Archive · 7 Oct 2026
Smaller Cities Expected to Drive Alcoholic Beverage Premiumisation
India’s alcohol industry thinks smaller cities could become important places for selling more premium drinks.
Premium drinks are growing faster than cheaper and regular products.
The industry says premiumisation means people choosing higher-priced products, not necessarily drinking more overall.
Smaller markets may have fewer premium products available today.
Better distribution and more accessible prices could help change that.
Alcohol sales also provide substantial tax revenue to central and state governments.
The industry says predictable tax and licensing rules would help businesses plan and invest.
It says the main opportunity is domestic consumers choosing premium Indian products, rather than imported liquor.
ISWAI CEO Sanjit Padhi said Tier-2 cities and smaller markets are expected to lead the next phase of alcoholic beverage premiumisation as growth in larger cities saturates.
Premium products grew at a 10.2% CAGR from 2022 to 2025, compared with 1.1% for cheap products and 1.4% for regular products, according to an ISWAI report.
The industry describes premiumisation as a shift toward higher-value products that can raise industry value and state revenues without necessarily increasing total alcohol consumption.
India’s alcoholic beverages market was estimated at Rs 6.2 lakh crore in 2025; the industry generated an estimated Rs 4 lakh crore in central and state tax revenues in FY25.
ISWAI said stable taxation and licensing policies over three to five years could support investment, while imported liquor represents around 2.5% of total volumes.
- Who
- Sanjit Padhi, CEO of the International Spirits and Wines Association of India (ISWAI), and India’s alcoholic beverages industry.
- What
- ISWAI expects Tier-2 cities and smaller markets to drive the next phase of premiumisation.
- When
- The remarks were reported on Wednesday; the cited premium growth figures cover 2022–2025, and the market estimate is for calendar year 2025.
- Where
- India, particularly Tier-2 cities and smaller markets.
- Why
- Larger cities are described as saturated, while better availability and accessible prices could encourage consumers in smaller markets to choose higher-priced products.
Industry’s growth case
Conditions and limits
Where future growth lies
Industry’s growth case
ISWAI says smaller markets could drive premiumisation as growth in Tier-1 cities saturates, with improved availability and accessible pricing helping consumers upgrade.
Conditions and limits
The article gives no opposing industry forecast, but notes that premium products have not yet achieved the availability and penetration found in larger cities.
Revenue and consumption
Industry’s growth case
ISWAI says shifting toward higher-value products can increase industry value and state revenues without necessarily increasing overall alcohol consumption.
Conditions and limits
No contrary viewpoint is reported; the article presents this as the industry’s rationale for premiumisation.
Policy and imports
Industry’s growth case
Padhi called for stable tax and licensing policies over three to five years and said domestic product upgrades offer the larger opportunity.
Conditions and limits
Padhi said free-trade agreements are unlikely to materially change the opportunity because imported liquor accounts for only around 2.5% of volumes.
- Premium segment growth
- 10.2% CAGR between 2022 and 2025
- Cheap segment growth
- 1.1% CAGR between 2022 and 2025
- Regular segment growth
- 1.4% CAGR between 2022 and 2025
- Alcoholic beverages market
- Estimated at Rs 6.2 lakh crore in calendar year 2025, or 1.8% of nominal GDP
- Industry tax revenues
- Estimated Rs 4 lakh crore in FY25
- State revenue contribution
- Alcohol-related revenues contributed around 19% of states’ own tax revenues across the 28 states and three Union Territories assessed
- Imported liquor share
- Around 2.5% of total volumes
- Policy visibility requested
- Three to five years for taxation and licensing policies