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Premium Portfolio Cushions Sector Headwinds for Q1FY27

Prestige & Above (P&A) portfolios significantly outperformed the market average. P&A volume grew 35.9% at RDCK and 12.8% at ABDL, while it rose 10.1% YoY at UNITDSPR despite a 1.3% decline in P&A volumes, highlighting strong realisation growth. Popular segment faced headwinds from Maharashtra's MML policy and route-to-market changes in states like AP and Telangana. Karnataka has reduced retail prices by an average of 15–20% supporting further demand recovery in the state for P&A. We believe this trend for aspirational consumption will continue to drive the shift for consumers towards higher-priced alcohol in the medium-to-long term

West Asia Conflict-driven Inflation Offsets Margin Gains

Elevated glass and PET packaging cost weighed on margin, while stable ENA prices provided partial relief. The implementation of the India–UK FTA is expected to provide further margin relief as bulk scotch becomes cheaper.

Top Investment Ideas: RDCK and ABDL

Our preferred investment ideas from the sector are RDCK and ABDL. Karnataka as well as Tamil Nadu privatisation and UK FTA are likely to provide further tailwinds to RDCK’s fundamental performance. ABDL’s growth is supported by an expected price revision and activation of backward integration projects.

Innovation-led Growth Continues across Sector

Innovation and premium portfolio expansion remained strong across the industry, with companies accelerating launches in RTDs, vodka, gin and premium whisky. White spirits continued to outperform, led by Magic Moments (+43% YoY to 3.5 Mn cases) and ICONiQ White (+33.8% YoY to 3.1 Mn cases). Companies also expanded into RTDs, tequila and luxury spirits to tap evolving consumer preferences and supporting sustainable margin expansion over the medium term

For Q2FY27E, demand is expected to improve gradually, supported by Karnataka reforms and premiumisation, while regulatory actions and input cost pressure are likely to remain near-term monitorables.

FSSAI Scrutiny may Cause Temporary Disruption in Volume

The current seizures and plant shutdowns are mainly caused by alleged “mis-labelling” practices. We believe this will be temporary and is likely to be corrected either by new labels or a court order approving longstanding industry practices.

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