Indias Alcobev Sector Predicted to Grow 8-10% in FY25 with Higher Margins

This optimistic forecast is buoyed by the anticipated moderation in raw materials prices, according to a recent report by ICRA. Specifically, companies producing Indian-made foreign liquor (IMFL) are expected to enjoy a revenue surge of 11-13%, driven by a growing consumer preference for premium products and an estimated volume growth of 3-5% on the substantial base of FY2024.

The beer sector is not far behind, with revenue expected to climb by 9-11%, supported by a volume increase of 4-6%. This positive outlook is further reinforced by expectations of a favorable Q1 FY2025, attributed to the anticipation of a hotter summer compared to the previous fiscal year, which was marred by unseasonal rainfall.

Moreover, the report highlights an anticipated easing in working capital requirements for selected companies within the industry for FY2024 and FY2025. This improvement comes against the backdrop of lower input prices, particularly in packaging costs, which are expected to lead to reduced funding requirements.

ICRA’s analysis also forecasts an expansion in the industry’s operating profit margin (OPM) by 50-100 basis points in FY2025, primarily due to the expected moderation in input costs. Key among these are packaging materials such as glass bottles. However, the report cautions that with the increase in the minimum support price (MSP) and higher procurement rates for recent crop arrivals, costs are likely to remain elevated in the near term.

Another factor that could influence costs is the diversion of grains towards ethanol production, potentially keeping prices firm and leading to more expensive extra neutral alcohol (ENA). Nevertheless, the cost of barley, a critical raw material for beer production, is expected to remain relatively stable.

This comprehensive analysis by ICRA sheds light on various factors influencing the domestic alco-bev industry’s growth and profitability prospects. With an overall positive outlook, despite some challenges related to input costs, the industry appears set for significant growth and margin improvement in FY2025.