Alcohol has been a part of human culture for thousands of years, from ancient rituals to modern celebrations. What started as simple fermented drinks has transformed into a vast industry filled with diverse options. Today, the alco-bev market is booming, especially in India, where consumers are eager to try new and exciting flavours. In 2024, the global alcoholic drinks market is projected to generate a total revenue of approximately $52.7 billion, with $47.1 billion coming from at-home sales in supermarkets and convenience stores, and $5.6 billion from out-of-home consumption in restaurants and bars, as per market research firm Statista.
In a conversation with BrandWagon Online, Varun Koorichh, vice president and portfolio head, marketing, Diageo India, talks about the company’s approach to the alcoholic beverage market in India, the launch of X range, and competition, among others. (Edited Excerpts)
How does the name ‘ X’ resonate with millennials, and does it serve as an ‘X factor’ in terms of capturing their attention and loyalty in a crowded marketplace?
That’s where it all started. McDowell’s was coming out with white spirits, which sparked some intrigue. We were looking at the phrase ‘delightfully unexpected’ and thought, could this be called the X range? The X factor for McDowell’s, signalling a foray into this premium segment—a new world of white spirits where consumers are now experimenting. It’s quite different from the good old days when we were the number one whiskey.
At first, it was still up in the air. But as we pressure-tested the idea, asking what consumers would think and how the market would react, we gained conviction. That’s when we decided to call it the X range, with these four beautiful words anchoring the concept. So, ‘delightfully unexpected’ became the essence of this new product line from McDowell’s.
We’re going with the term ‘X range’ because this is just the first step in a series of launches we plan to move forward with. It’s part of a broader strategy under the McDowell’s & Company umbrella, which is likely what you would have picked up on.
While brand expansion is a natural progression, why did you launch this series over others, especially when many IMFL brands have focused on categories like Gin and Vodka in the last year and a half?
It all started with the premiumisation journey we decided to undertake about two years ago, beginning with the signing of actor Karthik Aryan to elevate our branding and reach more consumers. McDowell’s has always been associated with connections and friendship, so the idea was to elevate that. We then observed what was happening in the market, particularly by listening to consumers and understanding their evolving preferences.
We found that consumers are experimenting more—they’re no longer just sticking to whiskey, which they might have learned from their parents. The younger generation is highly connected to the global world, born into the digital age, and they see experimentation happening everywhere. We saw an opportunity for McDowell’s to adopt a fresh approach, shifting from where we were and elevating ourselves to tap into this new consumer segment.
Looking at the market opportunities, we considered the 10 million case segment of white and dark spirits, one of the fastest-growing segments, with an 18% CAGR over the past three years and relatively few players. Given McDowell’s 125-year legacy, we felt confident that we didn’t need to prove our expertise in whiskey or alcohol in general. With all these factors in mind, it became clear that this was the right move to appeal to a younger consumer base. Many of these consumers may not even have a long history with McDowell’s and are seeing the X range for the first time, which is crucial as we aim to appeal to those seeking an upgrade.
For consumers in the lower tier, who are now earning more and are willing to experiment, they see that their favourite brand is premiumising and appearing more disruptive in the market. That’s how the X range came about, including vodka, citron, rum, and gin. There are also developments in the rum category, but mostly for specific markets like UP, which is seasonal, and traditionally rum remains popular in winter in regions like Punjab and Delhi.
What is the pricing strategy you have adopted in X range to ensure it remains competitive? Considering that over-premiumisation might alienate younger consumers while being too affordable could undermine its premium positioning, where do you see the X range fitting in the pricing spectrum?
We aim to find that sweet spot where the pricing is premium yet accessible. This has been a significant focus in our pricing strategy. We’ve been discussing this internally, and I believe we’ve identified the right model. We’ve worked on the bottle design and label disruption to ensure it captures attention while maintaining a super accessible price point within the upper prestige segment.
For example, in Maharashtra, the pricing is as follows: vodka at Rs 1,200, gin at Rs 1,450, and white rum at Rs 1,400. Maharashtra is one of the most expensive markets, so these prices reflect that.
We are starting with Maharashtra and have just launched there. We’ve also landed in Uttar Pradesh, and within the next six to eight months, we plan to scale this up across the country.
What is your perspective on the competition in the alco-bev space, considering the recent surge in brands launching new products? How much room do you believe there is for growth in this category?
The potential for growth in the alco-bev space in India is enormous. With a population of 1.4 billion, we’re looking at an industry valued at approximately $55 billion, which is expected to reach $63-64 billion in the next four to five years. In contrast, markets in the US and Europe are relatively stagnant or even declining.
India presents significant opportunities not just in alco-bev but across many categories. Around 65% of the population is under 35, and many are entering the legal drinking age. This demographic has disposable income and is willing to pay more for premium products. The focus is shifting from simply drinking more to drinking better, with consumers seeking high-quality brands that resonate with them.
Loyalty among Gen Z consumers is dwindling. With so many options available, it’s challenging to maintain brand loyalty. Additionally, the shareability of experiences on platforms like Instagram plays a role; consumers don’t want to be seen with the same product repeatedly. They aim to showcase unique and prideful Indian brands to their friends around the world, which adds to the demand for new and interesting offerings.