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Business News/ Industry / As India braces for a hot summer, beer makers have much to cheer
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As India braces for a hot summer, beer makers have much to cheer

Breweries are optimistic about 2024 after a 10% year-on-year drop in industry volumes last year as unseasonal rains marred sales during the summer months.

The hospitality sector faces uncertainties due to election-related dry days and this may affect on-premise alcohol sales. (Image: Pixabay)Premium
The hospitality sector faces uncertainties due to election-related dry days and this may affect on-premise alcohol sales. (Image: Pixabay)

New Delhi: Beer makers are hoping that the warmer-than-usual dry spell this summer will more than makeup for the dry days during the national election.

Breweries are optimistic about 2024 after a 10% year-on-year drop in industry volumes last year as unseasonal rains marred sales during the summer months.

Also Read: When summer sizzles, can beverage, AC sales be far behind?

"There were rains last year that wiped out the demand. There should be limited rainfall till the summer this year. When it rains, people normally don't drink beer," said DeVANS Modern Breweries Ltd's chairperson and managing director Prem Dewan told Mint. The company makes Godfather and Six Fields beers.

The company has recently signed two production tie-ups in Uttar Pradesh's Barabanki region, and in Assam scaling its production to six states. With this, the company expects to increase its capacity from six to 10 million cases by the end of 2025. 

The beer maker earlier had no tie-ups in Assam, Arunachal Pradesh and Tamil Nadu, but was supplying to these states through its existing units.

Another major challenge for the industry is navigating the complexities of state-specific duties and high freight costs. This means that most beer manufacturers need to set up local production units to be able to keep costs down.

Kingfisher maker United Breweries Ltd (UBL) is hopeful of a strong outlook but has taken into account supply disruptions. 

UBL, the entity behind Kingfisher and Heineken beers, remains positive about the upcoming season despite anticipating supply disruptions.

“Considering the evolving economic landscape and changing consumer preferences, we maintain an optimistic outlook for the upcoming summer season, anticipating a high single-digit growth for the beer industry compared to the previous summer. However, we do anticipate certain supply chain disruptions stemming from the restrictions imposed by states during elections," Vivek Gupta, CEO of United Breweries told Mint.

According to a recent report by rating agency Icra, beer companies will witness a 9-11% year-on-year increase in revenue in 2024, largely led by a 4-6% growth in volumes. 

The rating agency said it expects the industry to witness good sales in the April-June quarter in anticipation of a hot summer compared to the previous year, which had encountered unseasonal rainfall. Additionally, prices of barley, which is a key raw material for beer, are expected to continue to be fairly stable boosting prospects for beer makers. 

However, packaging costs may increase as aluminium, which forms the base for a can's price, and soda ash which determines glass bottle prices peaked in 2022 and 2023. Since then aluminum prices have softened marginally, and soda ash prices have corrected by 20% year-on-year in the nine months to FY24, raising hopes for beer makers.

Meanwhile, the hospitality sector faces uncertainties due to election-related dry days and this may affect on-premise alcohol sales. 

This means that while restaurants and bars will be open, they won't be permitted to sell alcohol, likely impacting business until early June, said Rahul Singh, founder of The Beer Café chain, which was acquired by B9 Beverages backed by Sequoia Capital.

“This situation could pose significant challenges, especially considering it coincides with the peak of summer and the IPL season. Traditionally, this period sees a robust trend in consumption. Consumers are generally enthusiastic, leading to strong consumption patterns," said Singh.

"However, despite this optimism, we may only reach the same numbers as last year. Additionally, another concern arises as many outlets, including trades, restaurants, or bars across India, that applied for their licenses in March may face delays due to the enforcement of the election code of conduct," he added.

Abhinav Jindal, founder and CEO of Kimaya Himalayan Beverages also expects robust sales in 2024. The company has increased its capacity from 2 million case to 2.3 million case this year. 

“We have added a new brewery partner at Roorkee this year, increasing our overall capacity by 30%. So this year we have three sources of supply –  Punjab, Uttar Pradesh and Uttarakhand," he said. 

Notwithstanding the dry days, which may have a limited impact, beer makers should see a good season, Jindal said.

 

 

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ABOUT THE AUTHOR
Varuni Khosla
Varuni is an Assistant Editor at Mint. She writes engaging and informative stories on luxury brands, hospitality news, business of sports, business of advertising and marketing, gaming, tourism and travel, and the business of alcohol. She is skilled in communication, research, and analysis. Varuni is passionate about covering the latest trends and developments in the lifestyle and business sectors.
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Published: 02 Apr 2024, 03:27 PM IST
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