More spirits companies are turning cagey about pumping investments into the nascent ready-to-drink (RTD) segment.
Shaw Wallace Distilleries Ltd (SWDL), the second largest spirits company, and Radico Khaitan Ltd (RKL), the fourth largest, have decided to go slow in pushing for a presence in the RTD business, citing the small size of the market that has failed the hype generated by the category.
Top Shaw Wallace officials said that the company has decided to go slow on the category after it test-launched RTD brand, Veba, in Goa in three flavours last year.
"No sensible company will invest money in RTDs now," they added.
SWDL had brought in Veba through a strategic marketing and distribution alliance with Kyndal (now Whyte & Mackay).
This carbonated product with less than five per cent alcohol was soft-launched in three fruity flavours - orange, grapefruit citrus and lemon.
Mr Abhishek Khaitan, Joint Managing Director of RKL, said that his company would "wait and see " longer enough before deciding to tap the new segment.
(RKL was in talks with UK's Halewood International to bring in Red Square, a vodka-based RTD.)
It follows a decision by United Distillers & Vintners (UDV) to put on hold the launch of its leading international offering, Smirnoff Ice.
The company had indicated that it would revisit the project as the market for the category gained further momentum.
Mumbai and Delhi remain the main markets for RTD sales (in 330 ml and 275 ml packs), and the total size is currently pegged at 3-4 lakh cases annually.
The early entrants into the category include McDowell & Co Ltd (Shotz, Cruiser) and Bacardi Martini India Ltd (Breezer), while Triumph Distillers & Vintners (TDV) recently forayed with the initial launch in Delhi.
While more States have allowed introduction of RTDs in their markets, a few important ones like Karnataka are yet to provide access to this new category targeted at the youth.
The companies that are reviewing their RTD strategies indicate that the domestic market size cannot sustain intensive marketing and promotional efforts since imagery and brand positioning primarily drive the category.
Apart from significant brand building investments and issues such as warehousing and product stability in the country's hot conditions, the liquor companies are also likely to face hurdles on the taxation front with the current structure pegging the retail price in the metros at Rs 32-Rs 42 for 330 ml packs.