.”

The Reported EBITDA was Rs. 491 Crores, up 27.9% and the reported EBITDA margin was 17.0%, up 159 bps, primarily driven by operating leverage on fixed costs. It said that Interest includes a one-off non-debt related charge. Underlying interest was Rs. 16 Crores, down 56.8% driven by reduced debt and lower interest rates.

The profit after tax was Rs. 291 Crores, up 26.7% and PAT margin was 10.1%.

Nine month’s performance highlights:

The reported net sales increased 22.6%, lapping soft prior year comparators. Growth was underpinned by strong consumer demand in the off-trade, premiumisation trend and continued momentum in at-home consumption occasions. Underlying net sales increased 21.9%, excluding the one-off sale of bulk scotch.

The Prestige & Above segment net sales increased 26.9%, lapping soft comparators and favourable product mix. The popular segment net sales increased 11.0%, while the priority states increased 10%. The Gross margin was 44.3%, up 113bps, primarily driven by favourable product mix, productivity savings from everyday cost efficiencies and lapping a one-off inventory provision. It said marketing investment was up 24.9% as the company lapped a reduction in promotional activity during the same period last year due to Covid-19. Marketing reinvestment rate was 8.0% of reported net sales.

The reported EBITDA was Rs. 1,084 Crores, up 88.2% and the reported EBITDA margin was 15.6%, up 544 bps primarily due to recovery in gross margin, operating leverage and lapping one-off costs in the prior year. Excluding the one-off items, underlying EBITDA was up 430 bps.

The reported interest cost was Rs. 52 Crores, down 62.3% driven by debt, interest rate reduction and a net reversal benefit of non-debt related interest charge. Exceptional items include a one-off provision towards an additional demand in relation to a historical customer dispute and tax includes a one-off reversal of 19.2 Crores.

The profit after tax was Rs. 634 Crores, up 343.2% and PAT margin was 9.1%.

United Spirits Ltd reports 27% PAT for third quarter

United Spirits Ltd (USL) has reported a 27 % year-on-year surge in profit after tax (PAT) for the third quarter of financial year 2021-22, which came in at Rs. 291 Crore, up from a Rs. 230 crore during the same period last year.

The PAT margin in Q3 FY22 was 10.1%, the company said. In a press release attached with the quarterly results, USL said it reached “debt-free status” by December 31, 2021, due to its “healthy operating cash flow”. The reported net sales in the three-month period ending December 2021 increased to Rs. 2,885 Crore, marking a 15.9% YoY jump.

The surge was driven by resilient consumer demand in the off trade channel, continued premiumisation and recovery of the on-trade channel, USL said. Underlying net sales increased by 14.3%, excluding the one-off sale of bulk scotch, it added.

“Prestige & Above segment net sales grew 20%, with strong double-digit growth in our scotch portfolio,” the company said. Popular segment net sales, however, declined by 1.7%.

The earnings before interest, tax, depreciation and amortization (EBIDTA) came in at Rs. 491 Crore, which was 27.9% higher as compared to the year-ago period. The EBITDA margin came in at 17%, up 159 bps, primarily driven by operating leverage on fixed costs.

“We upweighted our investment in marketing to support strategic priorities and on-going demand growth initiatives,” USL said.

Gross profit came in at Rs. 1,273 Crore, as compared to Rs. 1,082 Crore in the second quarter. Gross profit margin was 44.1%, down 49 bps on a reported basis, driven by input cost inflation, and “partially offset by favourable product mix and productivity savings”, USL said.

Diageo India chief executive officer Hina Nagarajan, while commenting on USL’s Q3 performance, said “external operating environment in the near-term will remain challenging, including potential impact from Covid-19 and rising cost inflation”.

“We continue to work with agility and remain focussed on strengthening our portfolio while driving productivity across the value chain. We remain confident in the market potential and continue to stay focussed on our strategic priorities to drive long-term value creation for all our stakeholders,” the CEO added.

The operations remained broadly normal for the quarter with sentiment gradually inching up seen in improved mobility and strong festive period helped demand. While input cost pressures continue, the global supply chains remain disrupted with port congestion and container availability issues. However, efforts, it said, are on to ramp up of innovation and renovation agenda, premiumisation trends continue, launched digital platform In.thebar.com during the quarter. It said it aligned itself with the new policies in Delhi and West Bengal, and tax rationalisation on BIO spirits in Maharashtra and West Bengal.

On the outlook, it said it was aiming to retain current demand momentum despite challenging near-term environment, expanding on new productivity initiatives, renovated portfolio well placed to benefit from ongoing premiumisation, and final stages of strategic review of popular brands.

