Beer Industry Sees Near Double-digit Growth but Margins Under Pressure: UBL MD & CEO

India’s beer industry is witnessing a positive momentum, with sales growing at almost double-digit rates over the past few months, driven by favourable state-level reforms and weather conditions, said United Breweries Ltd (UBL) Managing Director and CEO Vivek Gupta .

However, Gupta noted that despite the robust sales growth, the company's profitability continues to face pressure due to elevated input costs.

"The trends in the beer category are positive, driven by good reforms in states like Karnataka and Maharashtra, and also by weather," Gupta told PTI on the sidelines of an event here.

However, he also added that the beer industry remains under "severe cost pressure" on account of the impact of the ongoing global conflict on the prices of glass bottles, cans and imported materials, along with an unfavourable exchange rate, all of which have pushed up the cost of doing business.

The overall industry is in a good shape from a top-line perspective, though there is impact on the bottomline (margins), which he expects to recover.

"So right now, there is a good positive top-line momentum. At the same time, there is work being done to recover the profit erosion that has happened because of the war impact," he said, noting that the industry, from a top-line perspective, is "in a good shape".

On input costs, Gupta reiterated that prices of glass bottles have risen sharply because of the war-related impact, while prices too have gone up amid higher global aluminium prices compounded by a weaker rupee.

When asked about the nature of the growth, Gupta said that it is largely being led by volumes rather than price hikes.

"We are seeing high single-digit volume growth, and of course some price-led growth as well, but primarily it is volume growth," he said.

Over the impact of an unusual hot spell in North India in June, which some experts termed as "second spell of summer", after having hot, sunny weather following widespread above-average rainfall in May, Gupta said a well-balanced monsoon matters more for the industry than short-term weather spikes.

"We want to make sure the country gets the right monsoon, because for us it is more important to have a good economy with a right, balanced monsoon than having these spikes," he said, adding that a 10-15 day variation in weather patterns typically does not make a material difference.

He also pointed out that extreme heat can dampen consumption since beer is a "socialising" drink and people tend to step out less in very hot conditions.

Gupta further noted that beer continues to gain favour among the younger generation, who are increasingly opting for milder alcoholic beverages over harder spirits. He cited internal observations that 70-75% of people who consume their first alcoholic drink start with beer, underlining what he described as a continuing rise in beer penetration in the country.