Could you highlight a few key aspects of this quarter’s performance?

During the quarter, growth for beer as a category was back. Category volumes grew by almost 10 per cent. For UBL, primary volumes grew 4 per cent, and our secondary volumes were around 8 percent.

In the second half of CY25, category growth slowed down due to weather-related factors. In the last four months, multiple states took measures to reduce the differential tax on beer and spirits. Beer stayed similar in taxes in a few states, and lower-end spirits went up, due to which the category bounced back. Our gross margins improved by 330 basis points (bps), which means premiumization is working.

On the other hand, the West Asia conflict impacted the industry significantly compared to other FMCG companies. The big impact is on glass bottles and imported raw materials. We are expecting a ₹400 to ₹500 crore cost impact because of the war.

This is unfortunate because in our industry, we can’t change the pricing since it’s highly regulated, and we have to convince 30 different states and union territories. As a company, this is tougher because we are pan-India. We also don’t want to burden consumers because affordability has been a big driver of category growth. So we have to work with the regulators for tax reforms to overcome this crisis.

Which markets have seen the strongest demand growth?

In 14 states, our business is going above 25 per cent. These states include Maharashtra, where, thanks to reforms and tax differentiation, the category is growing above 20 per cent. In Jharkhand, retail became private, increasing transparency and the range of distribution. The category is growing more than 50 per cent. In parts of Assam, where affordability is maintained, it is on the rise.

Meanwhile, we have been working with states where the category is declining by 10 per cent. There has been an impact of elections in states like West Bengal. While this did not impact last quarter, there were almost 15 days of shutdown, which would impact the growth in the middle of summer. Overall, 80 per cent of our business grew, and within that, the category grew.

Margins have improved but net sales and PAT has declined—what key tailwinds and headwinds did you face?

A few factors, including getting the right mix and localization of our premium portfolio in various breweries. This is one reason why, in the last financial year, our premium business grew 21 per cent. Earlier, we were not producing ultra or ultra max locally, and had to pay the incurred taxes and transportation costs. Now, we have localised production of premium across almost eight breweries, which required a big capital investment.

But gross margins will be under pressure because of the cost of sales increase. We had to increase inventory to secure supplies this quarter. Our cost of financing has gone up. We have invested in capex and coolers. So our depreciation cost has gone up. But we have not slowed our investment in the bigger cause -- to grow the category and the pie in this industry.

You’ve guided for a ₹400-500 crore cost pressure over the next few quarters—how will you mitigate or offset this?

Our priority is consumers, and so, we are ensuring the availability of supplies. We are investing to ensure that in peak summer, consumers can access beer, and the impact of the supply chain is mitigated. We have imported some materials at a higher cost and are also working to improve productivity in our brewery.

The first action is continuity of supply, followed by working with regulators to discuss the viability of the business. States like Telangana and Andhra Pradesh are key because they are big markets. We have been working and pleading with these states to consider the impact of the conflict and pass on the pricing. We need to work with other states to improve the ease of doing business because this is the time to reduce barriers for the industry.

We are also working with Madhya Pradesh for the free movement of our goods to other states. Internally, we are accelerating the cost and productivity program. We don’t want to let go of the capabilities, but every rupee matters. If gas prices have gone up, so will fuel prices eventually. Consumers will bear the brunt, and this can impact consumption.

So we are investing more in brand building, coolers, and stores. At the same time, managing cash will be important because of a potential liquidity crunch.

On Karnataka’s excise policy shift, how will the revised alcohol-based structure impact the beer industry?

The government of Karnataka has come up with a progressive blueprint for the policy. One element is ease of doing business.

Some interventions, like digitization to reduce bureaucracy in simple things like label approval and permits, the work on giving longer shifts, and licenses, are welcomed by the industry. The direction that Karnataka is taking is a breakthrough.

India should be the biggest beer country. This initiative will shape the category growth. Taxation based on ABV means that low alcohol drinks like beer and others will be more affordable. While we await the final notification, I can say this is a game-changer for the country. And I hope other states also implement this.

Which brands performed well this quarter and over the fiscal year?

Kingfisher is back. Our brand power is the highest in the last 10 years. We are also seeing significant double-digit growth on ultra and ultra max.

Heiniken Silver is doing well in the markets it currently is in, including Goa, Maharashtra, Karnataka, and Kerala.

Our premium portfolio grew 21 percent for the full fiscal year and 16 percent last quarter. So all our portfolios are firing. We are declining in some pockets and need to do more work, both on the structural aspect of the category and our supply chain work.

Looking ahead to FY27, what growth outlook do you see, and how will the West Asia conflict impact the business?

The main thing is to maintain the structural financials of our business. We will mitigate factors within our control and work with the government. But the beer category growth is here to stay, and we are ensuring we keep fuelling that growth.

We are investing in CapEx and in our tie-up with Soufflet Malt on malt availability. We also announced a partnership with Crown Holdings, which is the world’s top manufacturer of cans. So, we are also looking at both backward and forward integration.

This year, we intend to work with regulators. 23 million youngsters are coming to legal drinking age, of which 70 per cent want to try alcohol. To unlock this potential, we need to work state by state so our business remains viable.