Ditched by the rich, vodka needs a new spirit

A decade ago, for every 10 bottles of whisky Lama ordered, he would order an equal number of vodkas and just two or three bottles of gin. Today, while the whisky count remains the same, gin stands at about eight bottles and vodka is down to just four.

Vir Kapoor, 37, who regularly hosts parties at his west Delhi home, has also observed this shift. “A lot of my friends have become gin drinkers," he said. Vodka, long the go-to white spirit for those who weren’t into brown drinks such as whisky and brandy, has fallen out of favour in his circle. “Gin never existed for a lot of us a decade ago. It was primarily whisky, vodka, and a little bit of dark rum in the winter, and a lot of beer in the summer," recalled Kapoor. It would be the norm to have at least two bottles of Absolut (Pernod Ricard’s premium vodka), or Belvedere (a Polish vodka distributed by LVMH) in his bar. Later, Grey Goose (Bacardi’s) made an appearance. “But today, a lot of my friends are becoming gin drinkers. These are people who don’t have brown spirits. They have almost exclusively switched over to gin from vodka and something like a Bacardi white rum," he said. And so, Kapoor’s bar today features four-five bottles of gin such as Bombay Sapphire, Greater Than, or Stranger and Sons during parties. Of late, his friends have also begun to ask for high-end sipping tequila. Greater Than and Stranger and Sons are craft gins made in India.

This change at Lama’s bar and Kapoor’s parties is playing out across the country. For decades, vodka reigned supreme in India’s white spirits scene, serving as a reliable companion to whisky at social gatherings. Today, even those who want to get into the vodka business are having second thoughts, said consultants. This is because a juniper-infused revolution has swept the nation in recent years, with premium gin dethroning entry-level vodka as the drink of choice (all gin contains juniper, a berry-like seed cone). Consequently, the white spirits arena has become crowded, with vodka facing stiff competition not just from premium gins but also from high-end tequila, agave-based spirits and white rum. Agave is a plant that mostly grows in arid regions and is native to the Americas.

Coming of age

Gin has been part of the overall liquor portfolio in India for over a hundred years. However, despite its history and visibility, it was always on the fringes in terms of its market size and acceptability. For years, gin had seen very little innovation and became stagnant, with Indians hardly ever touching the stuff.

But around 2017, gin came into its own. The likes of Nao Spirits and Third Eye Distillery, makers of Greater Than and Stranger & Sons gins, respectively, arrived on the scene and began churning out premium gins that were both easy and expensive on the pocket. Pretty soon, gin had dethroned entry-level vodka.

According to industry estimates, India’s gin industry has grown from a mere 12,000 cases in 2017 to about 320,000 cases now. Typically, a case comprises nine bottles of 750ml or 1,000ml each, depending on the category.

Looking to tap this surge in demand, in 2023, nearly half a dozen companies, including Radico Khaitan, Spaceman Spirits, Third Eye Distillery, and NV Distilleries & Breweries, launched new brands and variants of gins and even some white and golden rums.

Today, many other larger companies have also jumped onto the white spirits bandwagon with much gusto. Allied Blenders and Distillers (ABD), which is primarily a brown spirits whisky maker, launched a premium gin, Zoya, this month. Associated Alcohol & Breweries Ltd has launched its own premium gin, Nicobar.

Indian gins priced above ₹1,000 have been growing rapidly, and are outpacing imported premium gins. They accounted for just over a quarter of the premium segment four years ago but today, the number has risen to over 40%, said the Confederation of Indian Alcoholic Beverage Companies (CIABC), noting that the share of imported gins has fallen from 74% to 59% in just four years.

Premiumization

Clearly, this shift within the white spirits world isn’t just about taste. It’s a story of premiumization, where consumers are increasingly willing to pay more for quality and experience. Gin, with its versatility and burgeoning craft spirits scene, has capitalized on this trend. “10-15 years ago, vodka was the most sought-after spirit, but gin and craft spirits came in. What the dark-spirit making companies did was capitalize on the craft market, which vodka couldn’t," said Lama.

Siddharth Banerji, owner and managing director of Kyndal Group, the spirits manufacturer behind well-known scotch brands such as Cutty Sark and The Famous Grouse, said the premiumization of higher-quality spirits is the backbone of the growth of the white spirits sector, specifically gin. The sheer number of brands in the premium segment has gone up across many spirit categories. The biggest beneficiary of this has been gin, since all these spirits come with appealing packaging and innovation.

“All this has resulted in people trying a lot of new brands. This was not the case some years ago, when people were completely inflexible about the brands and categories they consumed. Today, there is also huge growth in per capita income and that is clearly reflected in India’s ‘premiumization’ story. Also, more people are consciously drinking better quality over quantity since the pandemic," Banerji added.

