A faraway war may squeeze margins for one of India’s biggest beer makers just as the summer season begins.
After two tepid quarters, demand is finally recovering but profitability could be under pressure amid rising input costs due to the ongoing war in West Asia, Vivek Gupta, managing director and chief executive officer of Bengaluru-based United Breweries, which makes Kingfisher and Heineken, said in an exclusive interview.
“The growth of the beer category is dependent on not just favourable weather but also on affordability, local policies and raw material supplies,” Gupta told Mint. “Our margins will surely be under pressure as there will be some impact from the war. We can already see a 5-6% increase in our cost of sales beyond the regular inflationary plan we had accounted for.”
The bulk of the brewer’s cost is bottles, cans and freight. Bottle makers are looking for a price increase while freight rates are going up due to higher oil prices. Cans, too, a part of which is imported to cater to peak season supplies, will also erode margins, Gupta added.
prices are set by the state in several large markets, including Telangana, Chhattisgarh, Karnataka and Kerala. This typically means brewers end up absorbing inflation when input costs from glass bottles to freight start rising.
In January 2025, the -controlled company, which commands roughly 70% of India’s beer market, stopped delivering Kingfisher beer to Telangana. The pause came after a standoff over rising costs and unpaid dues, with the company seeking higher prices that the state government had not cleared.
In its Q3 earnings call in February, Gupta said the entire industry in Telangana faces challenges. While some of its dues have been received, new overdue payments have increased again.
“I won’t say we are in a better position out there. This is something we need to work on because the total exposure for us still remains,” Gupta said.
Policy changes
States such as Uttar Pradesh and Maharashtra are growing following policy changes, including tax rationalization and expansion of retail access. For United Breweries, Jharkhand, where retailing has been privatized, has also seen strong expansion, Gupta said.
Uttar Pradesh now allows both IMFL (Indian made foreign liquor) and country liquor outlets to sell beer, doubling the number of beer retail licenses to almost 13,000 and helping sales grow over 13% despite weather disruptions, the Brewers Association of India said.
The industry estimated growth of about 90% in Assam after tax changes. In Maharashtra, tax structure revisions removed a price disadvantage for beer vis-a-vis spirits, which the industry said improved the category’s competitiveness and supported a rebound with a growth of 19% since the changes took effect. Sales in Andhra Pradesh also almost doubled following excise changes.
Other large markets remain under pressure. Delhi continues to await policy clarity, while in Punjab and Haryana, demand has weakened due to high retail prices.
“Beer is no longer affordable in some of these markets, which is impacting consumption,” Gupta said.
For beer manufacturers, the economics remain skewed. Gupta said about three-fourths of the value in a bottle of beer goes to the government and the trade, leaving only about a quarter for companies. Beer remains among the most heavily taxed categories, with the bulk of the final price accruing to state governments.
“The real lever is with the government. If beer becomes less affordable, consumption drops and that impacts state revenues as well,” he said.
This could be why United Breweries is pinning its hopes on new launches in premium-pricing categories. In January, the company introduced Kingfisher Smooth, a less bitter strong beer in some states including Rajasthan.
Summer test
Gupta said the response has been encouraging, although a clearer picture will emerge only after the peak summer season when distribution and offtake stabilize. The idea is to target newer consumers to try stronger beers that have a more palatable taste.
The brewer is hopeful that a recent announcement in Karnataka indicating a shift to pricing beer based on alcohol by volume could provide relief, depending on how the policy is implemented.
To manage costs, United Breweries is increasingly leaning on localization. Almost 80% of its premium portfolio is produced locally, reducing dependence on imports. The company is adding capacity, including a new can line in Telangana and additional investments in Maharashtra.
“We are in a better shape to get more out of our current production this summer,” Gupta said.
Even so, supply constraints remain a risk. Shortages in raw material and packaging, particularly of cans, could limit how much companies can capitalize on peak demand.
The company expects the beer market to grow 6-7% over the coming months and aims to outpace that growth. However, the focus will remain on balancing volumes with profitability in a volatile cost environment.
In the nine months ended December 31, United Breweries reported revenue from operations (gross of excise duty) of ₹13,050 crore, down from ₹14,975 crore in FY24. Profit declined to ₹311 crore from ₹344 crore.
Industry executives said the recovery comes after a period of modest expansion. According to data shared by Vinod Giri of the Brewers Association of India, which represents three of India’s largest brewers, the category has grown at about 3.5-4% annually in recent years, reflecting structural constraints around pricing, taxation and policy.
“These reforms, aided further by the latest announcement by Karnataka to rationalize taxes in favour of lower-alcohol products such as beer, may boost the industry growth to 8-10% in the year FY27, if the weather holds good in the summer,” said Giri.