Alcoholic Beverage Companies To See 8-10% Revenue Growth In FY26, Says Crisil Report

The Indian alcoholic beverage industry is expected to witness a revenue growth of 8-10% in the current financial year, reaching Rs 5.3 lakh crore, according to a research report. This growth continues the momentum seen over the past three years, with a Compound Annual Growth Rate of 13%.

According to the Crisil Ratings report, operating profitability is also expected to increase by 60-80 basis points, driven by ongoing premiumization in the sector.

The industry is dominated by spirits, which account for 65-70% of total revenue, with the remainder coming from beer, wine, and country liquor. Industry volume is projected to grow 5-6%, fueled by urbanization, an expanding drinking population, and rising disposable incomes.

These factors are expected to drive growth in the sector, with premiumization playing a key role in enhancing profitability.

"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 %. The contribution from these segments will rise to 38-40% 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% of the total material cost, while the rest is towards packaging, primarily glass bottles.

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

Barley prices are expected to increase 3-4% 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% 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% in the past two fiscals.

The industry is currently operating at 70-75% 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.

(With PTI inputs)