Thursday, May 23, 2013


India is considered the biggest market for Scotch Whiskey, in spite of the fact it is one of the poorest countries among the comity of nations. Paradoxically almost 25% of its population are considered impoverished with high level of malnutrition and under nutrition. Still Scotch Whiskey rules the country with every well to do person aspiring to have it as frequently as possible. There was a time not in the distant past when almost all Indian visitors returning from a sojourn abroad carrying a jumbo pack of internationally reputed cigarettes and a carton of Scotch Whiskey both allowed into the country without any import duty. Some of the popular brands include Chivas Regal, Johnniewalker, Buchanans, Ballentines, Glenlivet, Famous Grouse, Highland Park etc. These brands costing astronomically have gained global acceptance though one really does not know whether they have any USP compared to other brands marketed by many companies in different parts of the world! 

According globally accepted agreement one can call a spirit Scotch whiskey  only if it is made in the country Scotland which has the Geographical Indication (GI) protection, similar to patenting. It is considered a national brand which many consider as the right medium for toasting and celebrations. Though many manufacturers make Scotch Whiskey, one cannot call the same type of product in any other country by that name unless manufacturing takes place within the boundaries of Scotland. The process involves brewing the grains, distilling and maturing for different periods varying from 12 to 25 years! Is it not amazing that this unique product is sold in more than 200 countries across the globe and its patrons have no color, cast or economic discrimination while drinking the much coveted spirit. 

Scotch, to begin with was a cottage industry during early years of nineteenth century with widely scattered production base, involving many players, mostly families engage in making the spirit in small scale. Though the Scotch Whiskey industry was down in the dumps by the middle of 20th century, its fortunes were revived by multinational brewers like Diageo which controls to day 40% of Scotch market globally.  It is not disputed that Scotch is a global phenomenon now and Scotland gains much because of the employment generated by this industry and the taxation on the product. In fact it is a paradox that Scotch Whiskey is made by genuine Scotland incorporated breweries only to the extent of 20% while remaining comes from giant multinationals  headquartered else where. 

The remarkable turn around of the Scotch whiskey occurred when it was positioned by the organized liquor industry as an aspirational product among the middle class in emerging markets such as Asia, South America and Africa. According to the industry spokesman Scotch's success can be attributed to its appeal to the affluent as well as the middle class people. The unique status enjoyed by Scotch consumers has become symbolic of their importance in the society. No business deal is struck unless it accompanies a Scotch Whiskey session! The nearest competitor for Scotch is Champagne which gives a different feeling of elation when it is uncorked but Scotch is often considered as an excellent anti-depressant to drown one's sorrow.   

According to the industry Scotch Whiskey is consumed world wide with the top consuming countries including the US, France, South Africa, Taiwan, South Korea and Venezuela. Global trade is estimated at about $ 6 billion and the Scotland economy derives 4% of its GDP from exports of Scotch, with 25% of its total exports basket coming from Scotch. Imagine each second 40 bottles of Scotch is exported overseas from Scotland. In spite of all these positive trends, Scotch Whiskey is still struggling to produce enough to meet the insatiable quest for its product from all quarters of the world. This is due to the fact that the product has to be stored in special wooden caskets for duration beyond 12 years before it can be marketed.

India has a unique culture of consuming spirit beverages with Indian made foreign liquor, popularly known as IMFL dominating the landscape. IMFL is made by alcoholic fermentation of molasses, a by product of sugar industry abundantly available in the country. Also popular is Arrack a locally distilled spirit beverage using fermented Toddy tapped from coconut trees. Kerala is the top alcohol consuming state in India and one has the unique distinction here of State undertakings marketing alcoholic beverages in every nook and corner of the state. Rum another product derived from molasses is popular with Defense Force personnel whose consumption of liquor is very high. As a part of national policy to discourage alcohol consumption Governments use the taxation route to make these products costlier and unaffordable to many. However such economic restraints do not seem to be working as reflected by the soaring sales of liquor in the state every year!  

If Kerala, a tiny state in the country has a per capita annual liquor consumption of 9 liters, country wise it is negligible, about 550 ml! Is it not shocking that despite preaching alcohol abstinence by the nation every state is capitalizing on the gullibility of people to alcoholic beverages and this is reflected by the revenue earned by Kerala government in 2012 through excise duty to the tune of Rs 6000 crore out of sales estimated at Rs 7000 crore! Probably this attitude and action are giving hope to the global liquor industry to set up shop in the country in droves to tap the exploding market.  

In India the Scotch is imported in significant quantities but a hefty import duty of 150% is inhibiting the growth. There is considerable pressure on the Indian government to reduce the duty component to reasonable levels and as a member of WTO it is bound to bring down the duty to lower levels sooner or later. Established manufacturers are investing heavily in creating additional capacity for Scotch whiskey production hoping to exploit the Indian market in the years to come. It is to be realized that if the spirit is made to day it will take 12 years for maturation and sending to the market and hence this increased tempo in investing on this product. Knowing the appetite of Indians for Scotch, if the country ever opens up the market for import of Scotch under a low import duty regime, it is likely to become the top Scotch consuming in the world within a matter of few years!


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