India consumes 48% of the world's whisky. It is the fastest-growing market and the largest producer of the spirit. But what exactly are we making and drinking?
When the Kenyan chef-restaurateur Kiran Jethwa visited India earlier this year to shoot Spirited Traveller, a show aired on Fox Life that discovers a country through its favourite beverages, he made Fried Whisky Ice Cream—chocolate ice cream flavoured with whisky, oranges and pistachio, dipped in jalebi batter, deep-fried and served with sugar syrup—for the Delhi episode. “I was told that people in Delhi love whisky and fried food," Jethwa said. “So here’s my tribute to that spirit."
Whisky is decidedly the spirit of choice in India—we consume almost half the whisky produced worldwide. From the cheapest Indian-made foreign liquor (IMFL) variant—whisky makes for almost 90% of IMFL—to limited-edition single-malt Scotch, people are drinking more whisky today than ever, spending anywhere between Rs50 per 25ml peg for a McDowell’s at a Paharganj bar in Delhi to Rs1,500 for a small Johnnie Walker Blue Label at a five-star hotel. While gin is going through something of a resurgence, it is still whisky that racks up the numbers, with a more-than-healthy lead over every other alcoholic beverage.
“Though the entire alcobev (alcoholic beverage) industry has grown steadily over the last decade, whisky is the flag-bearer in India," says Thrivikram G. Nikam, executive director at Bengaluru-based Amrut Distilleries Pvt. Ltd. Part of the growth is because whisky has gone through an image makeover. It is not considered an old man’s drink anymore. Just like James Bond single-handedly legitimized the vodka martini and Carrie Bradshaw made Cosmopolitan the drink of choice for young women, Don Draper has made the Old Fashioned sexy again in the 21st century.
“With social barriers to enjoying a drink being discarded, increasing economic prosperity and 19 million new consumers entering the legal drinking age each year (in India), the overall economic and demographic opportunity is extremely attractive," says Amrit Thomas, chief marketing officer, Diageo India, which represents more than one-third of the whisky sold in India.
The growth is most evident at entry-level IMFL, a category that includes all alcoholic spirits made in India, except beer and wine. “The majority of consumers choose IMFL, rather than beer or wine," says Nikam. “This is the segment that is largest in India."
But there is one pertinent question: Is the concoction manufactured in India whisky at all?
The Indian spirits market was valued at Rs1.84 trillion in 2016, according to data from consumer research firm GlobalData. Whisky accounts for more than 60% of this figure. The country is not only the largest market for the spirit, it is also the largest global producer of whisky.
Consider these numbers: Whisky consumption in India has more than doubled, from 80.2 million nine-litre cases in 2007 to 193.1 million nine-litre cases in 2016, according to the 2017-2021 forecast by the International Wine and Spirits Research (IWSR ), a leading source of data and analysis on the alcohol beverage market. In the same 10-year period, global whisky consumption rose from 242.8 million to 399.2 million nine-litre cases. Of the whisky consumed in India last year, 189.7 million nine-litre cases, or 98.24%, was Indian-made.
This indicates that India consumes 48% of the world’s whisky. It also suggests that India has been, by far, the largest contributor to the 157 million nine-litre case increase in worldwide consumption of the liquor over the last decade. No wonder, then, that the IWSR says that Indian whiskies will be one of the major contributors to the growth of the global industry in the next five years.
“Globally, Scotch is forecast to contribute 10.5m (million) cases to whisky growth over the next five years and US whiskies a further 8.9m cases," according to the IWSR report. “Other whiskies (predominantly Indian) will be the largest contributor, growing by 28.2m cases. The US is the second-largest growth market for whisky behind India..."
Whisky’s growth story in India is largely predicated on the rise of IMFL brands. But most Indian whiskies are made of molasses, which means they would qualify as rum and not whisky in the international market.
Your whisky is rum
Whisky, in the classical understanding, is an alcoholic beverage made from fermented grain mash. These grains—barley, maize, wheat, rye, etc.—are malted and fermented, and can be used in various combinations or on their own to make whisky.
