Using data from the three biggest state beverage corporations, the report says that spirits growth has barely seen a jump in the past four years with CAGR standing at a meagre 0.9%.
Following the highway ban on spirits, the alcohol beverage industry has seen a sharp decline in the fourth quarter of FY19. However, beer growth is slightly higher compared to spirited drinks, a report said. “A bounce back in composite spirits volumes in the past few quarters (3QFY18-3QFY19) off a weak base created by the highway ban,” was witnessed, according to a Kotak Institutional Equities research report.
Using data from the three biggest state beverage corporations, the report says that spirits growth has barely seen a jump in the past four years with CAGR standing at a meagre 0.9%. Beer, on the other hand, has recorded growth, compared to spirits, even though its standalone growth has hit a slowdown. From the second quarter of the financial year 2019, Beer sales growth has actually seen a downward trend with a considerable fall from 18% to 11%. In fact, the prices of the beer haven’t seen premiumization, at least in the three unidentified states that the report took into account.
In spirits segment, “Lack of easy base comps and likely pre-election impact (indicated by UNSP) are perhaps reflecting in the 2.3% YoY decline in the three-state-composite volumes for spirits”, the Kotak report said, adding that it is the first decline since the second quarter of financial year 18. Also, growth for the composite also decreased to 4.8% on a year-on-year basis.
However, the data could not be applied to a pan-India basis as the report’s findings are constrained to three states. Even then, “We believe our database should be a good indicator of trends if not absolutes are given the high salience of the three states we track. Our database covers nearly 40% of pan-India spirits volumes and 25% of pan-India beer volumes. Value shares should not be materially different, in our view,” the report co-authored by Rohit Chordia, Aniket Sethi and Jaykumar Doshi said.