Liquor companies are worried; the sector’s FY20 growth is expected to be a crawl as economic hardships hit household budgets and consumption

Here’s the good news: Many Indians are giving their overworked livers a bit of a break — by drinking less. And here’s the bad news: it’s just another sign of the economic slowdown. Across India, household budgets have shrunk and this has hit consumption hard, especially given the price of onions. Discretionary spending, whether it is on eating out or buying booze, has taken a backseat. And this is expected to take a toll on the final tally of liquor and spirit sales this fiscal year. Growth is likely to be in “single digits” in comparison with the low-double-digit growth that the segment recorded last fiscal year.

United Spirits Ltd, controlled by Diageo, saw just 2.2 per cent year-on-year growth in standalone revenue from operations, at ₹7,296 crore, during the quarter ending September. Overall volumes inched up 1 per cent year on year against 10.3 per cent last year.

Broad-based consumption slowdown

“Our revenue growth in this quarter was impacted by a broad based consumption slowdown as well as liquidity challenges in the trade channel in certain markets. We also faced some one-off operational issues,” the company’s CEO AnandKripalu said recently.

Market sources say the popular segment reported a net sales decline of 1 per cent YoY. On the other hand, the ‘Prestige and above segment’ saw net sales decline by 0.1 per cent YoY. They refer to USL’s numbers as a benchmark.

During a conference call with investors in November (uploaded on the website seeking alpha) PernodRicard, the second largest spirit maker globally and Diageo’s biggest rival, said business growth has been “plus 3 per cent for India”; this is a sharp decline from the 34 per cent growth the company witnessed a year ago.

“There is some softening macroeconomic environment happening in India, and we had as well some impact of very severe flooding in Q1,” said Helene de Tissot, the company’s Managing Director in charge of Finance, IT and Operations.