India raises a toast to premium pours, snubs budget liquor

India’s liquor market is seeing a growing divide. Consumers with deeper pockets are spending more on premium spirits and beer, while those feeling the pinch of inflation are cutting back on cheaper drinks. The split was clear in the September quarter earnings of top liquor makers, with premium brands driving growth at Radico Khaitan and United Breweries, and United Spirits seeing a sharp fall in sales of its lower-priced spirits while the prestige segment was buoyant.

The numbers point to a market where premiumization is gaining ground, while the mass-market consumer remains under pressure amid rising living costs and economic uncertainty, which are making price-sensitive consumers cut back on discretionary spending.

Other listed liquor makers Allied Blenders and Tilaknagar Industries, meanwhile, reported broadbased growth in volumes, although the latter’s performance was boosted by its acquisition of Imperial Blue.

United Spirits’ sales of popular brands, such as Director's Special (DSP) and DSP Black, fell sharply, even as its ‘prestige & above’ portfolio, which includes brands such as Johnnie Walker, Smirnoff, grew 6.3%. The popular segment's net sales value fell 22.7% year-on-year to ₹181 crore and by 29.7% to 1.58 million cases during the quarter. The company has reclassified last year's figures to account for McDowell's No.1 brandy, moving it from popular to the prestige & above segment, ensuring a like-for-like comparison.

Overall, United Spirits reported a consolidated revenue from operations of ₹7,014 crore for the September quarter, down 2.5% from ₹7,199 crore a year ago. Net profit fell 7.7% to ₹428 crore.

“The India 1 consumer, which is a target audience for the lower half of the IMFL portfolio, is showing signs of fatigue due to the impact of inflation on its wallet,” United Spirits managing director and chief executive Praveen Someshwar said during the earnings call last week. Consumers in the middle- and higher-income groups were holding up better, he added.

Similarly, Radico Khaitan saw growth in its premium portfolio—which includes brands such as After Dark whisky, Magic Moments vodka, Morpheus brandy and Royal Ranthambore whisky—with its ‘prestige & above’ volumes rising 36% year-on-year to 5.28 million cases, as against 7% growth in total Indian made foreign liquor (IMFL) volumes. Volumes in its ‘regular and others’ portfolio, that includes 8PM whisky, Old Admiral brandy and Contessa rum, declined 9.7%.

Radico's managing director Abhishek Khaitan said changing preferences among younger consumers, particularly towards vodka and other white spirits, contributed to the prestige growth. “We are seeing a lot of shift, especially with the Gen Z and the younger generation and the women coming in—their liking is towards the white spirits because it is more easily mixable,” he said during the earnings call.

Radico’s consolidated revenue from operations rose 10% to ₹5582 crore, while net profit increased 66.5% to ₹232 crore. The company's gross margin expanded 440 basis points to 48%, helped by a better product mix but higher packaging and raw material costs had an estimated impact of ₹27 crore during the quarter, chief financial officer Dilip Banthia said.

Premium play

The quarter's results indicate that premiumization is gaining momentum, said Poonam Chandel, an independent industry veteran told Mint: “But I would be cautious about interpreting this as a fundamental shift in consumer behaviour across India. We are seeing strong growth in premium portfolios, but that is also a result of companies consciously focusing on higher-margin brands," she said. "It does not necessarily mean that the mass-market consumer is trading up. India remains an extremely price-sensitive market, and inflation is putting pressure on disposable incomes.”

The beer market also recorded strong growth. United Breweries reported a 16% increase in volumes, while premium beer volumes rose 38% year-on-year of which Heineken Silver and Kingfisher Ultra grew 67% and 44%, respectively. The company’s consolidated revenue from operations increased 23.7% to ₹4,623 crore, while net profit rose to ₹134.8 crore from ₹46.3 crore. The profit increase also included ₹36 crore in interest income on an income tax refund.

United Breweries' managing director and chief executive Vivek Gupta said in the earnings call that its growth strategy rested on “affordability, availability and the clear tax differentiation". Input costs remain a concern for the brewer. It estimated the impact of higher costs at ₹350-400 crore for fiscal year 2027.

Allied Blenders, which makes whiskies such as Officer’s Choice and Sterling Reserve, reported consolidated revenue from operations of about ₹2,085 crore for the quarter, up nearly 6.8%, while net profit rose 9.6% to ₹69 crore. It reported an 11.1% year-on-year increase in volumes to 10 million cases, from 9 million a year ago.

The company's managing director Amar Sinha said the mass-premium portfolio—with the likes of Officer’s Choice Blue and ICONiQ White—grew 15.5% in volume terms and 16% in value. He added that excluding the disruption-related supply chain costs, the Ebitda would have been ₹172 crore and the margin 14.9%, compared to the actual reported Ebitda of ₹148 crore and a margin of 14.1%.

Nuvama Institutional Equities' research, broking, and capital markets division flagged persistent pressure on lower-income urban consumers and regulatory challenges for the mass market portfolios of companies such as United Spirits, along with rising input costs across the industry.

It said Allied Blenders’ margins were hit by supply-chain disruptions and rising debt, while Radico Khaitan faced grain and packaging cost inflation, a decline in regular-segment volumes and delays in its net debt-free target. For United Breweries, Nuvama flagged elevated input costs, particularly for sugar, and delayed price increases in some states that could keep margins under pressure.

Tilaknagar Industries also reported sharp growth, though its numbers are not strictly comparable as they were boosted by Imperial Blue, which was acquired during the year. The company's revenue from operations rose to ₹2,437 crore, growing 171.8% from ₹896.9 crore a year ago, while its volumes rose 160% to 8.9 million cases.

Nuvama flagged pressure on the company's near-term profitability from elevated raw material costs, which it estimates reduced profitability by about ₹25 crore in each of the first two quarters of FY27.