In contrast, United Breweries saw a 3 percent decline in beer volumes due to a persistent monsoon and a weaker summer, although its premium beer segment grew 17 percent year-on-year.
A report from Motilal Oswal Financial Services (MOFSL) shows that the industry has achieved 11 percent revenue growth and 14 percent EBITDA growth in Q2 2026, driven by premiumization, strong demand in the Prestige & Above (P&A) segment and declining input costs. Spirits continued to drive industry momentum, while beer volumes declined due to erratic weather conditions.
Premium-based consumption remained the main growth driver for all major players. United Spirits (USL) posted 8 percent volume growth in P&A, supported by its strong position in Andhra Pradesh. Radico Khaitan emerged as the fastest growing player, with P&A growth of 22 percent and record volume growth of 38 percent. Allied Blenders & Distillers (ABD) also posted a 30 percent increase in its P&A portfolio, while Tilaknagar Industries grew 16 percent.
In contrast, United Breweries saw a 3 percent decline in beer volumes due to a persistent monsoon and a weaker summer, although its premium beer segment grew 17 percent year-on-year.
On the other hand, the increasing diversion of molasses and other feedstocks into ethanol production for fuel has reduced availability for distilleries that rely on molasses-based alcoholic beverages or related intermediates, putting pressure on input costs and production capabilities. This shift has tightened the supply of sugarcane and molasses, raising prices and affecting the profitability of producers using these commodities.
Adjust wordings
In response, distillers have had to adjust formulations and rethink sourcing strategies. And so some distilleries have diversified into producing ethanol for fuel blending.
Margin performance varied due to these commodity trends. United Spirits delivered the strongest margin growth, up 340 basis points (bps) to 21.2 percent, supported by better operational efficiencies and a richer mix. Radico’s margins rose 130 basis points to 15.9 percent, and ABDL’s margins improved from 11.9 percent to 12.7 percent. However, Tilaknagar, United Breweries and Sula experienced margin pressure due to unfavorable mix, higher-priced inventories and lower operating leverage. Sula’s margins fell sharply by 590 basis points due to expensive inventory and a shift to lower margin products.
Policy changes at the state level also continued to shape market dynamics. A report by Emkay Research shows that the sector has faced two years of regulatory volatility as states focused on maximizing revenues, with frequent policy changes.
While some states introduced progressive measures – such as curated stores in Uttar Pradesh, out-of-state brand licensing in Andhra Pradesh and excise rationalization in Rajasthan, others imposed steep tax hikes on beer (Karnataka, West Bengal) and liquor (Maharashtra, Telangana, Karnataka, Haryana), often to promote state liquor. As regulatory uncertainties diminish, companies expect a more stable environment.
However, analysts note that the regulatory environment is unlikely to undergo structural reforms given the perception of ‘sin’ and state-level dependence on alcohol revenue, especially post-GST. Frequent excise duty revisions may continue to increase uncertainty.
Premiumization remains the most reliable long-term growth driver and a buffer against regulatory pressure. After the COVID-19 crisis, all major players switched to premium portfolios. Meanwhile, ‘Indianess’ is gaining popularity globally as homegrown brands expand internationally with single malts, aged rum, craft gin and premium spirits of Indian origin, even pushing multinationals like United Spirits and Pernod Ricard to develop Indian single malts.
Despite regulatory volatility, analysts note that the overall outlook for the sector for the second half of FY26 remains positive. Companies expect holiday and wedding demand to support volumes, while ongoing premiumization will continue to support profitability.
Published on November 24, 2025
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