India’s alcoholic beverage industry is in high spirits!

The Indian alcoholic beverage industry, after facing two consecutive pandemic-hit years in FY2021 and FY2022, witnessed a remarkable resurgence in FY2023. The industry’s performance during this period was characterised by robust revenue growth and an increased demand for spirits and beer. As we look ahead to FY2024, the outlook remains positive, with steady revenue growth projected in the range of 8-10%.

However, there are challenges to be reckoned with, primarily a contraction in operating profit margins due to input cost pressures, particularly in the prices of grains and packaging materials.


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The estimated revenue growth of 8-10% for domestic alcoholic beverage companies in FY2024 marks a significant recovery following the pandemic’s impact on the industry, as per ICRA’s prediction. ICRA’s sample set of companies witnessed a YoY growth of ~20% in revenues in FY2023 to ~Rs 26 billion, exceeding the pre-COVID levels. During Q1 FY2024, the spirits industry reported a ~13% YoY increase in revenues despite being the lean season for the segment, while the beer industry, despite being the peak season, witnessed a marginal decline of ~1%, due to the unseasonal rainfall.

This resurgence can be attributed to a surge in demand across both segments, spirits, and beer. The demand has been bolstered by various factors, including increasing urbanization, rising disposable incomes, favourable demographics, and a more accommodating regulatory environment in some states.

Kinjal Shah, Vice President and Co-Group Head – Corporate Ratings, ICRA Limited states that, “ICRA expects alcobev consumption to remain steady, supported by growing urbanisation, rising disposable incomes, favourable demographics, and easing regulatory environment by some states. A sub-par monsoon with warm weather amid ongoing El Nino conditions will further drive demand, particularly for beer, in FY2024.”

The industry’s capacity expansion trend, which saw a significant capex of approximately 5% of revenues in FY2023, is expected to moderate to around 2-3% in FY2024 and FY2025. Key players have recently enhanced their production capacities, with a particular focus on beer manufacturing. This expansion is expected to materialise in the near to medium term, with some players looking to expand to new states and deepen their market penetration.

The timely adjustment of selling prices by state governments plays a pivotal role in helping alcoholic beverage manufacturers absorb rising input costs. Traditionally, such price adjustments occur at the beginning of the fiscal year, meaning any mid-year raw material price volatility must be absorbed by the manufacturers.

Several key states, including Karnataka, Haryana, Delhi, and Uttar Pradesh, have allowed the increase in prices of alcoholic beverage products for the current fiscal year. Furthermore, the expansion of distribution networks for alcoholic beverage products, such as the initiative undertaken by the Madhya Pradesh government last year, continues to provide support to the industry in FY2024.


Despite the promising revenue outlook, the industry faces challenges in terms of operating profit margins (OPM). In FY2024, OPM is expected to contract by approximately 90-140 basis points, following a sharp decline of 300 basis points in FY2023. The primary reason for this margin contraction is the soaring prices of key inputs during the current fiscal year.

Notably, the cost of non-basmati rice and other grains like maize, used in the production of extra neutral alcohol (ENA), a vital component for manufacturing spirits, has increased substantially. The impact of sub-par monsoon and El Nino conditions, as well as government measures affecting grain prices, remains crucial in determining the industry’s cost structure.

Packing material costs, particularly glass, have also contributed to margin pressures due to an increase in soda ash prices. On the positive side, prices of barley, a critical raw material for beer production, have seen corrections in recent quarters and are expected to remain stable in the near to medium term. However, the diversion of grains towards the production of ethanol, driven by government blending norms, poses an additional challenge that industry stakeholders must closely monitor.

Additionally, the alcohol and beverage industry is heavily regulated in India. This can make it difficult and expensive for businesses to operate. Most of the states have policies which are far from ground reality and hence ease of doing business is a mere term, especially for alcobev industry except for a few states. Hence to tackle these issues, additional cost is incurred in each state to set up local teams to do follow-ups and make the requisites happen.

Way ahead

The Indian alcoholic beverage industry appears set for steady growth in FY2024, underpinned by strong revenue growth expectations. However, challenges related to input cost pressures, including grain prices and packaging materials, are expected to contract operating profit margins. Government measures, such as timely price adjustments, will be crucial in helping the industry weather these challenges.

Additionally, the capacity expansion in beer manufacturing signifies the industry’s readiness to meet growing demand. Despite these challenges, the industry is expected to maintain stable and healthy credit metrics, supported by strong cash flow generation and limited debt addition. Monitoring input costs and government policies will be essential for industry stakeholders to navigate these complexities effectively.

According to Mr Malay Kumar Rout, founder of WSCI, India is a young country with the fastest-growing economy leading to an increase in disposable income. The fuel to the Indian Alcohol industry is also its well-travelled citizens who are more inclined towards a balanced approach. India today is increasingly spending on experiences rather than creating only assets.

The future of the industry does seem promising, especially if there’s a thoughtful approach to allow new companies and investors to enter the market. As Mr. Rout aptly noted, the industry can grow significantly with the right support and policies in place.

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