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Health Positioning Leads to Strong Growth of Malt-Based Hot Drinks in India

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Though malt-based hot drinks originated in the US and the UK, consumers in these countries now infrequently consume these beverages. However, these drinks remain highly popular among middle- and upper-class consumers in many countries that were formerly British colonies.

The British Army brought Horlicks to India at the end of World War II for nutritional fortification. Since that time, makers of malt-based hot drinks have taken advantage of rising health awareness and incomes to position them as health food drinks that can aid physical health and mental functioning. The focus on functional health benefits has allowed India to become the world’s largest market for malt-based hot drinks with US$1.1 billion in 2015 retail sales, with room for additional growth. By 2020, India is expected to account for 47% of global malt-based hot drinks retail volume sales, up from 41% in 2015. Marketing initiatives such as age segmentation, combined with continued growth in GDP and population, are expected to contribute to an 8% retail volume CAGR for malt-based hot drinks for 2015-2020, up from the 7% CAGR for 2010-2015. India’s success with malt-based hot drinks represents a situation where a product category that has been around for decades is expected to grow faster over the forecast period than during the review period, due to the combined forces of greater income and nutrition knowledge.

Selected Countries: 2015 Per Capita Retail Volumes for Malt-Based Hot Drinks and Total Hot Drinks

Country Malt-based hot drinks (kg) Total hot drinks (kg) Malt-based hot drinks as percentage of total hot drinks
India 0.2 0.4 50.0%
Malaysia 1.1 2.5 44.0%
Singapore 1.2 3.0 40.0%
UK 0.1 2.8 3.6%
US 0 2.7 0.0%

Source: Euromonitor International

A large youth population and growing awareness of health and wellness support growth of malt-based hot drinks

In addition to health-oriented marketing initiatives, growth of malt-based hot drinks in India has been aided by a young population, growing knowledge of health and nutrition, and an increase in income. India has one of the youngest populations, with 29% of the country aged 0-14-years-old in 2015, compared to 26% for the world. The number of children aged 0-14 grew by 1% from 2010-2015 in India and is projected to grow by 0.5% from 2015-2020. Growing health awareness and incomes have helped to increase demand for malt-based hot drinks among middle- and upper-class Indians. Greater access to the internet has contributed to increased health awareness in India. The internet has expanded Indians’ knowledge about health and nutrition, including about the importance of micronutrients for children’s development. This increased health knowledge is supported by stronger purchasing power due to the rise in India’s GDP and gross incomes. The more educated classes have become willing to spend on health-oriented products such as malt-based hot drinks, vitamins and dietary supplements, and sports nutrition.

Makers of malt-based hot drinks focus on function, not flavour

Wider internet access has helped malt-based hot drinks companies expand their marketing beyond traditional advertising and event sponsorship, to offer nutrition and education tips on their websites. The Indian website for Horlicks, the leading malt-based hot drinks brand in the country, appeals to ambitious parents by offering an Educational Corner that provides video lessons on subjects such as biology, chemistry, mathematics, and physics. The online lessons reinforce Horlicks’s claim that consuming it leads to better concentration in children. By positioning malt-based hot drinks as a health food drink to be mixed into warm milk, manufacturers in India have been able to grow volume sales of a product that is considered to be old-fashioned in the US and the UK. In contrast to its functional positioning in India, the Horlicks UK website appeals to consumers’ nostalgia by highlighting the brand’s history from its 1873 invention to war ration to present day. Producers of similar beverages, such as chocolate-based flavoured powder drinks and RTD chocolate flavoured milk target children by focusing on its rich, chocolatey taste. In contrast, makers of malt-based hot drinks in India target adults by focusing on its ability to address nutritional deficiencies and to improve physical and mental performance. In India, the functional claims made by malt-based hot drinks are similar to those made by toddler milk formulas, such as PediaSure (tracked in Euromonitor International’s Packaged Food database) and supplement nutrition drinks such as Ensure and sports nutrition such as Muscle Milk (tracked in Euromonitor International’s Consumer Health database). The focus on function instead of flavour has allowed malt-based hot drinks retail volumes to grow at a faster rate from 2010-2015 than all other hot drinks categories, excluding instant coffee and tea bags black (standard, speciality).

Age segmentation likely to grow future sales of malt-based hot drinks

Though India has a growing youth population, manufacturers are likely to use age segmentation to reach beyond the 5-14-year-old base. The number of Indians aged 5-14, the main consumer base for malt-based hot drinks in India, is expected to grow by 1% from 2015-2020, down from 2% for 2010-2015. To keep growing demand for malt-based hot drinks, GlaxoSmithKline has already extended its Horlicks family brand through a Junior Horlicks for children aged 1-3-years-old (1995), a Horlicks Lite for diabetics (2005), and Women’s Horlicks (2008). Its 2014 relaunch of Mother’s Horlicks for pregnant and nursing mothers with a new taste, combined with TV commercials and in-store promotions, contributed to a 10% off-trade value sales gain for Horlicks in India, leading to US$528 million in sales in 2015. The company’s Boost brand is currently aimed at 6-18-year-old boys with Cricket World Cup champions M.S. Dhoni and Virat Kohli representing the brand. By adding a Boost variant with more protein, it is possible that Boost could appeal to active men aged 15-25, and compete against sports nutrition products. Marketing for Mondelez International’s Cadbury Bournvita currently focuses on how its combination of vitamin D, vitamin C, iron, and other vitamins and minerals enhance the nutritional power of milk for growing children. Given the rigors of school exams and college, it may be possible to introduce a Cadbury Bournvita for teenagers and college students with vitamins A and B-1 and B-6 for stress relief.

Relatively low per capita volume figures show strong room for growth in India

A look at per capita retail volumes for malt-based hot drinks shows room for continued growth in India. In comparison to other former British colonies where malt-based hot drinks are consumed, India has a relatively low per capita volume consumption of these drinks. India’s 0.2kg of per capita retail volume sales of malt-based hot drinks in 2015 is a fraction of Singapore’s 1.2kg of sales, Malaysia’s 1.1kg, and Hong Kong’s 0.5kg. Positive drivers for future growth of malt-based hot drinks in India include continued growth in GDP, income, and population, as well as the rising interest in health and nutrition matters among Indians.

At the same time, malt-based hot drinks are likely to see more competition from RTD flavoured milk drinks that offer more convenience. Retail volume sales of dairy only flavoured milk drinks are expected to see a 15% CAGR for 2015-2020, outpacing the projected 8% CAGR for malt-based hot drinks. Given the stronger prospects for flavoured milk drinks, some malt-based hot drinks brands may want to extend themselves into a RTD flavoured milk drink format. The Boost brand, as it is associated with physical fitness, may lend itself to being a post-exercise RTD option for teenage boys.

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