Analysis of the cognac market in India
The relevance of research
Alcoholic products are one of the first places in popularity in the consumer market, although they are not a necessary product. In India, cognac is still commonly referred to as any strong alcoholic drink produced by distilling wine, followed by aging spirits in oak barrels. Today, even specialists find it very difficult to understand the abundance of cognac products produced in India and abroad, which enter the market under the name ""cognac""
Purpose of the study
Analysis of the state of the cognac market, assessment of the market volume, analysis of competitors, as well as identification of factors affecting the cognac market
Content
Part 1. Overview of the Indian cognac market
1.1. Main characteristics of the market
1.2. Dynamics of cognac market volume 2015-2019 Potential market capacity
1.3. Assessment of factors affecting the market
1.4. Cognac Market Life Cycle Stage
1.5. Competition from substitute products
Part 2. Competitive analysis in the cognac market
2.1. Major players in the market
2.2. Market shares of the largest competitors
2.3. Profiles of major players
Part 3. Cognac Production Analysis
3.1. Volume and dynamics of domestic cognac production
3.2. Share of exports in cognac production
3.3. Segmentation of cognac production by regions
3.3.1. Production by Union Territories
3.3.2. Production by states of India
Part 4. Analysis of foreign trade supplies of cognac
4.1. The volume and dynamics of cognac imports
4.2. Import structure
4.3. The volume and dynamics of cognac exports
4.4. Export structure
Part 5. Analysis of cognac consumption
5.1. Cognac Consumption Dynamics
5.2. Analysis of the results of tenders for the purchase
Part 6. Price Analysis
6.1. Average producer prices by union territories
6.2. Average consumer prices by states in India
Part 7. Assessment of factors of investment attractiveness of the market
Part 8. Cognac Market Development Forecast until 2024
Part 9. Recommendations and conclusions
Research excerpt
Part 1. Overview of the Indian cognac market
1.1. Main characteristics of the market
Alcoholic products are one of the first places in popularity in the consumer market, although they are not a necessary product. Cognac production, in particular, cognac aging, is one of the most complex and expensive areas of winemaking. This determines the importance of such aspects as obtaining high-quality and environmentally friendly products. At the same time, the most important thing for cognac is the quality of the initial wine materials and modern production technologies that form the organoleptic properties of the drink.
In India, as, indeed, in a number of other countries, it is still customary to call cognac any strong alcoholic drink produced by distilling wine, followed by aging alcohols in oak barrels. Today, it is very difficult even for specialists to understand the abundance of cognac products produced in India and abroad, which enter the market under the name ""cognac"". This category is very extensive and includes products of various origins.
The cognac market is divided into the following segments:
– Elite imported cognac belongs to the first segment. By production, it is predominantly France.
– The second segment includes imported cognac produced by Georgia, Armenia, and to a lesser extent Moldova.
– The third segment includes cognac produced in India.
The third segment also includes counterfeit drinks. But the exact quantity of counterfeit drink in the Indian market is unknown, so India has developed a market structure that is highly differentiated by price.
Chart 1. The ratio of imported and domestic products in the cognac market, 2015-2019, %
1.2. Dynamics of cognac market volume 2015-2019 Potential market capacity
Consider the dynamics of the volume of the cognac market in India. In 2015-2016 The market volume was almost at the same level ...
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Diagram 3. Revenue (net) from the sale of cognac in the union territories for 2015 - 2019, %
In 2018, according to experts, the share of the shadow alcohol market in India accounted for ...%.
...
1.3. Assessment of factors affecting the market
Let's consider the main factors influencing the market and, accordingly, demand.
Economic
GDP dynamics
Data on the dynamics of GDP is a macroeconomic indicator that reflects the market value of all final goods and services produced in a year in all sectors of the economy on the territory of the state for consumption, export and accumulation.
The dynamics of India's GDP is decisive in the vector of development of the entire economy of the country and determines the key trends in consumer effective demand and economic activity.
