There is a “lot of pressure” on margins in lesser-priced alcohol products due to high grain prices currently, Abhishek Khaitan, managing director, Radico Khaitan said on Friday. He added that the pressure can be eased if the government releases its rice stock.
“I think the biggest headwind that we are facing is the alcohol price, because the grain prices have gone too high,” he told Fe, adding that this is the reason why the regular segment in the alcobev industry is “degrowing”.
Khaitan also said that if the rice stock lying with the government is released, “the headwinds will turn into tailwinds”.
In its results for the quarter that ended on September 30, announced on Thursday, Radico Khaitan reported a strong 24% rise in its profit mainly on increasing demand for its premium alcohol.
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The company sells brands such as Rampur Indian Whiskey and After Dark in its premium segment, aside from Magic Moments vodka. Its Rampur brand sells bottles for as high as Rs 5 lakh.
Khaitan said that the grain prices do not have much impact on the premium segment of the products, but they constitute a large part in the cost of regular products.
The company’s premium segment grew 12% during the quarter. However, its regular segment, which has brands like 8 PM, showed a degrowth of 12%.
In the coming quarter, the company expects single-digit growth in its regular segment and a “strong double-digit” growth in the premium category.
Khaitan also said that with policy changes like the Andhra Pradesh government’s new Excise Policy for 2024-26, they “expect third quarter to be a good quarter”. Under the new policy, the state government has decided retail of liquor to be privatised with 3,736 retail shops notified across the state.
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Radico Khaitan also expects the highest demand in the next quarter to come from the southern part of the country, mainly due to the policy changes. It is likely to be followed by the western and northern parts of India.
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