Ground malted barley is soaked in warm water to extract sugars. The sweet liquor called wort is drained and transferred to fermentation tanks. Yeast is added to this to break down the sugars to alcohol. The fermentation results in a liquid called wash, which is then distilled. Most companies distil the liquid twice but sometimes it is distilled thrice. The distilled whisky is then stored in wooden barrels for maturation.
In India, most of the whisky is made from molasses—the dark, viscous by-product obtained by refining sugar from sugarcane. Fermented molasses are boiled to extract alcohol, which is distilled. The distillation results in a neutral spirit with 96% alcohol by volume, which forms the base of all IMFL. This is blended with a small amount of Scotch for flavour, and voila, we have Indian-made whisky.
“The major difference between the molasses-based and grains-based whisky is at the distillation stage," says Nikam of Amrut, which makes both kinds of whiskies. “When we use the molasses base, we distil the alcohol till it becomes neutral and doesn’t have any characteristic flavour. For grains, we do an incomplete distillation so part of the flavour from the grains is there before it goes into barrels to mature."
Amrut, which was established by Radhakrishna Jagdale in 1948, produces spirits from vodka to gin, including Amrut single malt whisky, which is exported to more than 25 countries.
According to Nikam, Amrut produces about 6 million nine-litre cases of liquor annually, 35,000 of which are single malt whisky. The company exports at least 60% of its single malts. As the company tries to expand beyond its key southern markets, Amrut is planning to increase its single malt production to 100,000 cases by 2022, half of which Nikam hopes will be consumed in India.
Globally, making whisky is a strictly regulated business. For example, in 2008, Europe passed a directive asserting that whisky was an alcoholic drink produced exclusively by the distillation of a mash made from malted cereals. This immediately excludes most “Indian whiskies" from the category.
Scotland took this a step further the next year, introducing the Scotch Whisky Regulations 2009 (SWR). The new regulations gave the precise definition of different kinds of whisky and the difference between a single grain and a single malt. The document has stringent guidelines on regional and geographical indications, production and maturation of Scotch. According to the SWR, Scotch can’t be made or matured outside Scotland. For a whisky to be called Scotch, it has to be made in Scotland, with set raw materials, and has to be aged within the country for three years or more.
Much of the whisky-producing world—from the US to Japan and Australia—has stuck to similar guidelines regarding the product and its manufacturing process. American bourbon whiskey, for example, must mature in new oak barrels, which are then used to age Scotch. In India, however, there are multiple regulations governing consumption age, on obtaining liquor licences and the tax structure—leading to arbitrary and exorbitant prices. But there are hardly any rules that benefit the end user, such as differentiating whisky from rum, or even country liquor for that matter.
The only stricture, according to a 2005 Bureau of Indian Standards publication, is that whisky should be made either from a neutral spirit that matches its standards, or a Grade I rectified spirit, or a mix of both. It is this laxity on the part of the Bureau of Indian Standards that allows for so many different spirits, many of which are artificially coloured, to be bottled and legally sold as whisky.
Yet last year, for the first time, the Union government standardized alcohol as a consumable product beyond tax purposes, and the Food Safety and Standards Authority of India (FSSAI) came up with the draft Food Safety and Standards (Alcoholic Beverages Standards) Regulations, 2016, which defined various kinds of alcohol and their types.
According to the draft, “Whisky is an alcoholic beverage made from neutral grain spirit or rectified grain spirit, or neutral spirit or their mixture or is made by distilling the fermented extract of malted cereal grains such as corn, rye, barley; or molasses."
At the same time, both rum and country liquor are defined by the FSSAI in pretty much the same way. Going by this definition, it’s hard to establish the difference between these three kinds of alcohol.
Most whisky made in India is aged briefly because the higher temperatures result in quicker evaporation of the spirit during the maturation stage, a phenomenon known as “the angels’ share". The draft regulations require that whiskies in India, when labelled matured, “shall be matured for a period of not less than one year in wooden oak, wooden vats or barrels". This means that much of the whisky that falls in the IMFL category is not aged at all.
