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The domestic alcoholic beverages industry is likely to see 8-10 per cent revenue in FY25, led by steady demand for beer and a revival in consumption of spirits, along with increasing consumer preference for premium products, a report said on Monday. 

According to credit rating agency ICRA, the revenue increase in FY25 will additionally be supported by the price hikes granted by a few state governments in the current fiscal.

During Q1 FY25, the spirits industry reported 9 per cent YoY increase in revenues, supported by 5-7 per cent improvement in realisations, while volumes grew by 2-4 per cent.

According to the report, the beer industry witnessed a higher revenue growth of 12 per cent in Q1 FY25, owing to 3-5 per cent increase in volumes and 7-9 per cent in realisations.

Kinjal Shah, SVP and Co-Group Head–Corporate Ratings, ICRA, said that the alcoholic beverages industry’s volume growth is estimated to improve to 5-6 per cent in FY25 from 4 per cent in FY24.

ICRA expects spirits volumes to grow at a moderate pace of 2-4 per cent in FY25, supported by favourable demographics and a limited increase in taxes anticipated for the year.

“We expect moderate growth of 5-7 per cent for beer volumes in FY25, on a high base,” said Shah.

The manufacturers witnessed an increase in grain cost in the first half of FY25 due to 20-25 per cent rise in non-basmati rice prices, while barley prices have been fairly stable.

However, the non-basmati rice prices have started softening from July 2024 onwards.

Further, the packaging material costs (glass bottles) declined in the current year due to a sharp correction in soda ash prices.

“This, along with price hikes received from various state governments at the start of the fiscal, is expected to keep the operating profit margin (OPM) for ICRA’s sample set companies intact at 12-13 per cent in FY25,” added Shah.