Alcobev Industry Toasts to Steady Growth Amid Premiumization Wave

A report by Crisil Ratings predicts 8-10% revenue growth in India's alcoholic beverage industry by fiscal 2026, driven by premiumization and increased urbanization. With stable credit profiles and minimal debt-funded expansion, the industry sees robust profitability despite rising raw material costs. Spirits dominate, contributing 65-70% of total revenue.

India's alcoholic beverage sector is on a growth trajectory, with revenue expected to increase 8-10% to Rs 5.3 lakh crore by fiscal 2026. A report from Crisil Ratings highlights a solid compound annual growth rate of 13% over the previous three years, maintained by the ongoing trend of premiumization.

The report underscores a strong credit outlook bolstered by healthy financial accruals, reduced debt, and limited capital expenditure. The industry is predominantly driven by spirits, which account for 65-70% of revenue, while beer, wine, and country liquor constitute the remainder.

Volume growth is projected at 5-6%, fueled by urbanization and a growing drinking-age population with higher disposable incomes. Director Jayashree Nandakumar notes that premium and luxury segments, priced above Rs 1,000 per 750 ml, will see a 15% revenue increase this fiscal year.

Operating profitability is set to improve by 60-80 basis points through enhanced cost absorption and contribution, despite slight rises in input costs. Primary materials like extra neutral alcohol (ENA) and barley represent 60-65% of production costs, with packaging also taking a substantial portion.

The report notes a forecasted 2-3% rise in ENA prices and a 3-4% increase in barley prices due to heightened demand and limited supply. Glass bottle prices remain steady but firm. Alcohol companies anticipate a 3-4% price increase for premium products.

Despite the price adjustments, the industry has ramped up capacities by 15-20% over two years, operating at 70-75% capacity, thus minimizing the need for major debt-funded expansions this fiscal year, according to Crisil Ratings. (ANI)