The liquor industry is hoping that increased spending during the festive season will help them recover from a five-year period of shrinking profit margins

India’s liquor industry is optimistic that easing inflation and a normal monsoon season will lead to increased consumer spending during the upcoming festivals. This boost could help the low-cost alcohol market recover from high input costs and stagnant profit margins.

Anant S. Iyer, director general of the Confederation of Indian Alcoholic Beverage Companies (CIABC), noted that while the first quarter of the fiscal year was challenging due to elections and extreme heat, the second quarter has seen improvement. He believes that the next two quarters will likely bring positive results, with several product categories expected to perform better.

The CIABC represents major distillers, including Radico Khaitan and Allied Blenders & Distillers. The Indian liquor market, valued at $32 billion, is projected to grow by an additional $7 billion by 2028, driven by a young population—about 460 million people, or 33% of Indians, are of legal drinking age.

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In the last fiscal year, the industry sold 385 million cases of liquor, a 14% increase from the previous year and 12% above pre-COVID levels. However, profitability has been under pressure. Over the past five years, while everyday products like face washes have seen annual price increases of 10-12%, the alcobev sector has struggled to raise prices due to state regulations. In India, alcohol is not subject to the goods and services tax, and its pricing is heavily controlled, making it a key revenue source for state governments.