Top Liquor Stocks to Invest in India

The liquor business in India has been rapidly expanding and is now considered one of the most attractive investment industries. As a result, liquor stocks in the country have performed exceptionally well in recent years.
India's liquor industry has a rich history, with both local and international companies competing in the market. The rise of the middle class and changing attitudes towards alcohol consumption are expected to further fuel the growth of the liquor industry in India in the coming years.

In this blog, we will explore various aspects of alcoholic beverage companies and liquor stocks in India, including their potential for growth, associated risks, and investment opportunities.

Investing in spirits stocks can be a lucrative opportunity, but it requires careful evaluation of certain factors:

I. Regulatory Environment: The alcohol market in India is highly regulated, with state-specific laws governing manufacturing, sale, and distribution. Investors must understand licensing rules, tax regulations, and advertising restrictions in the state where the company operates.

II. Financial Performance: Assess the company's financial health, including cash flow, profitability, and sales growth. Examine its cash reserves, debt levels, and overall balance sheet.

III. Market Share and Competition: Evaluate the company's market share and the competitive landscape in the industry. Understand the company's position in the market and its ability to compete with other players.

IV. Management and Leadership: The performance of a company is greatly influenced by its management team. Evaluate the expertise, track record, strategy, and execution capabilities of the leadership.

V. Growth Potential: Analyze the company's and the sector's growth prospects. Look into the company's plans for market expansion, product launches, and overall growth strategy.

VI. Potential Risks: Consider the risks and challenges the company and the industry may face. This includes regulatory issues, changing consumer preferences, and competitive pressures.

By carefully considering these factors, investors can make informed decisions while investing in liquor shares in India."

Overview of the Liquor Industry

The liquor industry in India is booming, thanks to the growing middle class, urbanization, and changing attitudes towards alcohol. It has been experiencing steady growth of around 7-8% each year, and this upward trend is expected to continue.

Liquor dominates the Indian alcohol market, accounting for more than 60% of total alcohol consumption in the country. The market is categorized based on price, with premium and super-premium brands enjoying a significant share.
While the liquor market in India is highly regulated with unique rules and regulations varying from state to state, this control also offers opportunities for growth and stability. State excise agencies oversee the licensing of producers and distributors and levy taxes on alcohol sales, ensuring a structured and organized business environment.
Overall, the liquor industry in India has a promising future, fueled by increasing demand and favorable market conditions.

Overview of the Best Liquor stocks in India

1. Sula Vineyards Ltd

Key Operation Highlights

I. Market Dominance: Sula Vineyards is the largest wine producer and seller in India, holding over 50% market share by value in the domestic 100% grapes wine market as of March 31, 2022. The company has been a consistent market leader in terms of sales volume and value since Fiscal 2009.

II. Diversified Business Segments: Sula Vineyards operates in two main business segments. The first is the "Wine Business," which includes wine production, import, and distribution. The second is the "Wine Tourism Business," where the company generates revenue through services from owning and operating wine tourism venues, such as vineyard resorts and tasting rooms.

III. Strong Distribution Network: Sula Vineyards has built the largest distribution network among wine companies in India, with close to 13,000 retail touchpoints across the country in 2021. The company also has tie-ups with distributors in key states, including Maharashtra, Haryana, Delhi, Goa, and Punjab.

IV. Innovative Branding and Recognition: Sula is renowned for its innovative branding and has successfully positioned its flagship brand "Sula" as the "category creator" of wine in India. Additionally, the company's wine-themed music festival, "SulaFest," held at its Nashik facility, is widely recognized as one of the largest wine music festivals in Asia and has garnered significant attendance.

V. Extensive Wine Variants: Sula Vineyards offers a diverse range of wines, including red, white, and sparkling wines. Currently, it produces 56 different labels of wine at its owned and leased production facilities in the states of Maharashtra and Karnataka.

VI. Strong Digital Presence: Sula Vineyards has a substantial following on social media platforms, with approximately 118,000 followers on Instagram, 123,000 likes on Facebook, and 14,000 followers on Twitter as of September 30, 2022.