Australian wines focus on India paying rich dividends

Australia’s industry is different. It is much more mature, and our climate allows for a more diverse variety of wines to be produced. So it isn’t a “like for like” comparison. In fact, we see no real competition between the domestically produced and imported wines. Both are targetted to different parts of the society. Domestic wines are often perceived as “value for money”.

Imported wines often carry a perception of quality among Indian customers who are willing to pay a premium. According to some statistic, imported wines account for about 35% of the country’s total wine consumption in terms of value but only about 12% in terms of volume.

Australia is looking at the upper end of the spectrum in wines, we see an opportunity for Australian labels to offer an experience to consumers.

The diversity and quality we can offer, gives us the ability to provide consumers with something that few new world countries can.

What experiences of Asian markets would you like to bring to the marketplace?

The Indian wine market is in a nascent stage, especially for imported wine. We are delighted to see wine culture slowly evolving and consumer adoption growing.

As the industry continues to grow, we are hoping to see more advanced matching of wines and foods. Cobranding of wine experiences with other activities, like premium tourism. Curated experiences that take the consumer on a journey. Tasting rooms, which we see coming up in Maharashtra soon, are something we are working on.

Our main aim is to see wine transformed from consumption to experience in the mind of the consumers.

Exports of Australian wines in glass bottles have grown 2% in value and unpackaged wines by 13%, what are your comments? Do you see an opportunity for bulk wine exports to India?

There is an opportunity for bulk wine. But current duty structures don’t really make it viable. There is no significant cost saving to import bulk as custom duty remains same for bottled and bulk wine. It’s not something we are looking into right now.

We do see opportunities for private labels in India and have had success with Australian brands developing private labels for Indian organisations.

What kind of pricing strategy should Australian wines adopt as the global trends are for low-end wines and high-end wines?

Brands should consider a multi-pronged strategy. Offering an entry level wine to generate awareness of their label in the market. Support this with a more premium offering, that elevates the perception of quality.

What are your comments on the growth of wines in value (less than $2.50 per litre) by 8% and that of high-end wines ($50 and more) increase by 34% in value?

This is a very encouraging trend. It shows a maturing of consumers’ pallet and an appetite for a premium experience.

As has been the case all around the world, as the industry matures, consumers’ pallets become more sophisticated and the premium segment emerges. We also see this trend in the fact that importers are not only seeking entry level wines, but also mid and premium level wines

Australia has unique position in Indian market. Australia has significant market share not only in wines value less than $2.50 per litre, but also high-end wines, too.

Australian wines have an approximately 23% market share, and a little over US$ 6 million in value. What target would you like to set for yourself in terms of market share and value?

We are very proud of our position in the market. It’s something we want to hold on to and grow. We haven’t set targets in terms of overall dollar value. We want to focus on creating a brand for Australian wine, as we feel this will give the best outcome.

Importantly, younger generations, particularly the age group of 20-35 years, is the emerging consumer segment for wine. This is due primarily to an exposure to Western culture.

Austrade India have a significant presence on the ground. Austrade has offices in six Indian cities (Mumbai, New Delhi, Bangalore, Chennai, Kolkata & Hyderabad). We are working closely with Indian importers and providing personalised one-on-one service to understand importers’ requirements to expand their portfolios and connect with Australian wineries. Austrade is playing an important role to maintain and grow Australian market share in imported wines in India.

With a very low per capita consumption of wine (a tablespoon) and total consumption of 30 million litres how would you rate prospects of Australian wine in India?

With the market being in a developing state, there is huge potential for Australia.

Historically, India has been a market for spirits and beer and wine consumption has been limited by availability of domestic wine as well as the high cost of imported wines.

In a country with a billion-plus population, it is estimated that wine in India has penetrated only a small segment of the population so far, resulting in low capita consumption of wine. Wines are increasingly becoming popular among younger generations and are now being served at functions, events, Indian marriages, and gifting.

Australia’s proximity to India, in comparison to other wine producers, gives Australian exporters a slight advantage. Not only are freight cost moderately cheaper, but diplomatic relations are strong due to our shared democratic values and large Indian diaspora in Australia.

The position of Australian wine and its wineries is critical. We want consumers to think of Australia in terms of a premium brand for wine – A leader in the new world.

With India being such a young country (by demographics and at heart) we’ve taken a long-term vision for the market.

With India importing about 500,000 cases of wines per annum what is the scope for Australian wines in India?

With the market being in such a developmental state, there is huge potential for Australia. The amount of wine imported will grow over the coming years and if Australia can establish its brand in the market it will be a big part of that growth.

Many well-known Australian wines are not present in India – Jacob’s Creek, Hardy’s, Yellowtail are three accessible brands. For consumers looking to explore Aussie labels and varieties further there is Yalumba, Torbreck, Two Hands, Penfolds, Lindeman’s, Wolf Blass and Debortoli available across a range of state, just to name a few.

