Alcoholic Beverage Revenue to Grow 8-10% in FY26: Report

Mumbai, May 16 (PTI) Alcoholic beverage manufacturers in the country are expected to witness a revenue growth of 8-10 per cent at Rs 5.3 lakh crore in the current financial year, keeping up momentum after a Compound Annual Growth Rate (CAGR) of 13 per cent over the three preceding fiscals, a report said on Friday.

The operating profitability will increase 60-80 basis points (bps), supported by continuing premiumisation, Crisil Ratings said in a report.

The industry is dominated by spirits, which contribute 65-70 per cent of total revenue, with the remaining coming from beer, wine and country liquor, said the report.

Spirits are alcoholic beverages produced through distillation, whereas beer and wine are made through fermentation.

The industry volume will grow 5-6 per cent, driven by urbanisation, an increase in drinking population and rising disposable income, it added.

"This fiscal, healthy volume and ongoing premiumisation will support revenue growth despite the absence of major price revisions. Revenue from premium and luxury segments, priced at over Rs 1,000 per 750 ml, is expected to grow 15 per cent. The contribution from these segments will rise to 38-40 per cent of spirits revenue this fiscal," Crisil Ratings Director Jayashree Nandakumar said.

According to the report, higher volumes and realisations are likely to support the profitability of players through better contribution and cost absorption, despite a marginal increase in input costs.

The major raw material inputs for the spirits and beer segments are Extra Neutral Alcohol (ENA) and barley, which together account for 60-65 per cent of the total material cost, while the rest is towards packaging, primarily glass bottles.


ENA prices are expected to rise 2-3 per cent this fiscal due to higher demand from the ethanol blending program, notwithstanding expected higher supplies.

Barley prices are expected to increase 3-4 per cent this fiscal due to a tight supply-demand situation, while prices of glass bottles will remain firm given increasing demand and steady supplies.

However, a 3-4 per cent increase in realisation due to premiumisation, along with continuing volume growth, will help in cost absorption and improve operating margins.

"We expect operating profitability to rise 80-100 bps in the spirits segment and 50-70 bps in the beer segment this fiscal. The blended operating margin for the industry is expected to grow 60-80 bps, marking an expansion for the second year in a row," Crisil Ratings Associate Director Sajesh KV said.

Further, the Crisil Ratings said that steady growth in volumes has encouraged manufacturers to expand capacities by 15-20 per cent in the past two fiscals.

The industry is currently operating at 70-75 per cent utilisation, leaving enough headroom for meeting demand. Therefore, no major debt-funded capex is expected in FY26.

The absence of large capex plans and a steady working capital cycle indicates the credit metrics of alcoholic beverage manufacturers will remain solid, with the interest coverage ratio healthy at 21 times this fiscal, it stated.

However, government policy, changes in duty structure and volatility in input costs need to be watched, added the report.