Propelled by the rising spending power of young adult population, the hot drinks sector in India is expected to grow at a compound annual growth rate (CAGR) of 10% from INR584bn (US$8.5bn) in 2018 to INR941.3bn (US$12.6bn) in 2023, says GlobalData, a leading data and analytics company.

GlobalData’s report, ‘India Hot Drinks – Market Assessment and Forecasts to 2023’, reveals that hot tea was the largest category with value sales of INR452.5bn (US$6.6bn) in 2018 while other hot drinks (includes chocolate and malt-based drinks) category is forecast to register the fastest value growth at a CAGR of 11.8%, closely followed by hot coffee category with a value CAGR of 11.4% during 2018–2023.

Priyanka Jain, Consumer Analyst at GlobalData, says: “Being a traditional and affordable drink, black standard tea has always remained the leading hot drinks segment in India. However, due to the rising disposable income and urbanization, the country is witnessing a growth in demand for premium products across all hot drinks categories.”

The report states that India’s value share in the global hot drinks sector is expected to increase from 4.4% in 2018 to 5.1% in 2023. Similarly, the country’s value share at the regional level is expected to increase from 11.3% in 2018 to 11.8% in 2023.

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The report also reveals that the hot tea led the Indian hot drinks sector in terms of per capita consumption with 0.77kg in 2018, which was sizably high compared to hot coffee and other hot drinks categories.

In terms of distribution, off-trade transactions accounted for 74% value share of the overall hot drinks sales in 2018 while on-trade transactions held 26% of overall value sales in the same year.

Priyanka concludes: “The rising purchasing power and growing influence of western culture is enabling the affluent middle income consumers to trade up to premium and innovative hot drinks. The trend is expected to boost the sales of specialty products in the tea and coffee categories.”