Liquor sales growth fell to a six-quarter low during the January-March period in the country, partly due to pre-election related disruptions. Sales of whisky, rum, brandy, gin and vodka grew just 3% year-on-year during the period. On the other hand, spirit sales logged 13% on year-on-year growth for the quarter ended March 2018 with the market expanding 10% in the last calendar year, the most since 2012, according to a report in The Economic Times.
The sales growth was spurred by decreasing impact of a highway liquor sales ban and rising stability following distribution changes in some states, the ET report said.
However, industry expects a rise in liquor sales after the Lok Sabha election currently being held in seven phases for a total of 543 constituencies.
"The slowdown is more of an aberration and is led by destocking and excise hikes rather than consumption issue," said Deepak Roy, executive vice-chairman at ABD, the country's third largest distiller told ET. "We expect volume sales to pick up post the election once operations are normalised."
India, which is among the largest liquor markets in the world, saw consumption of 91 million cases of alcohol, known as Indian made foreign liquor, or IMFL, for January to March period compared to 89 million cases a year earlier, industry executives told ET, citing excise department data.
For 2018-19, spirits sales rose 8% to 361 million cases.
Whisky brands such as Royal Stag, McDowell and Officer's Choice comprise more than three-fourths of the Indian market. Fourth quarter of the fiscal is seasonally weak for the liquor industry due to channel destocking ahead of new excise policy, industry insiders said. Liquor sales also took a hit during the January to March period due to restrictions on running the factories ahead of Lok Sabha elections.
United Spirits, the country's largest distiller with 30% market share, may have contributed the most to the slowdown in liquor sales, according to analysts. United Spirits factory in Karnataka worked in two shifts instead of three which may have dented the sales during the January-March quarter.
Two months ago, United Spirits, a subsidiary of London-based Diageo, had raised concerns about Lok Sabha election disrupting liquor sales in the next quarter. Volume growth of liquor sales in five key states stood at 2.3% during January to March "due to an 8% decline in Karnataka and a moderation in Maharashtra and Andhra Pradesh", a recent DBS Emkay report said.
Sales also took a hit in the liquor market after prices of extra neutral alcohol (ENA), a key raw-material used in IMFL, rose more than 20% in the last fiscal compared to FY18.
The price of glass bottles too had increased in the fourth quarter. Liquor companies are likely to take a hit on their margins as they may not pass on the steep hike in costs to consumers.
Margins are likely to be adversely affected on delay in price hikes due to Lok Sabha election and lower pass-through of tax increases in states such as Maharashtra, experts said.
(Edited by Aseem Thapliyal)