VII. Long-term Supply Arrangements: The company has entered into long-term supply arrangements with grape growers, securing approximately 2,290 acres of vineyards as of September 30, 2022.

VIII. Thriving Wine Tourism: Sula Vineyards is the most visited vineyard in India, with approximately 368,000 people visiting its vineyards in Fiscal 2020. The company's wine tourism business is contributing to its overall success and recognition in the market.

Outlook

I. Influencer Marketing: Leverage influencers for wider audience reach and brand awareness.
II. Strong Digital Presence: Maintain engagement, grow followers, and build a loyal community.
III. Focus on Wine Tourism: Enhance wine tourism initiatives for immersive experiences.
IV. Increase Wine Penetration: Drive interest and adoption of wine in the Indian market.

Sula Vineyards Ltd Share Price

2. United Spirits Ltd

Key Operation Highlights

I. Sales Performance: United Spirits Ltd. (USL) sold 11 Mn cases in Q1FY24, with a significant 83:17 ratio between Prestige & Above (P&A) and Popular categories.

II. Segment Growth: P&A category witnessed a 10% YoY volume growth and Popular category experienced a significant decline of -74% YoY.

III. Digital Marketing Impact: Innovation and renovation strategies drove double-digit volume growth in the P&A segment through social media influencers and brand visibility.

IV. Profitability Improvement: USL's supply agility program aims to control raw material costs and enhance the operating margin to high teens from the current ~15%.

Outlook

I. Positive Growth Outlook: The beverage alcohol industry, particularly spirits, is expected to see robust performance, and USL is anticipated to be a leader in FY24.

II. Continued Expansion: USL's innovative and renovated brands are expected to continue expanding their distribution and penetration in different markets, driving growth.

III. Margin Enhancement: Replenishing A&P spending to guided levels is projected to improve EBITDA margins, reaching mid to high teens in the future.

United Spirits Ltd Share Price

3. Globus Spirits Ltd

Key Operation Highlights

I. Strong Revenue Growth: Globus Spirits (GBSL) reported robust revenue growth in Q3FY23, with gross revenue increasing by 48% YoY and 28% QoQ.

II. Volume Expansion: The manufacturing segment saw a significant 120% YoY growth, driven by expanded capacities in West Bengal and Jharkhand, resulting in higher bulk alcohol volumes.

III. Margins Under Pressure: Elevated raw material and energy costs, along with operating losses in the IMFL segment, led to a contraction in gross and EBITDA margins on a YoY basis.

IV. Margin Improvement Initiatives: The management is implementing cost-saving measures to optimize power cost and mitigate the impact of rising input prices on margins.

Outlook

I. Continued Revenue Growth: GBSL is expected to maintain healthy revenue growth in the near term, supported by strong volume growth and price hikes across segments.

II. Margin Challenges: Margin pressure is anticipated to persist in Q4FY23 due to higher energy and input prices. However, the management's initiatives are expected to alleviate some cost pressures in the future.

III. Capacity Expansion: Aggressive capacity expansion plans are set to drive growth in the medium term, with the ethanol/ENA capacity expected to nearly double by FY25.

IV. Long-Term Drivers: GBSL's positive outlook is supported by its role in the ethanol-blending program, expansion into new markets and categories, and an increasing share of high-margin value plus products within its total volumes.

Globus Spirits Ltd Share Price

Conclusion

In conclusion, the Indian alcohol market presents a promising investment opportunity for potential investors. With a growing middle class, rising disposable income, and changing perceptions towards alcohol consumption, the sector is expected to witness continuous growth in the coming years.

The liquor stocks mentioned above are among the top choices for investment in India as of 2023. However, it is crucial for investors to be mindful of the regulatory landscape, consider their investment goals and risk appetite, and be aware of potential challenges in the industry before making investment decisions. By staying informed and conducting thorough research, investors can capitalize on the potential of the liquor sector while navigating any possible pitfalls.