...
Experts estimate that the covid-19 pandemic could damage the global economy by $35 trillion. At the same time, analysts fear that the planet's economy will face new difficulties at the end of 2020 if the governments of leading countries abandon stimulus measures too early.
Let's take a look at some expert opinions: ...
...
Dollar rate
...
Retail turnover
Retail trade turnover is also a reflection of the effective demand of the population and the level of real incomes of the population.
Социальные
Real disposable money income
Real disposable money income per capita is income minus mandatory payments, adjusted for inflation. This factor determines the level of effective demand of buyers, is one of the key reasons for the formation of the dynamics of both retail turnover and demand for services.
...
According to a survey by IC Rosgosstrakh Life, conducted jointly with the Perspektiva Center, one in five in India has experienced a significant drop in income since the start of the spread of covid-19 in India and the introduction of quarantine restrictions, and one in ten has experienced a complete loss of earnings.
...
Population decline
During 2012-2017 India's population has shown a positive trend. However, in 2018, the vector changed - the population decreased due to the natural population decline in 2016-2019.
Healthy lifestyle
Refusal of alcohol is a trend that confidently finds its fans.
...
technological
Poor quality products
According to experts, instead of cognac in Indian stores, you can often find a completely different drink. At best, this is a cheaper brandy, at worst, it is completely counterfeit. According to Roskachestvo, every third bottle is a fake. Artificial flavors and alcohols of non-grape origin were found in these drinks. This is due to the fact that brandy alcohol is the most expensive, and its imitations are easier and faster to make.
Cognac alcohol is replaced with wheat and potato, they are several times cheaper. They mask the fake with dyes like burnt sugar and flavorings. Such a violation of the law in India is not punished, and manufacturers take advantage of this.
The situation with raw materials for cognac production
The main technological stages of cognac production include the collection of raw materials, processing and pressing of grapes, fermentation, distillation, bottling and aging, blending and stabilization (if necessary).
One of the common methods of falsification is the replacement of cognac distillate with alcohols of non-grape origin. There are many drinks in the Indian market that are called “cognacs”, but in fact they are made from other raw materials, and many producers also buy distillate from abroad.
...
The development of viticulture in India takes place with the active support of the state.
Political
EAEU technical regulations
If cognac has to be renamed, this will entail additional costs for producers, increase the cost of the product, its retail price and sharply reduce demand. We are talking about the costs of developing new technological documents, design layouts and labels, as well as conducting marketing research and undergoing repeated conformity assessment procedures. As a result, cognac production and sales volumes will decrease, as well as budget revenues at all levels, which will negatively affect the market. Also, the new technical regulation for the EAEU states requires manufacturers to increase the area of the inscription “Excessive alcohol consumption is harmful to your health” to at least 10% of the label, counter-label or consumer packaging.
Restrictions on the sale of alcohol
Restrictions on the sale of alcohol exist in many countries around the world. This is due to the harm of alcohol to health, the social danger of people under the influence of alcohol, in some cases - with religious considerations.
In India, restrictions on the retail sale of alcohol are established by Federal Law No. 22.11.1995-FZ of November 171, . It contains restrictions on the place and time of the sale of alcohol, as well as a restriction on the minimum age of persons to whom alcohol can be sold. There are also requirements for premises where alcohol can be sold. The states of the federation may, in due course, tighten the requirements of the law.
The law establishes holidays on which the sale of alcohol is prohibited. These are Knowledge Day on September 1, Children's Day on June 1 and other dates related to children, youth and families. In some regions, the sale of alcohol is prohibited on neighboring days of the calendar.
At the place of trade, restrictions have been placed on the sale of alcohol in children's and medical organizations, in cultural organizations, on public transport, at military facilities, in crowded places and near sources of increased danger. Commercial facilities selling alcohol must be located no closer than 100 meters from child care facilities.
