Mint Explainer | Rains, rising taxes, and weak demand: What’s souring India’s alcohol business

In the September quarter, the picture turned mixed—worse for some, better for others. Relentless rains and weak discretionary spending dented wine and beer sales, even as some states and segments held up better. Where did alcohol sales land this quarter, and what lies ahead? Mint explains.

How did rain affect alcohol sales?

Torrential rain and a monsoon season that refused to end hurt beer sales in the September-ended quarter.

United Breweries, the maker of Kingfisher beer, reported a 3% year-on-year decline. Three of its breweries were flooded due to heavy rains, forcing the company to rely on contract manufacturers, further weighing on sales. The non-stop rains also dampened demand for other beverages such as colas, juices, and packaged water this year.

Why are alcohol makers complaining about big states like Karnataka, Telangana, and Maharashtra?

In the past two years, Karnataka has repeatedly hiked excise duties on beer and spirits. Companies initially absorbed the higher costs but eventually passed them on to consumers. United Breweries said its sales in the state saw a “double-digit” decline.

In Telangana, liquor shop licences are set to expire, with new ones to be issued in December for a two-year period. Until then, alcohol sales in the state face a decline. United Breweries reported nearly a 20% business decline, CEO Vivek Gupta told analysts. Sula, too, said Telangana’s licence renewal cycle hurt its performance—sales of its own brands fell 6.4% year-on-year in the quarter.

Meanwhile, in Maharashtra, a new policy introduced in August to promote “Maharashtra Made Liquor” (MML) has hit mass-market spirits. United Spirits, the maker of McDowell’s whisky and Smirnoff vodka, said its sales in the state fell as cheaper MML brands flooded the market. The state also raised excise duties on Indian-made foreign liquor (IMFL) and imported alcohol in July, prompting United Spirits to hike prices by 30-35%, Mint reported.

So is it all bad news from the states?

Not entirely. Some states are showing improvement. In Andhra Pradesh, companies are seeing steady growth after the new government replaced state-run liquor shops with private retail outlets.

Radico Khaitan, maker of 8PM whisky and Magic Moments vodka, told investors that these policy changes drove an almost 80% jump in volumes of its mass brands in the September quarter. United Spirits also reported brisk sales of McDowell’s X Series in the state.

In Meghalaya, sales surged after the state cut excise duty on beer by 20% in September.

How are companies hedging against challenges?

By pushing pricier liquor to affluent Indians and export markets.

Radico Khaitan stands out: its revenue from operations rose nearly 34% year-on-year in the September quarter, driven by a more than 24% jump in sales of prestige and luxury brands, which make up most of its business.

United Breweries also benefited from rising premium demand–volumes for its high-end beers, including Kingfisher Ultra Max, were up 17% year-on-year, even as overall sales declined.

How will the rest of the year pan out?

High taxes in key states like Maharashtra and Karnataka will remain a drag. Alcohol makers are unlikely to absorb further cost increases, meaning beer and spirit prices will stay elevated. In Maharashtra, the lower-priced locally made liquor could intensify competition for national brands already squeezed by higher levies.

That said, consumer demand is gradually improving, with early signs of a recovery in discretionary spending following recent goods and services tax (GST) cuts. This could lift alcohol sales despite price hikes. Premium and luxury liquor continue to perform well as wealthy Indians keep spending. What remains beyond companies’ control, however, are weather shocks—which can still unpredictably sway demand.