Covid-19 impacted the liquor industry as out-of-home consumption came to a standstill. This is the first season since the pandemic where consumption levels have gotten back to normal and are even expected to surpass pre-covid levels.
“The liquor industry is seeing a strong upsurge in demand. Since October 2022, industry sales are up 14–15%, and the trend is expected to continue in the coming months as well,” said Vinod Giri, Director General Confederation of the Indian Alcoholic Beverage Companies.
There are some variations and shifts in brands, mainly driven by availability concerns due to supply-side issues, he said. “We have seen disruption in Delhi, which is an extremely important market for premium products, and in Kerala as well.” However, by and large, overall demand is back in full swing.
Giri expects industry sales volumes to be way ahead of pre-covid levels in FY23. He is estimating sales of 385–395 million cases of Indian-made foreign liquor in FY23, up from 340–345 million cases at pre-covid levels.
JK Arora, managing director of Som Distilleries, said, “The demand in the market is very strong. The company is not able to meet the demand.”
He added that beer plants in Karnataka, Orissa, and Madhya Pradesh are working at 100% utilisation, and the company is working to double capacity in these regions before February 2023. Also, the company is expected to see strong growth in profitability from Q1FY24 onwards.
Premiumisation is a reality, a natural trend. Producers of malt whiskey are seeing a huge demand in export markets due to a global upswing in sales of Indian brands, creating a shortage. Premium category products are growing much faster than mainstream products due to a lower base; however, growth in volumes of mainstream products will not fade away.
Margins and profitability are a major concern for liquor companies due to high raw material prices.
“Due to the Russia-Ukraine war, malt prices have inched higher,” Arora said. “Fifty percent of malt supplies come from Ukraine, which is causing a challenge for Indian companies and impacting profitability and margins.”
Also, the unavailability of glass bottles is a concern as Hindusthan National Glass, the largest producer of bottles, is under NCLT, he said. “Around 50–60% of glass bottles are produced by HNG in India.”
Giri said, “The cost hit in IMFL is significant as extra-neutral alcohol prices are touching the roof. The price of ENA has increased from Rs 40 to Rs 60 now. Also, barley, which is used for malt, costs Rs 25,000 per tonne in India versus Rs 15–16,000 per tonne in Europe.”
Higher costs are eating into the profitability and margins of Indian companies, and they are being forced to absorb higher costs as two-thirds of the liquor industry is controlled by the government and companies are unable to pass on the cost to consumers, he said.
Though margins are under pressure, the silver lining is that there is demand, Giri said.
The above news was originally posted on news.google.com