India’s alcohol beverage industry is expected to see continued growth in the upcoming fiscal year, according to a recent report by credit rating agency Icra. The report, based on a sample set of domestic alcohol beverage companies (alcobev), projects revenue growth of 8 to 10 per cent in FY2025.
Icra anticipates a particularly strong performance from Indian-made foreign liquor (IMFL) companies, with a revenue increase of 11 to 13 per cent predicted. This growth is likely driven by a consumer shift towards premium products alongside modest volume growth of 3 to 5 per cent. Beer companies are also forecast to experience positive results, with a projected revenue rise of 9 to 11 per cent year-on-year, primarily due to anticipated volume growth of 4 to 6 per cent.
Additionally, the report attributes this positive outlook to several factors. Icra expects a moderation in input costs, particularly for packaging materials like glass bottles, which account for a significant portion (approximately 60-65 per cent) of an alcobev manufacturer’s expenses. While grain prices, especially non-basmati rice, remain a concern, the anticipated softening should provide some relief.
In addition, Icra predicts a favourable season for beer in Q1 FY2025, with warmer weather compared to the previous year’s unexpected rainfall potentially boosting sales.
While acknowledging potential challenges such as rising minimum support prices (MSP) for crops, Icra expects barley prices, a key raw material for beer production, to remain stable. However, the report highlights the possibility of elevated extra-neutral alcohol (ENA) prices due to grain diversion for ethanol production.
Further, regarding packaging materials, Icra notes a positive trend with a marginal softening in aluminium prices and a significant correction in soda ash prices compared to the previous year. This, combined with anticipated lower input prices and reduced funding needs, is expected to lead to a moderation in working capital requirements for sample set companies in FY2024 and FY2025.
This trend is likely to contribute to the maintenance of strong credit metrics for these companies, driven by improved cash generation and limited debt addition.