Non-stationary sale of alcohol, sale of alcohol in plastic containers and in premises that do not meet the requirements of the law are also prohibited. Selling alcohol online is prohibited.
The issue arose especially acutely during the period of self-isolation, when there was more alcohol abuse. Against the backdrop of alcohol consumption, an increase in crime began. In the spring of 2020, as part of strict home isolation regimes amid the coronavirus pandemic, the sale of alcohol was limited in Indian regions.
Concluding the assessment of the factors influencing the Indian cognac market, let's summarize the key ones in the framework of the STEP-analysis.
Table 1. STEP analysis of factors influencing the cognac market
According to the results of the performed STEP-analysis, macro-environment factors have an impact on the development of the cognac market ...
1.4. Cognac Market Life Cycle Stage
The cognac market is at the stage of maturity of the life cycle. The maturity stage is the longest of all life cycle stages. It is built on the consumption of conservative consumers, on the popularity and wide representation of the product, which ensures a stable level of sales over a long period.
The level of competition in the cognac market has reached its maximum and is stabilizing, which, in the face of a slowdown in growth, creates a more aggressive struggle for existing consumers. A high value at the stage of maturity gets the speed of the company's reaction to the actions of competitors. Price competition in the cognac market is reduced and turns into short-term price promotions for consumers. Now the emphasis is on the display of goods, its visibility on the shelf in the store among a large number of competitors.
...
The maximum coverage of the target audience has been achieved on the cognac market and the drink consumption culture has been formed. When working with the target audience, the emphasis is on retaining the consumer, searching for new micro-niches, monitoring product satisfaction and implementing prompt measures when product loyalty is reduced.
1.5. Competition from substitute products
The main competition for cognac is whiskey. The basis of whiskey are cereals (wheat, barley, rye, rice and corn), then it is also aged in oak barrels. In general, cognac production technology is somewhat more complicated, since it requires a more careful selection of ingredients. With the same aging period, cognac is more expensive than whiskey. This rule may not work in the case of well-known brands. For example, you will have to pay more for Jack Daniels whiskey than for cognac of a lesser known manufacturer, although the aging time of both drinks will be the same. The concentration of esters and fusel oils in whiskey is about twice as high as in cognac. With equal doses and the same quality, whiskey is considered more harmful.
Also, cognac competes with other alcoholic beverages with a strength of 40% vol. The most popular of them is vodka. Vodka is the leader in terms of addictiveness, that is, it can lead to alcoholism much faster than cognac.
This is explained by its ""purity"". Once in the body, it is able to ""lull"" the alertness of the internal organs, which react sharply to impurities.
Diagram 11. Retail sales of cognac and vodka in physical terms, 2017-Sep. 2020, thousand dal
Cognac, although it has taken root in India, still remains a more refined drink than vodka. The high cost of cognac is the reason for the choice of cheaper substitutes for alcoholic products.
Part 2. Competitive analysis in the cognac market
2.1. Major players in the market
Along with ordinary cognacs, vintage cognacs are produced in India, which have been repeatedly awarded gold and silver medals at international wine competitions.
...
2.2. Market shares of the largest competitors
The assessment of the shares of the largest operators in the cognac market was carried out by GidMarket based on Rosstat data on companies' revenues in 2019, taking into account the share of cognac production in the company's total assortment, as well as the volume of product imports for foreign manufacturers. Shares of competitors from Armenia are GidMarket estimates based on data from market operators.
According to GidMarket, the top three competitors in the Indian cognac market are ...
From the point of view of competitive concentration, the market is classified as low-concentrated (Herfindahl-Hirschman index (HHI <1000). Mergers and acquisitions are allowed without hindrance.
2.3. Profiles of major players
LLC ""XXX""
...
JSC ""XXX""
...
XXX
...
Yerevan Brandy-Wine-Vodka Factory ""XXX""
...
""Yerevan Brandy Factory""
...