His company is in the process of adding an international tequila to its portfolio. In his view, India’s biggest spirit growth story will be in the premium drinking segment, in the ₹1,000–2,000 per bottle range. To be sure, while a battle is raging within the white spirits universe, brown spirits still command a staggering 97% share of the overall market, which is largely driven by mass-produced value offerings.

And while gin is reporting the fastest growth, vodka’s volumes are still four times larger—it has maintained growth momentum, but only in the much larger economy category. Premium vodka, however, has seen only a modest increase in market share. According to IWSR, a drinks consultancy, in calendar year 2021, volume-wise, growth across the overall vodka segment was higher, at 35%, while gin trailed behind at 28%. However, that same year, in the ‘premium and above’ category, it was gin that grew faster than the vodka segment, surging 177% versus just 66% growth for vodka.

Widening market

It isn’t just gin that is making waves in the white spirits market. Competition is hotting up from other white spirits, with tequila, agave-based spirits and even white and golden rum becoming popular in the market, especially among young upwardly mobile Indians. This segment has seen new players such as Allied Blenders, Himmaleh Spirits, Associated Alcohol & Breweries wade in and experiment with a range of drinks for tipplers. The trend also led Diageo to launch its Don Julio tequila two months ago.

Vikram Achanta, co-founder and chief executive of Tulleeho, an independent beverage training and consulting firm, said tequila has been trending heavily of late. “It’s very interesting to note that while agave consumption has gone down in America—one of its biggest markets traditionally—in India, it has gained immense popularity in the last six to eight months. Mexican and Spanish-themed restaurants and bars that are sprouting up are fuelling this demand," said Achanta. “There is also in-home consumption. America’s lack of consumption has freed up allocation of the spirit to markets like ours. The supply of agave spirits is not likely to be a problem now and we could see more companies coming in and innovating in this category."

In fact, Diageo and Bacardi, two of the largest liquor companies in the world, are now focused on promoting their tequila brands Don Julio (Diageo), and Patron (Bacardi) in India and will look at expanding the market heavily here. DesmondJi, an Indian company that cultivates agave in India, has also come up and supplies companies looking to develop the agave-based spirit here. Its clients include Maya Pistola Agavepura, which was launched by Indian restaurateur Rakshay Dhariwal last June.

“Tequila, especially sipping tequila, is very sexy from a consumer perspective right now and there is a lot of interest from both genders because it supposedly gives people a ‘clean’ high. Not sure how much of this is true, but it is encouraging demand," he added.

All in all it’s a good time to be in the white spirits business. Premium white rums, gins, and agave account for over a million cases per year, said Achanta, with the entire white spirits hemisphere accounting for about four to six million cases.

“It (white spirits) is a very, very exciting category right now with a lot of innovation going on in some spirits," said Alok Gupta, ABD’s managing director. “Gin has had this astounding growth because it offers new experiences. Globally, today, the only two white spirit categories spoken of are gin and tequila. There is a lot of curiosity around mezcal- and agave-based spirits and Indians really want to know what the hype is all about."

The industry is yet to put out any official data for this fiscal year, but Gupta estimated the market for tequila to be about 75,000–80,000 cases per annum, growing at a rate of 40%.

Time to get with it

Meanwhile, vodka, said some aficionados, appears to be suffering from a bit of an identity crisis. It has been stuck in the ‘value’ spirits rut, and is struggling to keep up with gin. While its volume growth continues, that growth is primarily in the lower-priced segments under ₹1,000, according to data from CIABC.

Indeed, Indian brands haven’t made any significant inroad in the premium vodka segment, leaving the space dominated by foreign players, such as Diageo’s Smirnoff, Absolut and Grey Goose. A few players such as NV Distilleries & Breweries, which sells the Smoke brand of vodka, and has innovated with flavours such as saffron and mango, are the exception. Somewhere, this lack of homegrown innovation has hindered vodka’s appeal.

Gupta said India needs to introspect as to how to grow the vodka category again. “We believe there is a gap in the super-premium vodka segment and we will launch something in the higher-end category soon," he said.

The expectation from vodka was always that it was “clean" and delivered the same standard experience every time it was consumed, said Gupta. But with other white spirits, it has become more about who is offering newer flavours. “I don’t think gin is taking away the consumption of any other white spirit. The biggest share of white’s growth is possibly from someone who normally drinks brown; women and other newer age drinkers," he added.

Anand Virmani, co-founder of Nao Spirits, appears to concur with Gupta. “To my mind, it is not a vodka versus gin debate. There is some migration from other categories. Some are beer drinkers, some are new drinkers. In fact, India is adding 20 million new drinkers each year. New drinkers generally begin with lighter spirits," he said.

While the battle for India’s white spirits market is far from over, one thing is crystal clear: Premiumization is the name of the game today.