Sri Lankans more into hard liquor
Sri Lankans, unlike in the other regions of the world, consume more hard liquor than beer and wine, according to a report by TKS Research.
In 2011, hard liquor consumption stood at 61 per cent out of the total legitimate liquor industry whilst the remaining 39 per cent was held by beer. “Out of hard liquor, almost 90 per cent is taken up by ‘Arrack’ a distilled alcoholic drink originated from Sri Lanka which is followed by Whisky and Vodka. However, the country has an illicit market for hard liquor which is of the same size as the legal market, thus the actual demand is well above what is reported,” the report said.
According to 2011 data, almost one third of the demand for liquor within the country came from the Western Province which holds 25 per cent of 4,065 liquor licenses in the country. “Colombo claims the highest share of liquor consumption (15 per cent) through 768 licensed liquor premises by the end of 2011. However with swarming restaurants and hotels with the growth in tourism industry the aforementioned numbers would significantly grow in the coming years. Out of the alcohol consumers 57.9 per cent have initiated drinking alcohol with beer whilst 36.2 per cent started with arrack. It was reported that around 2 per cent has had illicit liquor to get introduced to alcohol,” the report said.
It said that there is a clear shift in the trend towards beer from hard liquor among youth. Within the past five years beer consumption has been growing by far com- pared to the hard liquor segment where in 2011 beer industry achieved a growth of 23 per cent in volumes against 10 per cent year on year growth in the hard liquor segment, the report said. “Currently per capita consumption of beer in the country stands at 6.3 litres whilst for licit hard liquor it is 10.5 litres. Out of the beer consumed in Sri Lanka 90 per cent is manufactured locally whilst the others are imported from Asian markets such as Vietnam, Singapore and India.” It said that Lion Brewery Ceylon is the leader in the local beer segment having over 80 per cent market share, that it is the manufacturer of ‘Lion’ brand which has captured nearly 60 per cent of the market, where ‘Lion Strong’ is the fastest moving product. "The company also holds the license from the world’s fourth largest brewer, Carlsberg Group to brew, bottle and market their ‘Carlsberg” brand in the country.”
With the changing attitudes and booming tourism Sri Lankan liquor industry is poised to grow despite the stringent controls by the regulator, it said, adding that there's a growing preference in hard liquor now seen in colourless, fruity spirits among the youth.
Whiskies and vodkas are the most popular imported spirits in Sri Lanka and are brought down by well-established players in the market. Johnnie Walker’s red label and black label dominate the whisky market (about 70 per cent market share) whilst Chivas Regal also has a considerable hold in the market, the report said, noting that Glenfiddich is also popular as a single malt whisky.
“Smirnoff plays the game on the price factor, selling around half the normal price as there is a production facility with a Sri Lankan liquor manufacturer. Absolut which comes in a range of flavors has also been able to grasp the young crowd. Locally manufactured Rum brands rule the market but Bacardi is also popular out of the imported rums. Wine has a very limited market in Sri Lanka and Cinzano is one of the top picks." the report added that the local liquor brands would only grow only at a slower pace of about 2-3 per cent per year during the short term and would step up its volume in medium to longer terms with a shift from illicit to licit. However the local liquor brands can still have an edge over pricing whilst high inflationary environment would somewhat stagnate the demand across all the segments of the alcohol industry in the short run, it said.
“Cider, which is again back on the global trend is another new segment with great potential which liquor manufacturers could look into in an environment where consumer preferences is changing towards mild liquor with fruity notes.” The report noted that emerging fine dining restaurants and hotels would create a space for high quality wines as well. "Heavy taxes on inputs as well as the outputs remain the biggest challenge for the industry whilst the illicit products (non tax paying) which come cheaper on shelves would also hinder the sales of the legal manufacturers," it said.