Part 3. Cognac Production Analysis
3.1. Volume and dynamics of domestic cognac production
...
Diagram 13. Dynamics of cognac production volumes in India for 2015 - 2019, thousand decalitres
The TOP-5 Indian cognac producers include LLC ...
3.2. Share of exports in cognac production
The export direction in the Indian cognac market is not developed.
3.3. Segmentation of cognac production by regions
3.3.1. Production by Union Territories
The largest volume of production among all federal districts in the entire study period falls on the North Caucasian Federal District.
Table 4. Dynamics of Cognac Production in India by Union Territories, 2015-Sep. 2020, thousand dal
3.3.2. Production by states of India
The largest cognac-producing states in India in 2019 were ...
Chart 16. Cognac production in India by states of India, 2019, %
Part 4. Analysis of foreign trade supplies of cognac
4.1. The volume and dynamics of cognac imports
...
During the analyzed period, in ruble terms, the import of cognac to India increased from ... billion Rs. in 2015 to ... billion Rs. in 2019
4.2. Import structure
In the structure of cognac imports by importing countries in 2019, the key supplier is Armenia, which accounts for ...% of all imported cognac.
...
4.3. The volume and dynamics of cognac exports
In the period under review, a significant increase in exports was noted in 2018 - more than eight times. Growth was facilitated by an increase in deliveries to Ukraine.
...
Diagram 21. Balance of exports and imports, 2015-2019, million Rs.
4.4. Export structure
The main volume of cognac, in value terms, exported from India in 2019 is supplied to Ukraine, mainly to the Donetsk and Luhansk regions - ...%.
Part 5. Analysis of cognac consumption
5.1. Cognac Consumption Dynamics
When choosing cognac, buyers are interested in the characteristics that give a guarantee of quality and speak of the prestige of the product. For consumers, brand awareness, taste, country of production, as well as price are important.
5.2. Analysis of the results of tenders for the purchase
Tenders for the purchase of brandy are announced extremely rarely: in January-October 2020, only seven contracts were concluded. Customers announce tenders for the purchase of cognac under 223-FZ. Also, a feature of the procurement of this product is a large number of tenders without a formal selection procedure - from a single supplier.
...
Part 6. Price Analysis
6.1. Average producer prices by union territories
Average producer prices for cognacs, cognac drinks and cognac spirits in India show an increase every year. At the end of September 2020, the average price was ...Rs./dal.
...
6.2. Average consumer prices by states in India
...
Also note that cognac has a minimum retail price (MRP). Since January 1, 2020, the MRP for cognac has increased by ...%, ...
...
Part 7. Assessment of factors of investment attractiveness of the market
The most significant negative factors.
...
The most significant positive factors.
...
Part 8. Cognac Market Development Forecast until 2024
Analysis of the impact of recent crises on the industry
An economic crisis is a profound disruption of normal economic activity, which is accompanied by the destruction of habitual economic ties, a decrease in business activity, the inability to repay debts and the accumulation of debt obligations. This is a phenomenon of a market economy, repeating with a certain frequency, and depending on the scale, it can either concern a particular state or be of global importance. The crisis is accompanied by a sharp decline in production, bankruptcy of enterprises, a fall in the gross national product, a large-scale increase in unemployment, and often a depreciation of the national currency.
Analysis of the impact on the state aid industry as of 01.11.20/ /
Alcohol production was not included in the lists of the most affected sectors of the Indian economy, therefore, there are no specific measures for state support of enterprises in the analyzed market.
...
Forecast of industry development scenarios under quarantine due to COVID-2019:
Forecasting the development of the cognac market in India is impossible without understanding the economic situation in the country, as well as the impact of the spread of the covid-19 virus and the measures taken.
Analysis of existing cases of business restructuring in the industry
The cognac market has faced a number of difficulties during the pandemic, including supply disruptions, the closure of bars, which are one of the few available sales channels. In retail, restrictions on the time of sale of alcohol were introduced, some regions introduced a complete ban on the sale of alcohol.
