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With supply chain disruptions due to the West Asia war, alcoholic beverage manufacturers are set to see a drop in their earnings this fiscal as well as slower revenue growth, a new report by Crisil Ratings has said. This is due to a rise in packaging costs because of the disruption in supply of liquefied natural gas, which is a key component for manufacturing glass bottles.<\/p>
\u201cAlcoholic beverage (alcobev) manufacturers in India are set to see their earnings before interest, taxes, depreciation and amortisation (Ebitda) margin decline by 150-200 basis points this fiscal due to a rise in packaging costs following supply-chain disruptions caused by the ongoing West Asia conflict,\u201d said the report by Crisil Ratings on Wednesday.<\/p>
Revenue growth is likely to slow to 5\u20137% due to bottle availability issues, in sharp contrast to the 11% CAGR\u00a0the industry clocked over the last three fiscals, it further said, adding that despite lower cash flows, a reduction in inventory will provide temporary relief to the working capital cycle for alcobev makers.<\/p>
This is as per a study of 31 alcobev makers (including 10 listed entities), which account for about 30% of the organised alcobev industry revenue of Rs 3.8 lakh crore.<\/p>
\u201cThe alcobev industry is currently battling a shortage of glass bottles. Notably, spirits and beer comprise more than 95% of the industry size,\u201d Crisil said. Packaging costs are higher for the beer segment, at 35% of net revenues, compared with about 25% for spirits, it explained, adding that around two-thirds of the packaging cost goes towards glass bottles.<\/p>
The current geopolitical crisis has affected the supply of liquefied natural gas, a key component for manufacturing glass bottles, it said, adding that glass bottlers have currently cut down their production by about 35-40%, resulting in shortage across industries and a gradual rise in glass bottle prices.<\/p>
Jayashree Nandakumar, Director, Crisil Ratings, \u00a0said that the cost of glass bottles is expected to increase 20% on average this fiscal, to Rs 280-300 per case. \u201cGiven that the alcobev industry is highly regulated and manufacturers have limited ability to pass on cost escalations to customers, operating margins are expected to decline by 140- 180 bps in the spirits segment; whereas the impact will be sharper in the beer segment, at 250-300 bps,\u201d she said.<\/p>
Packaging costs for several items have increased due to the war in West Asia which provides raw materials and LNG for both plastics and glass.<\/p>
A recent report by CareEdge ratings had warned that the persistent rise in crude oil prices may lead to a 3-5% dip in margins of plastic packaging players by H1FY27 if crude oil prices spike again by 5-10%. \u201cThe pressure is expected to be highest for flexible packaging, PET bottles, FMCG, and food and beverage players, where plastic usage is high and passing on costs takes time,\u201d it had said, adding that sectors like pharma, industrial packaging and e-commerce may see a relatively moderate impact, largely through margin pressure and slower price revisions.\u00a0<\/p>
The use of recycled plastic for packaging is also rising. Ravindra Venkata Paruchuri, Co-founder and Managing Director of Srichakra Polyplast pointed out that the conflict in West Asia has led to supply disruptions and demand is greater than supply not just in India but also globally. \u201cThe prices of virgin plastic have risen as a result and there\u2019s greater demand for recycled plastic as an alternative now,\u201d he said. For instance, virgin PET prices have risen by about Rs 47 in the last one month to Rs 135-Rs 140 per kg from the earlier price of about Rs 90. Due to the higher demand, prices of recycled plastic packaging have also gone up. \u201cWe are now selling at about Rs 100-Rs 105 per kg from the earlier price of Rs 95 per kg,\u201d he further elaborated.<\/p> <\/div>
#diet #coke #cans #shortage #brewing #beer #liquor #bottles #Heres1776868928<\/p> ","protected":false},"excerpt":{"rendered":"
With supply chain disruptions due to the West Asia war, alcoholic beverage manufacturers are set to see a drop in their earnings this fiscal as well as slower revenue growth, a new report by Crisil Ratings has said. This is due to a rise in packaging costs because of the disruption in supply of liquefied […]<\/p>\n","protected":false},"author":1,"featured_media":6993,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[37],"tags":[19095,17703,25991,25990,25989,25988,2280,24966,15790],"class_list":["post-6992","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-content-marketing","tag-beer","tag-bottles","tag-brewing","tag-cans","tag-coke","tag-diet","tag-heres","tag-liquor","tag-shortage"],"acf":[],"_links":{"self":[{"href":"http:\/\/longzhuplatform.com\/index.php?rest_route=\/wp\/v2\/posts\/6992","targetHints":{"allow":["GET"]}}],"collection":[{"href":"http:\/\/longzhuplatform.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"http:\/\/longzhuplatform.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"http:\/\/longzhuplatform.com\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"http:\/\/longzhuplatform.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=6992"}],"version-history":[{"count":0,"href":"http:\/\/longzhuplatform.com\/index.php?rest_route=\/wp\/v2\/posts\/6992\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"http:\/\/longzhuplatform.com\/index.php?rest_route=\/wp\/v2\/media\/6993"}],"wp:attachment":[{"href":"http:\/\/longzhuplatform.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=6992"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"http:\/\/longzhuplatform.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=6992"},{"taxonomy":"post_tag","embeddable":true,"href":"http:\/\/longzhuplatform.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=6992"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}