Understandably, there has been retaliation, mostly in Europe, against the rise of India-made “cheap whiskies". In its 2013 annual report, the Scotch Whisky Association (SWA) urged European Union-wide action against the “extremely worrying" quantities of cheap Indian blends being imported into the EU.
“There is no compulsory definition of whisky in India, and the Indian voluntary standard does not require whisky to be distilled from cereals or to be matured," according to a 2014 PTIreport which quoted the SWA report. “Very little Indian ‘whisky’ qualifies as whisky in the EU owing to the use of molasses or neutral alcohol, limited maturation (if any) and the use of flavourings. Such spirits are, of course, considerably cheaper to produce than genuine whisky."
Long tryst with whisky
Whisky distillation came to India with the British in the 19th century. Edward Dyer, father of Reginald Dyer, the infamous British colonel who ordered the Jallianwala Bagh massacre, was the pioneer of whisky-making in India. Dyer senior set up a distillery in Kasauli in the 1820s. Kasauli, in the Himalayan highlands at 6,000ft above sea level, has climate similar to Scotland, with the added advantage that there was fresh springwater nearby. The distillery later moved to Solan.
Dyer brought equipment and copper stills from Scotland, some of which are still in use. The distillery’s Solan No.1 was the best-selling whisky in India for over a century but today, the only malt whisky from the Himalayas is struggling to find takers.
How molasses took over grains is actually quite an interesting story.
Across the world, people use agricultural surplus to make alcohol. Barley in Scotland; wheat, corn and rye in the US; rice in some Asian countries; and sugarcane in India. This is why molasses became prominent in Indian alcohol production.
In 1947, entrepreneur Vittal Mallya bought United Breweries, a group of five breweries in south India that made beer for British troops. At one time, United Spirits Ltd, the group’s alcoholic beverages company, was the largest spirit producer in India, with around 60% of the market share. Its brands included locally produced Bagpiper, Royal Challenge, McDowell’s No.1, and Antiquity, Jura and Dalmore single malt Scotch whiskies.
Diageo Plc., the world’s largest producer of spirits, now owns USL and the business is now called Diageo India.
“Diageo India is a market leader in both Scotch and IMFL segments and our brands are all available at distinctive price points in the overall whisky category," says Thomas. “With each brand attracting a different set of consumers driven by varying taste preferences and affordability, we see sufficient interest across all the segments."
But if you want to reach the masses, pricing your product at Rs300 per 750ml bottle, it simply isn’t possible to make it with grains, says Nikam. “At that price point, the product can only be made from neutral spirits," he says.
Entry-level whisky is the most volatile space of the market. “Those people who were consuming country liquor will slowly move up to entry-level IMFL," says Nikam.
“If you take the whiskies in the Rs300 price range and change the price by Rs5, you’d suddenly gain or lose 50% of your market share," says drinks consultant Anand Virmani. “Frankly speaking, at that range, you can’t really make a good whisky."
But consumers are upgrading as a result of increased exposure, better knowledge and more disposable income. Brands are taking notice. “Several brands in the Rs600-800 range have repackaged themselves," says Virmani. “Many now have a limited edition kind of product too in the mix. It is an evolving market."
IMFL has its place. “It is okay in the context in which it is being consumed," says London-based whisky writer Joel Harrison. “Even though it isn’t the drink of the connoisseur, it is sweet and accessible, and can be easily consumed neat or mixed into a long drink."
“There’s been significant improvement in the distillation technology and, therefore, even the alcohol made from molasses in most cases is of extremely good quality and does not make much of a quality difference," says Sridhar Pongur, joint managing director at Goa-based John Distilleries Pvt. Ltd, which makes the Paul John brand of single malt whiskies. “However, since maturation is not normally done in India, there is definitely a difference in taste and flavour."
The company produces around 1.3 million nine-litre cases of whisky per month which, according to Pongur, is a 50:50 mix of grain-based and molasses-based whisky. Though the company sells in select Indian markets, most of its single malt is exported to 30 countries.
“Both Amrut and Paul John are making some of the best single malt whiskies in the world," says Virmani. “But if India is predominantly a whisky market, why are some of its best whisky makers exporting the bulk of their produce?"
No takers at home?
