Indian alcoholic beverages industry to grow by 8-10% in FY25, margins to rise: ICRA
Upstox
2 min read • Updated: March 19, 2024, 3:55 PM
Summary
Indian-made foreign liquor companies are expected to witness 11-13% revenue expansion supported by preference towards premium products, a report released by ICRA said. Revenues for beer companies will witness a 9-11% YoY increase, largely led by 4-6% expansion in volumes, it added.
The Indian alcoholic beverages industry is expected to grow by 8-10% in fiscal year 2024-25, ratings agency ICRA said on March 19, adding that the industry-wide margins are likely to grow by 50-100 basis points (bps). One bps is equivalent to one-hundredth of a percentage point.
Indian-made foreign liquor (IMFL) companies are expected to witness 11-13% revenue expansion supported by preference towards premium products, ICRA said in a report, adding that volume growth is likely to be in the range of 3-5% on a high base of FY24.
Revenues for beer companies will witness a 9-11% YoY increase, largely led by around 4-6% expansion in volumes, it added. The segment is expected to witness a “good season” in Q1 (April-June) of FY25, in “anticipation of a hot summer” compared to the previous fiscal, which had encountered unseasonal rainfall, ICRA noted.
Moderation in input costs
“In addition to the healthy demand, the industry is expected to benefit from the moderation in input costs, especially packing material (such as glass bottles), which accounts for ~60-65% of an alcobev (alcohol beverage) manufacturer’s cost, even though grain prices, particularly non-basmati rice, are not depicting a favourable trend,” Kinjal Shah, Vice President and Co-Group Head – Corporate Ratings, ICRA, said.
With the increase in minimum support price (MSP) and higher procurement rates for recent crop arrivals, the cost of grains is expected to remain elevated over the next few months, the agency said. Diversion of grains towards ethanol could also keep prices firm, it added.
However, the prices of barley, which is the key raw material for beer, are expected to “continue to be fairly stable”.
On the packaging side, aluminium, which forms the base for can price, and soda ash, which determines glass bottle prices, witnessed highs in the fourth quarter of FY22 and the first half of FY23, respectively. The prices have moderated since then, with aluminium rates marginally softening in the current fiscal, and soda ash prices correcting by 20% on a YoY basis in the first nine months of FY24.
The operating profit margin is set to rise by 50-100 bps owing to this “moderation in packaging material costs, coupled with price hikes approved by the state governments,” Shah added. The moderation in packaging material costs would also partly offset the increase in grain prices.