Due to the limited use of information channels to promote products, cognac producers failed to rebuild their customer relationship models.
...
Part 9. Recommendations and conclusions
According to GidMarket, ...
...
For existing and new market operators, we note the following:
...
Diagrams
Chart 1. The ratio of imported and domestic products in the cognac market, 2015-2019, %
Diagram 2. Dynamics of cognac market volume, 2015 - 2019, thousand decalitres
Diagram 3. Revenue (net) from the sale of cognac in the union territories for 2015 - 2019, %
Diagram 4. Dynamics of India's GDP, % to the previous year, 2012-2 quarter 2020
Chart 5. Expert forecasts for a decline in real GDP in India in 2020 (baseline/neutral scenario), %
Diagram 6. Monthly dynamics of the US dollar against the rupee, Rs. for 1 US dollar, 2015-Oct. 2020
Diagram 7. Dynamics of retail trade turnover, 2015-Aug. 2020, % to the previous period
Diagram 8. Dynamics of real incomes of the population of India, % to the previous year, 2012-Aug. 2020
Diagram 9. Dynamics of the population of India, million people, as of 01 Jan. 2012-2020
Chart 10. The area of vine plantations in India in the industrial sector of horticulture, 2015-2019, thousand ha
Figure 1. Industry life cycle stage
Diagram 11. Retail sales of cognac and vodka in physical terms, 2017-Sep. 2020, thousand dal
Diagram 12. Shares of the largest competitors in the cognac market in 2019, %
Diagram 13. Dynamics of cognac production volumes in India for 2015 - 2019, thousand decalitres
Chart 14. Dynamics of the total revenue of the largest producers (TOP-5) of cognac in India, 2015-2019, million Rs.
Diagram 15. The share of exports in production for 2015–2019, %
Chart 16. Cognac production in India by states of India, 2019, %
Diagram 17. The volume and dynamics of cognac imports in physical terms, 2015-Aug. 2020, thousand liters pure alcohol
Diagram 18. The volume and dynamics of cognac imports in monetary terms, 2015-Aug. 2020, thousand dollars
Chart 19. Cognac export dynamics in kind, 2015-Aug. 2020, thousand liters pure alcohol
Chart 20. Cognac export dynamics in monetary terms, 2015-Aug. 2020, thousand dollars
Diagram 21. Balance of exports and imports, 2015-2019, million Rs.
Chart 22. Structure of exports by countries in 2019, %
Diagram 23. Cognac consumption dynamics in physical terms, 2015 - 2019, l/person
Diagram 24. Cognac market volume forecast in 2020-2024 – under the scenario of one quarantine, mln dal
Diagram 25. Cognac market volume forecast in 2020 - 2024 – under the scenario of two quarantines, mln dal
Tables
Table 1. STEP analysis of factors influencing the cognac market
Table 2. Main companies participating in the cognac market in 2019
Table 3. Profiles of companies participating in the cognac market in 2019
Table 4. Dynamics of Cognac Production in India by Union Territories, 2015-Sep. 2020, thousand dal
Table 5. Brandy import structure by importing countries in 2019
Table 6. Data on tenders for the purchase of cognac announced in Jan. 2020 - Oct. 2020
Table 7. Average producer prices for cognacs, cognac drinks and cognac spirits across the Union Territories, 2017-Sep. 2020, Rs./dal
Table 8. Average consumer prices for ordinary domestic cognac by states of India, 2015-Aug. 2020, Rs./l
Table 9. Assessment of factors of investment attractiveness of the cognac market
Table 10. Assessment of the impact of recent crises on the industry
Table 11. Analysis of the impact on the industry of the state aid proposed as of April 01.11.20,
Table 12. Forecast indicators for the basic and pessimistic scenarios for the development of the crisis, %
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