“It is only in the last decade or so that Indians have really started appreciating good whiskies," says Nikam. “We have been making whisky since 1948. When we produced the MaQintosh blended whisky in the 1980s, which had a good portion of malt whisky, people rejected it, saying it was very dry and heavy."
When Amrut made its first single malt whisky in 2004, the company had to launch it in Glasgow, UK. “People had rejected our blended whisky," says Nikam. “So there was no way we could launch a single malt in India. In fact, we initially had no plans to sell it in India."
But as the initial scepticism towards an Indian single malt subsided—the launch in Scotland proving a brilliant PR move—Amrut began getting attention. Whisky connoisseur and writer Jim Murray vouched for Amrut and in 2010, in his Whisky Bible (a yearly guide), rated Amrut Fusion the third-best single malt in the world. “Heavy, thickly oaked and complex...", said Murray of Amrut Fusion.
Soon Amrut was in high demand in the domestic market. In 2010, Amrut launched its single-malt portfolio in India.
Consumption cues in India have always come from the West. Be it clothes or cars, people tend to prefer buying things that are made outside the county. But that perception is slowly changing. “Compared with whisky from, say, Australia, which still is a very young industry and needs improvement, Indian whiskies like Amrut are much better," says Bill Lumsden, head of distilling and whisky creation at The Glenmorangie Company. “I have tasted Amrut in blind competitions, and I must say it has potential."
Indian consumers are slowly warming up to good home-grown whiskies but there still is a general lack of awareness, especially about what makes whisky and what doesn’t. This is amplified by the high import taxes on foreign liquor, which puts imported whiskies out of the reach of most people, skewing the demand in favour of IMFL.
While locally made spirits are taxed by individual states, imported spirits are taxed at both the Union and state level. An import duty of 150% is levied on all imported spirits—finished, bottled-in-origin products such as Chivas Regal and Johnnie Walker, and bulk spirits that are bottled in India, such as Teachers. This is one of the highest import duties in the world. All states have different taxation levels and methods, so the cost of an imported whisky can appreciate by 160-500% by the time it reaches the consumer.
“India could be a great market for imported spirits such as bourbon and Scotch, but it needs to simplify the tax structure, state laws and import duty," says Harrison. “Maybe they should reclassify IMFL not as a whisky, to make the market more even."
One way to deal with taxes is to bottle Scotch in India. On the one hand, it reduces the tax burden on the manufacturer and on the other, it gives the consumer a far better product at a lower price point.
“The high customs duty at 160% is a deterrent for the Scotch whisky business," says Anshuman Goenka, who leads Bacardi Pvt. Ltd’s whisky portfolio for Asia, Middle East and Africa. “One of the initiatives taken by international Scotch brands is to bottle locally in India. This makes the pricing more accessible for the consumer."
Due to the complexity of the market and the tax structure, India becomes a hard market to navigate for foreign brands. “Many companies feel that there is a market in India, because the consumers are used to drinking spirits. There is an emerging middle class with increasing disposable income and the population is huge, so sale potentials are massive," says Harrison. “But then they try and operate in India and it is just too complex for many, so profitability is lower, and they end up moving away from the market." But high taxes open up a lot of possibilities for the whiskies made in India as well.
“We should actually take advantage of the situation," says Magandeep Singh, author of The Indian Spirit: The Untold Story Of Drinking In India. “There is nothing particularly wrong with molasses whisky. We have managed to create an entire industry with it. We actually have become better at it over the years and today there are some very decent molasses whisky."
The onus is on Indian distillers to improve their products and practices. In 2016, the per capita consumption of spirits in India stood at 3.2 litres compared with the global level of 6.4 litres. And the spirits market in India is forecast to grow at a compounded annual growth rate of 5.1% during 2016-21, according to GlobalData.
“I hope people start making good whisky here which is not just for export," says Virmani. “A platform has been readied by Amrut, John Paul and Rampur. Imported whiskies like Jim Beam have managed to bring the prices down by bottling in India and have given people at that price range a taste of a better product.
“I am sure in the next decade we will see many whisky makers coming out of India who will make good whiskies and will be able to sell in India."