NEW DELHI: Demand for beer in India is holding up, but for United Breweries Ltd, rising costs and delayed pricing are squeezing margins.
The Heineken NV-controlled maker of Kingfisher beer reported a weaker-than-expected performance for fiscal year 2026 (FY26), with revenue and profit declining even as volumes showed some resilience. A fresh wave of input cost inflation, particularly in packaging, alongside supply disruptions linked to the West Asia conflict, is driving the pressure in India’s tightly regulated beer market.
Revenue from operations fell 10% to ₹1,746.3 crore in FY26 from ₹1,940.8 crore a year earlier, according to exchange filings, while profit declined 6.6% to ₹413.4 crore.
For the quarter ended 31 March (Q4FY26), revenue was largely flat at ₹440 crore versus ₹442.7 crore a year earlier, while profit rose to ₹101.8 crore from ₹97.7 crore. Volumes grew 4% in the quarter, but not enough to offset margin pressure. For FY26, volumes grew 3%, with premium volume growth at 21%.
The company expects cost pressures of ₹400–500 crore to persist till Q2FY27, with inflation in glass bottles and aluminium cans, along with broader logistics and sourcing pressures, likely to keep margins under strain.
“Glass is one factor and will contribute to a third of this ₹400-500 crore. Glass bottles are very critical,” managing director and chief executive Vivek Gupta told Mint, adding thataluminium cans are another pressure point, up 20–25% and in short supply in India, and pointed to broader cost pressures, including raw materials, labour code changes and export weakness, particularly in West Asia.
Analysts said the results reflect a mix of margin pressure and accounting effects.
“We expect the stock to be under some pressure through today, although the stock has already cooled off. The Q4 results came below our estimates,” Abneesh Roy, executive director, research, Nuvama Institutional Equities.
He said while volume growth was slightly ahead of expectations, revenue missed due to a higher mix of contract brewing, which impacted reported numbers from an accounting standpoint. “On the gross margin, because of the Iran crisis, the bottling cost has shot up. This is something which will continue in Q1 and Q2 with the ₹ 400-500 crore cost impact flagged by the company.”
The company’s premiumization push is adding another layer of pressure, as premium products require more glass bottles even as supply remains tight and expensive, with glass production exposed to fuel-linked inflation. “The season is looking really good, but from a packaging cost and availability perspective, there is a challenge,” Roy added.
Demand trends remain supportive, with Q4 premium volumes growing 16%, led by Kingfisher Ultra, Kingfisher Ultra Max, and Heineken Silver. The company gained share in higher-end segments.
But pricing remains constrained. Beer in India is a tightly regulated category, with state governments controlling price revisions, creating a lag between cost increases and retail pricing.
State level reforms
Gupta said approvals from states such as Telangana, Karnataka, Kerala and Chhattisgarh determine whether companies can pass on higher input costs, making it difficult to respond quickly to inflation. He also highlighted affordability as a constraint, with regulators balancing revenue considerations against consumer price sensitivity before allowing hikes.
State-level changes, however, are shaping demand. Uttar Pradesh doubled retail licences to nearly 13,000 outlets, driving more than 13% growth for the company. Assam saw an estimated 90% surge after tax changes, while Maharashtra and Andhra Pradesh reported better rebounds following excise reforms. Maharashtra is seeing double-digit industry growth, Telangana may allow price hikes to pass on cost pressures, and Karnataka is showing some improvement in the lower-end segment.
Within India, “We are highly regulated business. It is not that we can just pass off the pricing to the consumer,” Gupta said, adding that pricing action depends on state approvals.
Industry insiders estimate United Breweries’ market share at a dominant 42–43%. India’s beer market, estimated at about 440 million cases last year, is expected to grow 4–5% this fiscal despite a weak start due to an extended monsoon and subdued summer demand. According to Brewers Association of India estimates from March, volumes could reach 455–460 million cases if weather conditions remain normal.
On competition, Gupta said sustained investment from global brewers such as Anheuser-Busch InBev and Carlsberg signals long-term confidence in the category, though rising participation will make competition more structured as the industry scales.
