Tetra Pak cartons this year to account for about 50% of branded liquor sales in India's second-largest alcoholic beverage market, Karnataka; trend is now spreading in India, in effort to fight duplication and adulteration of alcohol

BANGALORE, India , July 19, 2013 () – About 50% of branded liquor sold in Karnataka, the country's second largest alcoholic beverage market, will be in tetra pak this year, setting a new trend in the social dynamics of domestic alcohol consumption.

Tetra pak sales galloped after industry leader United Spirits Ltd, in which British drinks giant Diageo has acquired a controlling interest, introduced it as a pilot project five years ago. Smaller distillers joined in as tipplers in semi-urban and rural markets favoured tetra paks over glass bottles which made cheap liquor more acceptable socially.

Ironically, for many tetra paks are largely still associated with fruit juices and milk. For Tetra Pak, the Swedish-Swiss packaging giant, India's more than 300 million cases (of 9 litre each) branded spirits market is possibly the biggest opportunity in waiting.

Tetra pak sales stood at 44% of Karnataka's monthly market pegged at 40 lakh cases in the first three months of the current financial year, moving up from just 14% three years back. It is soon poised to claim more than half of the liquor sold in the state as distilleries ramp up tetra pak production lines to meet the increasing off take.

Karnataka's tetra pak boom in liquor is now crossing borders with USL starting to experiment it selectively in Andhra Pradesh. Bulk of Indian liquor sales is fetched through 180 ml packs, or 'nips' as they are referred in industry parlance, making it suitable for tetra pak adoption. Globally, tetra pak made in-roads into soft alcohol beverages like beer and wine with a handy tap serving as party packs, or to be served in airlines.

"Duplication and adulteration of alcohol has been a big problem. I think consumers have understood that tetra paks can address these issues," said Paul John, chairman of John Distilleries, who's Original Choice whisky is the second largest brand in Karnataka. The largest selling brand Old Tavern whisky of USL is almost entirely sold in tetra paks. John is lining up more investments to double the monthly tetra pak sales of Original Choice to 4 lakh cases.

More than 25 liquor brands in Karnataka, mostly the cheaper ones, have turned to tetra paks in the last 18 months. The smaller distillers share the tetra pak lines since setting it up costs more than Rs 4 crore per installation. "Alcohol in tetra pak is mainly for inducing buyers who otherwise patronize local (spurious) liquor. The absence of glass tingle sounds, and to that extant less embarrassment, also makes it friendly,"said GK Karanth, Professor of Sociology, Institute of Social and Economic Change.

But he doesn't believe tetra pak liquor necessarily becomes socially respectable. Instead, it displays more of 'cheap' than 'expensive' value. "Alcohol becomes more portable than before, as tetra paks are much easier to cart around than a clunky bottle," said Pinakiranjan Mishra, partner and national leader (Retail & Consumer Products) at Ernst & Young.

Liquor companies are also testing market with 90 ml tetra paks, in a bid to offer consumers more attractive prices as the state raises taxation on liquor to fund its welfare schemes. EY's Mishra added that liquor companies benefited from storage and transportation logistics as tetra paks helped them move more volumes and reduce breakage.

The tetra pak invasion of a large liquor consuming state also comes when the input costs of glass bottles remain volatile, gulping down meager profits in a tax squeezed business. Currently, the cost of bottling and labeling is between Rs 4 to Rs 4.50 whereas tetra pak packaging costs between Rs 2.25 to Rs 2.50.

But the changing format of alcohol delivery is unlikely to progress without challenges, with the glass industry already moving central food processing ministry on the alleged health hazards of packaging liquor in tetra paks.

(c) 2013 Bennett, Coleman & Company Limited

* All content is copyrighted by Industry Intelligence, or the original respective author or source. You may not recirculate, redistrubte or publish the analysis and presentation included in the service without Industry Intelligence's prior written consent. Please review our terms of use.