Breweries and Distillers Sector: Getting high and merry

Breweries and Distillers Sector: Getting high and merry

Market Outlook
by 5paisa Research Team Last Updated: 2022-07-20T15:29:55+05:30

India has one of the fastest-growing alcoholic beverage marketplaces in the world, with a market value estimated at USD 52.5 billion.

Overall, the spirits industry volumes in FY 2021 suffered significantly due to the pandemic-induced lockdowns during the early part of the year. However, in the second half of FY 2021, the sales momentum gained every quarter and by the fourth quarter, eight out of 11 top liquor-consuming states had returned to above pre-pandemic levels. This strong recovery made by the industry in the third and fourth quarters of FY 2021 demonstrates the fundamental strength and resilience of the spirits industry in India. This recovery happened despite the high tax rates implemented on alcohol during the pandemic.  

Given this focus on ethanol blending, there may be some headwinds in the extra neutral alcohol (ENA) prices. Furthermore, towards the end of the year, commodity prices, particularly dry goods such as packaging materials, experienced a sharp increase. Any short-term raw material price increase is not expected to have a significant impact on the profit margins of companies that are focused on premiumisation. According to Euromonitor International, during CY 2020 the overall Indian-made foreign liquor (IMFL) volumes declined as much as (18%) to 274 million cases of 9 litres each.  

Brown spirits, such as whiskey, brandy, and black rum, have historically contributed the most to the total amount of IMFL sales. Manufacturers have been able to identify customers that have comparatively lower price sensitivity levels that eventually drive value growth because the industry concentrates on premium brands. The CAGR for single malt and blended scotch for the years 2021 to 25 is predicted to be 13% and 7.3%, respectively.

Outlook  

Because of its tremendous development potential and growing societal acceptance, the Indian brewers and distilleries sector is a rising star. For the decade beginning in 2001, the domestic spirits sector grew at a CAGR of more than 12%, making it one of the world's fastest-growing markets. The future for India's alcoholic drinks industry remains good, owing to favourable demographics, a growing middle-class, rising disposable income levels, a penchant for luxury food and drink experiences, and increased societal acceptability of alcoholic beverages.

Rapid urbanisation is predicted to increase disposable income, which is good for the industry's growth. The recovery in GDP will provide a further boost to sales since it is experimentally seen that IMFL volumes expand ahead of GDP when GDP gets pace. Given the growing health issues linked with the drinking of country liquor, organised players stand to gain from a continuous increase in conversion from country liquor to IMFL. The growing concentration of the main companies on semi-premium and premium categories, with an increase in launches and strong marketing of these categories, demonstrates the growth in premiumisation.

With a median age of 28 years, India has a young demographic profile, and around 67% of the population is of legal drinking age. This presents a significant potential to boost sector growth as the working-age population grows. Furthermore, rural liquor consumption is likely to expand quicker as earnings rise and internet access increases. This will be another important driver of the market's rapid rise.

Financial Highlights

To gain a financial overview of the breweries and distilleries sector, we have analysed six major companies. United Spirits Ltd., with a market capitalisation of Rs 59,878.66 crore, leads the sector and is the world’s second-largest spirits company by volume.  

FY22 was a golden year for the breweries and distilleries sector. All the companies, after recovering from prior losses, posted positive growth numbers YoY in terms of revenue, EBIDTA and PAT. During FY22, the total net sales of these companies jumped by 270% as compared to FY21. The total operating profit also surged by 40.93% YoY and the total net profit soared 88.22% YoY. The major contributors to this commendable growth were United Spirits and United Breweries as these companies recorded a net profit of Rs 810.60 crore and Rs 366.08 crore, respectively.  

United Spirits recorded net sales and other operating income of Rs 31,061.80 crore, thereby posting a strong growth of 282% from Rs 8,131.30 crore registered in FY21. On the other hand, the operating profit was recorded at Rs 1,643.60 crore in FY22 as compared to an operating profit of Rs 1,092.30 crore in FY21.  

The lowest two businesses were GM Breweries Ltd. and Tilaknagar Industries Ltd. Tilaknagar Industries recovered losses from FY21 of Rs 38.40 crore to generate a net profit of Rs 45.18 crore. It is admirable that no firm suffered a loss in FY22. With net sales and other operating income of Rs 1,778.13 crore, GM Breweries posted a significant increase of 422.79% compared to Rs 340.12 crore reported in FY21. In terms of earnings per share (EPS), Globus Spirits Ltd. outperformed competitors Tilaknagar Industries and United Spirits, who came in last with earnings of Rs. 3.15 and Rs. 11.68 per share, respectively.

Start Investing in 5 mins*

Get Benefits worth 2100* | Rs. 20 Flat Per Order | 0% Brokerage

About the Author

Our research team is composed of some highly qualified research professionals, their expertise range across sectors.

Disclaimer

Investment/Trading in securities Market is subject to market risk, past performance is not a guarantee of future performance. The risk of loss in trading and investment in Securities markets including Equites and Derivatives can be substantial. Also, The

Open Free Demat Account

& get benefits worth 2100*

 
Resend OTP
Please Enter OTP
  • Have Promo code?
  • Use code ACT2100
Enter Promo code

By proceeding, you agree to the T&C.

Start Investing Now!

Open Free Demat Account in 5 mins

Enter Valid Mobile Number