India’s alcobev market shifts gears as premium segment surges

The Indian alcoholic beverages (alcobev) sector in 2026 is undergoing a structural shift toward premiumisation, with high-value and luxury segments significantly outpacing overall market growth. This transition is being driven by a more discerning consumer base and a clear preference for quality over quantity.

Luxury segment volumes growing 30% and a likely 40% surge expected from UK FTA-led price corrections. Key trends include a shift toward “drinking better, not more,” Indian single malts gaining global traction, and premiumization moving beyond metros.

Industry revenues are projected to grow by 10–12 per cent in FY2026, largely supported by the ongoing “trading up” trend across spirits and beer, rather than volume expansion. While overall volumes are expected to remain modest—around 1–2 per cent for spirits and 4–6 per cent for beer—the premium segment is delivering disproportionate value growth.

Premium and super-premium brands continue to gain traction, with products priced above Rs1,000 expected to grow by about 15 per cent in FY26.

Rising disposable incomes, rapid urbanisation, and evolving consumer preferences are fuelling this shift. The emerging trend of “drinking better, not more” is encouraging consumers to opt for higher-quality products, thereby boosting realisations and margins for companies.

This premiumisation wave has also strengthened operating profitability, with margins improving by 60–80 basis points, while offering some insulation against inflationary pressures.

Leading players such as Radico Khaitan, United Spirits, and United Breweries are among the key beneficiaries of this trend. Early movers like Amrut Distilleries and John Paul Distilleries have played a pivotal role in establishing India’s premium spirits narrative, particularly in the single malt category.

According to ICRA, the alcobev industry is expected to post volume growth of 1–2 per cent in FY2026. Beer volumes are projected to expand by 4–6 per cent, supported by stable demand, while spirits volumes may remain under pressure due to higher taxation and price increases. However, revenue growth is expected to remain strong at 10–12 per cent, driven by price hikes approved by state governments and an improved product mix.

The long-term outlook for the sector remains robust. India’s alcohol market is projected to reach USD 312.4 billion by 2036, up from USD 208.3 billion in 2026, growing at a CAGR of 4.1 per cent, according to Future Market Insights. This growth is structurally anchored in the premiumisation trend, with consumers shifting toward single malts, craft gins, and heritage spirits.

Industry bodies such as CII have highlighted that value growth in spirits is outpacing volume growth, reinforcing the shift toward higher-end consumption. This transition is prompting companies to invest in maturation capacity, premium packaging, and more controlled distribution networks. Simultaneously the regulatory landscape is shifting from state-level excise fragmentation to early signs of policy harmonization under GST discussions, which forces manufacturers to recalibrate pricing architectures and interstate logistics.

Global players are also deepening their India bets. Pernod Ricard India, for instance, is investing in large-scale manufacturing capabilities, including a major malt distillery and maturation facility in Nagpur, signalling India’s emergence as a global hub for premium spirits production.

At the same time, domestic players are expanding their premium portfolios. Radico Khaitan has launched super-premium offerings such as ‘Rampur 1943 Virasat’ and ‘TRIKAL’ Indian single malts, targeting affluent consumers. Allied Blenders and Distillers has also raised capital through its IPO to strengthen its premium portfolio and expand capacity.

The startup ecosystem is further reshaping the landscape. New-age brands such as The Teller, Nisaki, and Davana Vermouth are diversifying the category with innovative offerings, creating new consumption occasions beyond traditional whisky and rum.

Premiumisation is also visible in the beer segment. United Breweries’ launch of Kingfisher Smooth Strong highlights the growing focus on value-added products across categories.

Overall, the Indian alcobev industry is transitioning from a volume-led to a value-led growth model, with premiumisation emerging as the central theme shaping its future trajectory.