What Pernod Ricard’s trademark dispute says about spirits giants in India

India’s Supreme Court has ordered a district court in Mohali to resolve urgently a trademark dispute which typifies the intense competition between the global spirits companies in the country. Ron Emler investigates. 

Pernod Ricard India claims that its Blenders Pride whiskey brand has been harmed by Diageo’s United Spirits Limited (USL) subsidiary launching Royal Challenge American Pride in 2021.

Its case is the Blenders Pride marque has been available since 1994, and customers will be confused by the USL offering because it is similarly named and targets the same consumer groups.

For its part USL, contends the bottles and labelling of both brands are well differentiated and “pride” is a common word, featuring in the names of other alcohol brands available in India.

The top court said the dispute should be decided within six months, but given the labyrinthine complexities of the Indian legal system and the glacial pace at which it sometimes moves, that time frame may be optimistic.

Whatever the eventual ruling, the case highlights the scramble for market share in India.

Last year, the economy grew by 7% and will achieve almost that in 2023.

According to the IMF’s calculations, India will become the world’s fourth largest economy in 2025, and move into third place after the USA and China in 2027, when its annual output will be worth US$ 5.4 trillion.

The World Bank calculates in 50 years’ time India will be the world’s second wealthiest nation, eclipsed only by China.

The middle class, the group most aspiring to trade-up to premium international brands, is the fastest-growing segment of the Indian population in both percentage and absolute terms, forming 31% of the population. That is expected to grow to 38% by 2031 and 60% in 2047.

And as the population expands – the under 25s comprise 40% – and their wealth increases, demand for beverage alcohol will grow ever more rapidly.

According to Statista, India is already the third-largest market for alcoholic beverages globally, today worth about US$50 billion annually. Demand has grown at a compound annual rate of 6.8% since 2020. A similar rate of growth is predicted until 2027.

Simon de Beauregard, Pernod Ricard India’s Chief Transformation Officer, points out that every year 25 million new potential consumers attain the legal age for alcohol consumption and many former taboos surrounding alcohol are disappearing.

A third of women in the big cities have tried alcohol, he says, and since the Covid pandemic it is much more common to see couples, especially among the younger generation, sharing a drink at home.

That is why Pernod Ricard India is expanding its range to cater for female tastes, including lighter offerings such as gins, Lillet and the Jacob’s Creek wine varietals. That said, spirits make up two-thirds of all sales, a percentage forecast to grow further in the next few years as demand expands.

The market is dominated by Indian Made Foreign Liquors – locally-distilled brands other than traditional Indian alcohols. As premiumisation and the expanding middle class create burgeoning demand for higher quality international spirits the market is mushrooming in both volume and value.

Apart from being the largest market for all whiskies, India is now the biggest for exports of Scotch whisky in terms of volume with a 60 per cent rise in imports in 2022, according to the Scotch Whisky Association.

Over the past decade, shipments from Scotland have risen by more than 200% but still account for only 2% of the Indian market.

And if the much-mooted trade agreement with Britain goes ahead, the SWA calculates that over five years reduced tariffs on scotch could add about £1 billion to the industry’s revenues from India to swell the £282 million achieved last year.

De Beauregard says that annual volume growth in India is in “the high single digits” for locally distilled products but” between 10% and 20%” for imported luxury brands, trends he expects to continue.

He also points out that the potential for growth increases in direct relation to the higher up the quality and price pyramid a brand is placed.

So it is little wonder that the big spirits groups are battling to take big slices of a fast-growing pie.

It is what Alexandre Ricard, Pernod Ricard’s chairman and CEO, has repeatedly called a “must win” market.

The French group stole a march on its competitors in 2002 when it took the Seagrams’ Indian interests as part of the dismemberment of the Canadian group in concert with Diageo.

Its Indian arm remains the leader in locally-produced spirits with more than 40% of the IMFL whisky market and about a third of the imported premium spirits.

Despite the legal wrangles over its licence to trade in Delhi, net sales in India soared by 13% in the year to the end of June.

De Beauregard says Indian consumers accept price premiumisation due to their increasing disposable incomes and the greater availability of choice as the range on offer expands.

Arch-rival Diageo, which took control of United Spirits in 2013, saw its sales in India jump by 17% in the same period.

In both cases the results were due to price rises to match or beat inflation and premiumisation as well as low comparative figures in 2022 when the pandemic was in full force.

Diageo’s focus on premiumising the Indian market was underlined when last year it sold 32 of the lower margin local brands that came in the United Spirits takeover to Inbrew Beverages for US$106 million.

Beam Suntory is targeting Indian revenues of US$ 1 billion by 2030 and is introducing to the market its single malt whiskey Yamazaki 12, several different flavours of Jim Beam bourbons, Japanese craft vodka Haku and a super-premium tequila.

Thomas Mayr, Campari’s Asia marketing director said in a recent interview: “India is a key market within the Asia Pacific. We are aiming at 75% growth in FY23 in terms of volume and 100 per cent value growth. “

Meanwhile, Jack Daniels distiller Brown-Forman is seeking to tap a “huge opportunity” in the Indian market while Remy Cointreau is using its flagship Louis XIII Cognac to drive Indian aspiration for its cognacs higher.

To protect their own interests, local spirits producers are lobbying hard for a minimum import price structure. They fear they could be vulnerable to a flood of international premium brands if tariffs are lowered too far, especially from scotch.

One of their demands is that a trade deal with the UK should leave the tariff on international imports above US$4 a bottle to counter a flood of brands such as Chivas Regal and Johnnie Walker Black Label from making huge inroads into their traditional sales.