MUMBAI: The alcoholic beverage companies are on course to log in 8-10 per cent revenue expansion this fiscal buoyed by steady demand for beer and a revival in spirits consumption, along with increasing consumer preference for premium products.
The revenue increase will additionally be supported by the price hikes granted by a few states this fiscal, which will lead to a 12-13 per cent growth in operating profit margins due to a decline in packaging material cost, despite the increase in grain prices, Icra Ratings said in a note Tuesday.
During Q1FY25, the spirits industry reported a 9 per cent jump in revenue, supported by a 5-7 per cent improvement in realisations, while volumes grew by 2-4 per cent.
During the peak season, the beer industry saw higher revenue growth of 12 per cent driven by a 3-5 per cent increase in volume and 7-9 per cent growth in realisations, the report said.
Kinjal Shah, a senior vice-president at the agency, expects the volume growth to improve to 5-6 per cent in FY25 from 4 per cent in FY24 as spirits consumption contracted by 3 per cent on account of the rise in prices due to substantially higher taxes levied by some states, inflation, and increasing consumer preference towards premium products.
The agency expects volume to grow at a moderate pace of 2-4 percent in FY25 supported by a limited increase in taxes anticipated for the year.
Beer saw higher consumption than spirits in FY24 with a growth of 8 per cent, supported by stable demand and higher tax increases on spirits in some states. Accordingly, the agency expects a moderate 5-7 per cent volume growth this fiscal.
The operating profit margins improved by 200 bps to 12.9 per cent in FY24, due to a correction in glass bottle prices and largely stable grain prices.
Manufacturers saw an increase in grain cost in H1FY25 due to a 20-25 per cent rise in non-basmati rice prices, while barley prices were fairly stable.
However, the non-basmati rice prices have started softening from July on the one hand and on the other, prices of glass bottles declined this year due to a sharp correction in soda ash prices.
This, along with price hikes permission received from various states at the start of the fiscal, is expected to keep the margins intact at 12-13 per cent in FY25.
Liquor companies incurred a capex of over Rs 1,000 crore each in FY23 and FY24, which is 4 per cent of their operating income, indicating an investment revival after the pandemic. But capex is expected to moderate to 2-3 per cent this and next fiscal as key players have already enhanced their capacities.