India’s Alcoholic Beverage Industry Set to Maintain Double-Digit Growth in FY26: CRISIL

New Delhi (IANS) – India’s alcoholic beverage (alcobev) industry is expected to maintain strong momentum in FY2025-26, with revenues projected to grow by 8–10% to ?5.3 lakh crore, according to a new report by CRISIL Ratings. This continues the robust compound annual growth rate (CAGR) of 13% recorded over the past three fiscal years.

Operating profitability is also set to improve by 60–80 basis points, driven by ongoing premiumisation trends in the market. As a result, credit profiles across the sector are expected to remain healthy, supported by strong cash flows, low debt levels, and limited need for large debt-funded capital expenditure.

The CRISIL report is based on an analysis of 25 liquor companies, which collectively account for about 12% of revenue from India’s organised alcobev sector.

The industry is primarily led by spirits, which contribute 65–70% of total revenues. The remaining share comes from beer, wine, and country liquor. While spirits are produced through distillation, beer and wine are created via fermentation.

According to the report, industry volumes are expected to grow by 5–6%, fueled by rising urbanisation, a growing drinking-age population, and increasing disposable incomes.

“This fiscal year, strong volumes and ongoing premiumisation will drive revenue growth, even without major price hikes,” said Jayashree Nandakumar, Director at CRISIL Ratings. “Revenue from premium and luxury segments—priced above ?1,000 per 750 ml—is projected to grow around 15%, with their contribution to total spirits revenue rising to 38–40%, up from 31–33% in FY2023.”

The report notes that rising volumes and improved price realisation will support profitability through higher contribution margins and better absorption of fixed costs, despite a slight uptick in input prices.

Key raw materials include extra neutral alcohol (ENA) for spirits and barley for beer, which together make up 60–65% of total material costs. The rest goes toward packaging, especially glass bottles.

ENA prices are expected to rise 2–3% due to increased demand from the ethanol blending programme, despite anticipated higher supply. Barley prices are also likely to increase by 3–4% amid a tight demand-supply situation. Glass bottle prices are expected to remain firm, driven by steady demand and supply.

A 3–4% improvement in realisations due to premiumisation, along with ongoing volume growth, will help absorb input cost pressures and support margin expansion, the report adds.

Encouraged by consistent volume growth, industry players have expanded capacity by 15–20% over the past two fiscal years. With current utilisation rates at 70–75%, the industry has sufficient headroom to meet rising demand, and no significant debt-funded capex is expected this fiscal.

The report highlights that the sector’s credit metrics remain strong, with interest coverage ratios projected at a healthy 21 times for this fiscal year.

However, CRISIL cautions that government policy changes, shifts in duty structures, and raw material cost volatility will remain key factors to monitor.