With growing pangs of the sun, and beer season around the corner, prices for alcoholic and non-alcoholic beverages may be looking at hikes on the back of increasing input costs.
Accordingly, stocks of major beverage players like United Spirits Ltd., United Breweries Ltd., Allied Blenders and Distillers Ltd., Varun Beverages Ltd., and Radico Khaitan Ltd. will hog the spotlight in the coming sessions.
Packaging costs for have surged by 30% to 40%, mounting pressures on the industry as a whole, according to beverage associations. Piggybacking off of this, analysts told NDTV Profit that they expect beverage prices to go up by 6% to 7%.
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What Is Driving High Packaging Costs?
An array of factors including sharp rises in glass rates, PET (Polyethylene Terephthalate) bottles, and aluminium prices are, in turn, pushing the packaging costs higher.
Glass, which accounts for 80% of alcohol bottle manufacturing, has become costlier by 8% to12%. Similarly, beer packaging which has 80% glass and 20% aluminium alloy cans, has seen the price of the base metal go up by 8% in March alone.
Contrary to this, glass is lesser used for non-alcoholic beverage containers, accounting for only 10% to 15% of the manufacturing.
Instead, PET or Polyethylene Terephthalate is the most widely used. PET bottles have seen a substantial rise of 40% in the last month. Notably, rates of polypropylene cap have also undergone a sharp surge of over 30% in March.
Besides the input cost increase, a 10% jump in logistics and freight costs is also weighing on the beverage industry. In light of these surges, many beverage associations are currently contemplating increasing prices.
However, while manufacturers of alcoholic beverage must seek state government nod before any hike in prices, non-alcoholic beverage makers can shift the price lever based on market forces and factors.
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