Alcohol Beverages Industry To See 8-10% Growth In Revenue In FY24: ICRA

The rating agency noted that the industry’s operating profit margin (OPM) would see contraction by 90 to 140 basis points in 2023-24 on account of input cost pressure.

During Q1FY24, the spirits industry logged a growth of 13 per cent on a year-on-year (YoY) basis in revenue irrespective of the weak season the segment witnessed, while the beer industry, despite having a strong season, saw the revenue fall marginally by 1 per cent due to erratic rainfall. 

The domestic alcohol beverages (alcobev) industry is projected to witness revenue growth of 8-10 per cent in the current fiscal year, a report by the rating agency ICRA revealed. The report noted that operating margins for the industry might see contraction by 90 to 140 basis points on account of input cost pressure. 

The analysis by ICRA stated that the industry revenue is expected to grow, facilitated by the growth in volume and product mix benefits, reported PTI. ICRA’s report is based on a sample set of domestic alcohol beverage firms. It further noted that the industry’s operating profit margin (OPM) would contract in 2023-24 (FY24) due to the impact of grain prices and packaging materials. 

The report further noted that the alcobev industry saw a strong recovery in the last fiscal in FY23 on account of robust demand across the spirits and beer segments, after two pandemic-hit years of FY21 and FY22. During the first quarter of the current fiscal year, the spirits industry logged a growth of 13 per cent on a year-on-year (YoY) basis in revenue irrespective of the weak season the segment witnessed. On the other hand, the beer industry, despite having a strong season, saw the revenue fall marginally by 1 per cent due to erratic rainfall. 

The analysis found that the companies surveyed as part of the sample were set to witness a weakening in their operating profit margins by 90 to 140 basis points in FY24, after a sharp drop of 300 basis points in the previous fiscal year. The downward projection for the industry was attributed to the increased prices of key inputs in the current fiscal year, such as non-basmati rice and other grains like maize, used to produce extra neutral alcohol (ENA), the base required to manufacture spirits. Additionally, a deficit monsoon, the El Nino conditions, and government policies on grain prices remain key to determining the cost structure in the industry. Further, packing material costs also remained high, specifically glass, led by a surge in soda ash prices. 

Other factors in consideration included the price of barley, used as a raw material to produce beer, which saw some correction in recent quarters and was likely to be consistent in the near future. The report also noted that government blending rules also remained a key influencing factor to look out for in the industry. 

ICRA further stated that it expects the industry to keep demonstrating stable and healthy credit metrics helped by robust cash flow generation and limited debt addition.