India\'s Appetite for Whiskey Attracts Diageo

Carl De Souza/Agence France-Presse - Getty ImagesWhiskey manufactured by Scottish whiskey maker Whyte and Mackay.

India is the largest guzzler of whiskey in the world. One of the fastest-growing whiskey markets, it is estimated to be worth about $10 billion by 2013, according to a trade group study from last year.

So it was little surprise that on Friday the world's biggest spirits company, Diageo, said it planned to buy 53 percent in India's United Spirits, in a deal worth about $2 billion. The move is one of the biggest by a foreign company to savor a chunk of the Indian whiskey market. The last time a foreign company entered the domestic alco hol market in a major way was when Pernod Ricard acquired Seagram's wine and spirits operation in India in 2001.

Analysts say there are a cocktail of factors that make India the largest consumer of whiskey by volume: The alcohol has a long history in India, going back to the British colonial period. Also, over the past 20 years, the country's growing middle-class with its disposable income, particularly among youth, has increasingly quaffed whiskey.

In recent years, the prestige of sipping single-malts has grown among Indian elites. Whiskey has also gained popularity in smaller cities like Indore, Ludhiana and Lucknow, where consumption in restaurants and retail outlets has increased.

“We as a country have a strong palate,” said Sandeep Arora, a so-called certified whiskey ambassador, meaning he took a British training program on the drink, who lives in India. “We love flavors and spice, that bite in the mouth.” Whiskey, he notes, provides that.

Mr. Arora also points to Bollywood, the Hindi film industry in India, as a factor that glamorized whiskey drinking in the 1970s and '80s.

“Amitabh Bachchan was not drinking vodka. He was drinking whiskey,” he said.

In recent years, the flourishing of homegrown whiskey clubs and tastings attests to the growing popularity of the drink. Mr. Arora, who plans to open a professional whiskey club early next year, estimates that Indians consume 200 million cases of whiskey a year, of which less than a million cases are imported foreign liquor.

In India, prohibitively high import duties on foreign whiskey have ensured that those who controlled the local brands have called the shots for decades, including players like Vijay Mallya, the owner of United Spirits. The last few years, however, duties have slowly eased and more Indians have been able to sip global brands as a result.

Whiskey drinkers never had it better in India, w ith international drinks companies marketing aggressively here. In a good bar in the capital of New Delhi, Mr. Arora estimates that patrons can choose from up to 140 brands of imported whiskey.

“When you look at the growth, the sheer volume, more people are drinking more,” he said.

Although domestic brands enjoy tremendous popularity in India, they have yet to break into the global market, analysts say. One reason is that some of the alcohol in India is made from sugar cane molasses and not grain, so those liquors can't be labeled as whiskey in the European Union. Instead, those brands have to be content with the more modest title of “rum” abroad.

“You can call them Indian spirit; you can call them rum,” Rick Connor, director of public affairs for Chivas Brothers told Time magazine in 2007. “We do object to calling them whiskey.”