Indian Spirits Manufacturers Eye Russian Consumer Market
UK distillers lose out to Indian rivals in the Russian spirits market
Indian distillers, winemakers and brewers are not especially associated as high-end brands in the West, but the exodus of Western wines and spirits from the Russian domestic market is proving to be an incentive for large Indian MNCs operating in this field to gain a valuable new market.
Russia is the 4th largest alcohol market in the world in terms of volume, with imports accounting for 9% of total consumption in an import market worth about US$2 billion. With supplies of Western brands now being depleted, wines are being sourced instead from South America, and well as from South Africa. Russians have traditionally been significant consumers of Georgian wines and have a rapidly growing domestic wine producing industry.
But spirits are a different matter. While Russia itself produces plenty of vodka, spirits such as Gin and Whisky are traditionally sourced in the West, with the UK being a major supplier – English Gin, and Scotch Whisky. Pre-conflict UK exports of spirits to Russia amounted to about US$350 million until the UK government banned the export of ‘luxury items’, including spirits, to Russia last year. This means that the Russian market for imported spirits is about to change its tastes.
Step forward India’s Allied Blenders & Distillers (ABD), which actually produces the world’s most popular whisky, “Officer’s Choice”, with even its name being a British Imperial throw-back to the Raj era. Although that is a locally produced alternative to the Johnnie Walker blends, and has its own red, black and blue labels, it now outsells Johnnie Walker globally. In 2015 Officer’s Choice overtook Smirnoff vodka to become the world’s largest selling spirit brand. In 2019, the brand sold 36.5 million cases, higher than any other spirit brand in the world, worth over US$1 billion in sales. Interestingly, two other Indian whisky brands also have annual sales of over US$1 billion annually, being McDowell’s No. 1 owned by Diageo, and Seagram’s Royal Stag.
These tend to be aimed at the Indian middle-class market, with those significant sales volumes driven by the sheer size of the massive Indian consumer base. Typically, these are drunk with soda in the traditional fashion, although they are becoming an increasing component in trendy cocktails – a style drink fashionable among the younger consumer market in India but not previously endorsed. India’s generally warm climate is not especially conducive to consuming strong alcoholic drinks – which is why the whisky and soda is popular – a pick me up tonic and a hydrator all in one.
Allied Blenders & Distillers (ABD), though are the first to enter the Russian market, with local Russian vodka manufacturer the Alcohol Siberian Group (ASG) to be the sole distributor of two of the ABD brands, the Indian company announced on Tuesday (February 28). ABD’s whiskies for Russia will be the Officer’s Choice Blue, and will retails at about 1,000 and 1,200 rubles (US$13-US$16) for a standard 0.75-liter bottle. The Sterling Reserve Premium Blend price in Russia will vary from 1,100 rubles to 1,500 rubles (U$14-US$20) per bottle. Both contain some Scottish malt whisky, blended with Indian grain whisky.
India’s Premium Malt Whiskies To Follow?
But the Russian domestic connoisseur, while familiar with high-end (and expensive) whiskies, and still able to privately import them into Russia via duty free at Dubai or Istanbul, may also start to graduate to Indian whisky. India has begun to produce some very fine, award-winning malt whiskies as well. Much as the Japanese were successfully able to make a dent in the global whisky market from the early 2000’s, with the Hibiki 21 year old even winning the world’s best whisky award in 2013, Indian distillers have similar targets in mind.
Of essential importance to whisky manufacture is the quality of water, and the presence of a peaty sub-surface soil layer to help add natural flavor and colour. India has such a region in the north, where the Indian Himalaya’s release their mountain streams. Whiskies such as the Solan No.1, distilled near Simla, has been manufactured for 180 years – again that British Raj era connection – and is regarded as one of the best. It is certainly a personal favourite of mine.
As with all single malt whisky, Indian single malt must be matured for a minimum of three years and a day in oak casks, and it is the produce of a single distillery, distilled from nothing other than water, yeast and malted barley. Indian single malt whiskies are known for their fruity, malty character and are gaining increasing acceptance at the Malt, high end consumer market as well.
Other excellent Indian malt whiskies include the Rampur Double Cask Single Malt, the Indri Trini Three Wood Single Malt, the Amrut Fusion and the John Paul Classic Select Cask distilled in Goa, also known for its iconic Rum.
Russian whisky drinkers then are going to be in for a treat – although there will be some tears shed at the loss of the major Scottish brands – personal duty free, and parallel imports will solve much of that. However, Indian distillers will, over time make undoubted inroads into the Russian market. It may not just end with Whisky either. India is also starting to produce some excellent Gins.
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Dezan Shira & Associates have over 30 years experience of assisting foreign investors into Asia and have a presence in both India and Russia. Indian exporters requiring marketing advisory and distribution assistance in Russia may email russia@dezshira.com for assistance.
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During these uncertain times and with sanctions in place, our firm helps Russian companies relocate to Asia. We also provide financial and sanctions compliance services to foreign companies operating in Russia. Additionally, we offer market research and advisory services to foreign exporters interested in doing business in Russia as the economy looks to replace Western-sourced products. For assistance please email russia@dezshira.com or visit www.dezshira.com
