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Q4FY26 Margin Expansion: India’s AlcoBev sector delivered another quarter of margin-led growth in Q4FY26, driven by sustained premiumisation and a favourable input cost environment. Demand inclined towards Prestige & Above products, resulting in an improved product mix across the industry, while the Popular segment witnessed relatively softer growth due to state-specific disruption and a high base. Benign grain and ENA prices and ongoing backward integration initiatives supported healthy EBITDA expansion.

Q1FY27E Margins at Risk: The sector is expected to maintain its premiumisation-led growth trajectory in Q1FY27E, supported by new product launches, wider premium brand penetration and continued investments in manufacturing and distribution capabilities. However, the West Asia conflict has created a cost spiral with plastic and glass prices increasing by at least 20% YoY (packaging cost is 20–25% of net revenue). Price pass-through in the sector will lag; however, we believe cost increases would be fully passed-through by Q3–Q4 FY27E.

Our preferred investment ideas from the sector are RDCK and ABDL. RDCK is projected to benefit from economies of scale at its Sitapur Distillery as production volumes scale up, while ABDL is expected to benefit from investments in backward integration across PET plant, Malt plant and increased distillation capacity.

Higher for Longer Crude Price Threatens Margin Outlook

Q4FY26 margin performance across our coverage companies was outstanding as most companies saw their margin rise by 200–500 bps. However, packaging cost which forms 20–25% of net revenue, consisting of glass, PET bottles (Mass, Popular & Country Liquor segments), cardboard boxes and plastic caps have been adversely impacted. Approximately, 15–20% of cost of glass is natural gas, which is used for high-temperature melting. Further, PET bottles and plastic caps are directly linked to the Crude Oil value chain, although some of these can be recycled. A possibly prolonged West Asia conflict will aggravate gas shortages and lead to higher prices in both, glass and PET bottles. However, most companies expect the impact to remain short-term and manageable, supported by premiumisation-led growth, productivity initiatives and selective price hike.

For Q1FY27E, near-term margin and demand volatility may persist if geopolitical tension continues, although the broader domestic demand outlook remains stable.

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