Imported rosé is witnessing increased interest due to its versatility and food pairing. Rosé is often discussed as an excellent wine to pair with vegetarian food. It suits the Indian palate as it is light and fresh like white wine, but with the body and fruitiness of a red wine. Blush-coloured medium sweet Moscato wines that are low in alcohol content are emerging as a trend amongst health-conscious consumers. This is something Australia can bring more of to the market.

“Wine-in-can” is a new segment that is targetted primarily at millennials for on-the-go consumption. We’ve already seen success for Australia in this area with Barokes.

All these trends support the notion that Australia will continue to be a leading choice for consumers in India.

With 19 million young people entering the drinking market each year and with young people a prime target audience for wines, how do you plan to address this target and the general wine drinking audience?

The perception of wine needs to be looked at. For a long time, wine has held a distinct position in the Indian consumers’ mind. It has been seen as a sophisticated and stylish drink as compared to other alcoholic beverages, like whiskey, scotch and rum that are considered men’s drink or gin, which might be considered a preference for females.

But the thing with wine is there are so many different varietals and tastes, that there is a type of wine for everyone.

If we can bring exciting options, like rosé or different sparkling varieties I think it can really excite new consumers and appeal to broader tastes.

Right now, wine consumption in India is largely limited to urban areas and metropolitans. Austrade advises its Aussie labels to focus not only on metros, but also to look at tier-2 and tourist locations.

Younger wine drinkers in India are an experimental group who are searching for new experiences; an appetite we hope to satisfy with Australian wine.

The Struggle with Counterfeiting in Spirits Industry: Coming out of Covid Crisis

Spokesperson: Mr. Ankit Gupta, Gov Body Member, ASPA (Authentication Solution Providers’ Association)

What has been the counterfeiting scenario in the spirits industry during the Covid crisis?

During the Covid crisis, alcohol in India has emerged as the sector with the largest number of counterfeiting incidents. This includes adulteration, trademark infringement, fake liquor, fraud, and other ways to copy products. According to ASPA counterfeit news repository study, alcohol continues to be in the top five sectors in 2018, 2019 and 2020 facing these risks. The same trend continued through 2021. Alone in Uttar Pradesh officials had seized approximately 12.57 lakh litre illicit liquor till November 2021 (Source: Aabkari Times, December 2021).

Despite being one of the most regulated sectors, in normal circumstances also alcohol industry is one of the biggest victims of counterfeiting and illicit trade. During the pandemic the industry was hit badly as sales through restaurants, hotels, etc. was adversely affected. Drinking at home became more acceptable and picked up but was still not enough to substitute the lost revenues. While the industry was struggling with low demand, criminals exploited the demand-supply gap to sell more quantities of counterfeit liquor, creating an even bigger threat to human well-being.

Why is the alcohol industry one of the top targets for counterfeiters and illicit trade?

Criminals are attracted to the alcohol industry because of various reasons e.g. high profitability, evasion of taxes, low consumer awareness, lack of universal pricing in India as well as high demand. In addition to this, the easy availability of raw material Methyl Alcohol, which is widely used for industrial purposes is another reason.

The margins for criminals are considerably huge and despite regulations, the task of counterfeiting and illicit trade is not being made challenging enough for them. During lockdowns, restricted access to and availability of good quality liquor gave a bigger push to the sale and purchase of counterfeit or illicit liquor. In some cases, it was observed that people saw the acquisition of liquor in difficult times at higher rates as social status or public image booster.

The danger has increased as criminals are using more reckless methods of producing and smuggling alcohol. For instance, many incidents of liquor being produced from sanitizers or ethyl alcohol or spirits from petrol and diesel mixed with colour being sold in copycat or discarded packaging surfaced across the country. These products are hazardous.

How can counterfeiting be controlled effectively post-pandemic?

Development of a solution always starts with recognising the problem and assessing its magnitude. Counterfeiting has been underestimated and this has prevented the development of a robust strategy and solution to curtail it. The fight against counterfeiting and illicit trade needs to be fought from three fronts – policy, brand, and consumer. A policy framework that guides support and nurtures an ecosystem which strong against counterfeiters. It should protect businesses and consumers against counterfeiting malice while enabling effective law enforcement and effective punishment to those who commit the crime.

Being an integral part of the system, brands should take solid steps to protect their products by building an adequate defence of anti-counterfeiting solutions and traceability infrastructure. For instance, multi-layered protection through packaging by implementing anti-counterfeiting solutions which make it almost impossible to copy – one-time break seals and sleeves. Supported by smart solutions such as tax stamps, digitally readable labels, QR Codes, etc. Made more effective by awareness which educates consumers about how they can safeguard themselves from counterfeit products.

