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Sunday, March 05, 2006

The Indian Whiskey War

I wouldn't have guessed that India drinks 40% more whiskey than the U.S.:

Battle for the world's largest whisky market -- India, by Paul Peachey, Mail&Guardian Online: Sipping a tumbler of Johnnie Walker whisky ..., Kunal Doshi, a smartly-dressed young solicitor, appears an unlikely warrior. But in the increasingly bitter "whisky war" being fought between the Indian industry and traditional Scottish producers, Doshi, 21, has become an unknowing frontline soldier in a foreign assault on the world's largest whisky market.

"If it's really good whisky, maybe I'd spend 500 rupees ($11)," Doshi says. "I know I'm going to be making the money soon so what am I going to do with it? I might as well have a good time," he says. "Young Indians have a lot of money now. Your call centre employee, your financial analyst, thanks to foreign companies, are on 30 000 rupees a month, so what are they going to spend it on? It's going to be on foreign alcohol."

The Indians are prodigious whisky drinkers, downing 570-million litres in 2004, 40% more than the second largest consumers the United States, and the total is set to grow... Major drinks companies including the Edrington Group, Moet Hennessy and Diageo are jockeying for position ... However they are currently being priced out of the market because of tariffs of up to 525% ... leaving Indian producers with a tight grip on the mass market.

The powerful Scotch industry is running a two-pronged strategy: targeting the increasingly wealthy urban professional with a sales pitch for its "sophisticated" drinks and lobbying the government for tax cuts. ... Analysts say the trend for taxes is downwards ... but they need to come down sharply for young professionals like Doshi to make a major impact on sales.

Feuding between the two industries is partly based on differences in manufacture and distilling culture. When is a whisky not a whisky? When it's made with sugar cane molasses, say the Scots, sparking rage from the leaders of the thriving 160-year-old Indian industry. The Indian product cannot be sold in Europe as "whisky" although talks are continuing for it to be sold as "molasses whisky" or "Indian whisky"...

Indian "molasses" whisky has about 90% of the Indian market and the domestic industry is fighting a fierce rearguard to ensure that it does not lose its dominant position. It is also much cheaper at 200 rupees for a bottle of entry-level Indian whisky compared to some 3 000 rupees for a bottle of single malt Scotch whisky such as Glenfiddich. ...

The Scottish industry claims it is produces a superior product from malted barley -- a claim disputed by the Indians. ... In the hotel bar, Doshi agrees, the only member of his group of eight drinking Scotch. But for most of his friends the key factor is price. "We have a fixed amount of money and there's a huge amount of tax on foreign liquor. For most people, it just makes much more sense to drink Indian liquor -- unless you're with your parents and you can order whatever you like."

    Posted by on Sunday, March 5, 2006 at 01:01 AM in Economics, India | Permalink  TrackBack (0)  Comments (8)

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