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Credit rating agency ICRA in its latest report has estimated steady revenue growth of 8-10% for its sample set of domestic alcohol beverages (alcobev) companies in FY2024. After two consecutive pandemic-hit years of FY2021 and FY2022, the Indian alcobev industry witnessed a strong revival in FY2023, led by healthy demand across both the segments, i.e., spirits and beer. ICRA’s sample set companies witnessed a YoY growth of 20% in revenues in FY2023 to Rs 26 billion, exceeding the pre-COVID levels. 

ICRA further said during Q1 FY2024, the spirits industry reported a 13% YoY increase in revenues despite being the lean season for the segment, while the beer industry, despite being the peak season, witnessed a marginal decline of 1%, due to the unseasonal rainfall. However, despite a steady demand, the OPM of ICRA’s sample set companies is poised to contract further by around 90-140 basis points in FY2024, following a sharp 300 basis points decline in FY2023. The primary reason for the expected margin contraction is the elevated prices of key inputs in the current fiscal, like non-basmati rice and other grains such as maize, used to produce extra neutral alcohol (ENA), the base to manufacture spirits. The impact of a sub-par monsoon, the El Nino conditions, and the Government measures on grain prices thus remain crucial to ascertain the industry cost structure.

According to the report, packing material costs also remain high, particularly glass, led by an increase in soda ash prices. However, prices of barley, the key raw material for producing beer, have witnessed correction in recent quarters and are likely to remain stable in the near to medium term. Moreover, the availability and consequent pricing pressures from the diversion of grains towards production of ethanol, which is seeing increased demand due to the Government blending norms, is also a key influencing factor to monitor for the industry.