Indian Alcobev Margins to Decline Due to Glass Bottle Shortage
Alcobev margins to drop 150–200 bps as glass bottle shortage drives up costs: Crisil
The Economic TimesImage: The Economic Times
Alcoholic beverage manufacturers in India are projected to see a decline in their earnings before interest, taxes, depreciation, and amortisation (Ebitda) margins by 150-200 basis points this fiscal year due to increased packaging costs from a glass bottle shortage. The ongoing West Asia conflict has disrupted supply chains, impacting production and revenue growth.
- 01Ebitda margins for alcobev manufacturers are expected to drop by 150-200 basis points.
- 02The glass bottle shortage is primarily due to supply chain disruptions from the West Asia conflict.
- 03Revenue growth is anticipated to slow to 5-7%, down from an 11% CAGR over the last three years.
- 04The cost of glass bottles is projected to increase by 20%, reaching ₹280-300 per case.
- 05Despite challenges, balance sheets are expected to remain healthy with an interest coverage ratio of 6.8 times.
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According to a report by Crisil Ratings, Indian alcoholic beverage (alcobev) manufacturers are facing a significant decline in their earnings before interest, taxes, depreciation, and amortisation (Ebitda) margins, projected to drop by 150-200 basis points this fiscal year. This decline is attributed to rising packaging costs, particularly due to a shortage of glass bottles caused by ongoing supply chain disruptions linked to the West Asia conflict. The report, which analyzed 31 alcobev makers representing 30% of the organized alcobev industry revenue of ₹3.8 lakh crore (approximately $460 billion USD), indicates that revenue growth is likely to slow to 5-7%, compared to the previous 11% CAGR over the last three fiscals. The cost of glass bottles is expected to rise by 20%, reaching ₹280-300 per case, with manufacturers struggling to pass these costs onto consumers due to the industry's regulatory constraints. The report also highlights that while cash flows may decrease, a reduction in inventory could provide temporary relief to working capital cycles. Despite planned capital expenditures, the balance sheets of alcobev companies are expected to remain healthy, with an interest coverage ratio projected at 6.8 times.
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The increase in packaging costs and the glass bottle shortage will likely lead to higher prices for alcoholic beverages, affecting consumers' purchasing decisions.
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