Consumers can play an important role in the fight against fakes, they are their first line of defence. A little bit of carefulness and attentiveness on their part while buying liquor can save them from getting cheated.

Can the online sale of alcohol be a welcomed trend? Can it help in curbing the sale of counterfeit liquor in the country?

The pandemic crisis has encouraged discussions about the online sale of liquor in many states. According to a survey by YouGov National survey findings, almost 60% of consumers are eager to purchase alcohol online. Safety and convenience have been cited as key reasons to prefer the e-commerce channel to buy alcoholic beverages. While the online channel offers consumers more choice leading to innovation within the category and incremental revenue opportunities for state governments, we need comprehensive regulations and safeguards for selling liquor online and need to tread with a lot of caution. The process and compliance regulations for alcohol delivery will vary from the delivery of groceries or essentials. Moreover, the possibility of alcohol being seized during transit and the adulteration of alcohol by criminals cannot be ruled out either. The authentication industry can offer technology-enabled packaging and anti-counterfeiting solutions that can plug these risks and challenges. The digital footprint cn help in traceability and if done with proper provisions it can ease the process of identifying and catching frauds.

The Macallan unveils The Reach Single Malt Whisky

The Macallan has unveiled The Reach, an incomparable single malt whisky that reflects an extraordinary moment in time and exemplifies the enduring spirit that has been at the heart of the brand for almost 200 years.

Crafted during the Second World War in a period of increasing hardship, The Reach was laid to rest in 1940 before The Macallan was compelled to close its doors for the first time in its history.

Its very existence is testament to the care and commitment to uncompromised excellence that has driven The Macallan since it was founded in 1824. It also pays tribute to those who strived amid great adversity to resume distilling The Macallan’s spirit, as well as the crafts people today who continue to uphold the brand’s values.

A rare single malt at 81 Years Old, The Reach is the oldest whisky ever released by The Macallan, crafted from a single, sherry seasoned oak cask. The dark, precious whisky is encased in an exquisite decanter created from mouth-blown, hot glass, cradled on a bronze sculpture of three hands.

Each hand represents characters in The Macallan’s history and their unique story. One commemorates the Distillery workers of 1940 who crafted the spirit into existence, in challenging times, over eight decades ago. Another is the hand of one-time chairman, Allan Shiach, whose grandfather headed the company when this remarkable spirit was first consigned to its cask. The third is that of today’s Master Whisky Maker, Kirsteen Campbell, who carefully selected the 1940 cask used to create The Reach, deciding that now was the time to share this precious whisky with the world.

Kirsteen Campbell, Master Whisky Maker, The Macallan, said, “It is an honour to introduce The Reach. Created during a turbulent time in the world, this extraordinary expression showcases The Macallan’s history, ingenuity and unmistakable strength of character.

“The creation of many hands, The Reach has been a truly collaborative effort. It’s also a tribute to the people who made this precious whisky, and their enduring spirit which never wavered.

“Its deep auburn hue is the first hint of this remarkable whisky’s astonishing depth. Offering notes of dark chocolate, sweet cinnamon and aromatic peat, leading on to treacle toffee, crystalised ginger and charred pineapple, before giving way to an intensely rich, sweet and smoky finish.”

Reflecting its rarity and significance, The Reach is presented in unique packaging brought together by a collective of Scottish artisans. A tale of collaboration and connectivity, the result is a handcrafted quartet of liquid, glass, bronze and wood that is a fitting tribute to this very special whisky.

Sculptor Saskia Robinson created the timeless sculpture featuring three hands, producing countless drawings from every perspective before working in a physical medium. The veins, nails and skin detail are recorded in extraordinary accuracy, modelled on an artist’s impression of a hand of one of those original still men. The sculpture is cast in bronze and the glimmer of the metal contrasts beautifully with the amber whisky.

The surface of the glass decanter features subtle indentations that match the fingerprints of the bronze hands which support it, while a beautiful cabinet crafted using wood from an alien elm tree, which is thought to have been on The Macallan Estate in 1940, houses the decanter.

A film has been created by renowned London-based photographer Nadav Kander working closely with his art director, Matt Willey, who was previously the art director at The New York Times Magazine. Featuring original music composed and recorded by Scottish band Mogwai, recently shortlisted for the prestigious Mercury Prize, it tells the story of The Macallan’s legacy and the collaborative process behind The Reach.

Highly limited to only 288 decanters worldwide, The Reach will be on display at The Macallan Estate Boutique from 9th February 2022 and later in The Macallan domestic and travel retail Boutiques. The RSP is $125,000/£92,000/€110,000.