Indian liquor giants Radico Khaitan and United Breweries reported strong second-quarter profit growth as consumers switch to higher-end brands. While this premiumization trend is boosting margins for many, companies like Allied Blenders face margin pressure due to high marketing costs. Regional policy shifts in states like Karnataka are further supporting volume growth for the sector.
Indian alcoholic beverage companies are seeing a clear shift in consumer preference, with more buyers moving toward premium products. This trend, often called premiumization, has significantly impacted the quarterly results for major players, helping them navigate rising costs and improve their overall profit margins.
Radico Khaitan showed the impact of this shift in its September quarter results, reporting a 66% jump in net profit to ₹232 crore. While its total income rose by 10% to ₹5,588 crore, the internal product mix changed significantly. Sales volumes for its 'Prestige & Above' category grew by 35.8%, whereas standard product volumes dropped by 9.7%. Premium products now make up over 77% of the company's Indian-made foreign liquor revenue, a clear increase from 68.6% a year ago.
The beer market is witnessing similar dynamics. United Breweries reported that overall sales volumes grew by 16%, but premium beer volumes saw a much faster rise of 38%. By focusing on brands like Heineken Silver and Kingfisher Ultra, the company’s quarterly profit reached ₹135 crore, nearly three times higher than the same period last year. Strategic price increases and internal efforts to manage costs helped protect the company from supply-chain volatility.
However, the shift toward premium products comes with its own set of challenges. Allied Blenders and Distillers, for instance, showed a different performance pattern. While the company crossed the 10-million-case mark in total volume for the first time, its operating margins tightened to 12.4%. While its premium products remain highly profitable on a per-case basis, the company’s overall profit growth was limited to 10%. This was largely due to higher marketing spending and supply-chain pressures, showing that scaling a premium portfolio often requires heavy investment.
Policy changes have also acted as a catalyst for growth in specific regions. The rationalization of liquor duties in Karnataka has been a notable tailwind for the industry. Radico Khaitan reported 120% growth in its premium portfolio within the state, while United Breweries identified Karnataka as a key contributor to its market share expansion.
For investors, the key monitorable remains the balance between volume growth in premium segments and the high marketing costs required to sustain that demand. While premiumization helps companies charge higher prices and improve margins, the ability to control operational costs and maintain brand loyalty will be crucial for long-term growth. The market will likely continue to track whether this demand trend sustains as consumers balance their spending choices in the coming quarters.