Maharashtra's expensive alcohol—following its first duty hike in 14 years—will still find takers. Here's why
However, the tax hangover of the Maharashtra government's excise duty hike on key alcohol products might be short-lived as the underlying trend of India's alcohol consumption remains strong, particularly aided by demand for premium liquors, said experts.
'Young consumers are mainly driving this premiumisation," Naman Shah, an independent consumer sector analyst, told Mint. 'The growing popularity of cocktail culture and demand for curated experiences have made them less sensitive to price hikes. Alcohol is not a sin anymore. People want to taste luxury."
The Maharashtra government seems to be capitalising on this trend by hiking excise duty on premium liquors. Indian-made foreign liquors like whiskey, rum and spirits will attract duties 4.5 times their manufacturing costs, up from the current rate of three times, according to the committee tasked with boosting the state's liquor revenue.
Alcohol excise duty contributed about 6% of the state's total tax receipts in 2024-25, according to unaudited provisional figures from Comptroller and Auditor General of India. The state government plans to increase that to 10% in FY26.
While excise duties on beer and wine have not been increased, country and imported premium liquors will face relatively smaller hikes. This will increase their retail prices by 14% and over 25% respectively.
The industry impact
The increased liquor levies would support Maharasthra's strained exchequer and help fund populist schemes such as Ladki Bahin Yojana (to provide financial assistance to women in low-income families), as well as benefits for farmers and other communities, said experts.
Regarding the potential impact on volumes, Shah believes demand won't be dented in the long term as consumers are willing to pay. Moreover, 'majority of Indian consumers still fall under the 'mass" segment where the proposed hike on excise duty is only 3-4%. So, there should not be much of a volume impact, overall," the consumer sector analyst said.
But the market panicked and heavily penalised distilleries with significant exposure to the state. United Spirits Ltd, India's largest alcohol producer and owner of brands like McDowell's No.1, Royal Challenge, and Signature, has a sizable 25-30% exposure to Maharashtra. As a result, its stock corrected by almost 7% on Wednesday.
'Distilleries with significant exposure to Maharashtra might see a big volume dip in Q2 (the second quarter, July-September) following the price hike," another consumer sector analyst said, requesting anonymity. 'From Q3 onwards, as the festive season kicks in and new prices are absorbed, volumes should recover again."
Among major distilleries, shares of Allied Blenders and Distillers Ltd, the maker of medium-ranged Sterling Reserve and Officer's Choice whiskies, declined 5%. The market anticipates major volume hits on the lower to mid-ranged products, despite the proposal of a limited tax hike on them, according to experts.
'There might be some impact on the country, lower-end and mid-premium segments. But I don't see any significant impact on the premium or luxury end," the unnamed consumer sector analyst said.
A 'premium' explosion
Alcohol companies have been riding a formidable wave of premiumisation post-covid as they have seen an explosion in demand in the 'prestige and above' (P&A) segment, which places an emphasis on brands with quality, reputation, and higher profit margins.
United Spirits's P&A volume grew at a faster pace—9% year-on-year—than its overall volume growth of 7% during the fourth quarter of FY25, mainly driven by resilient consumer demand in the luxury and premium segments, Nuvama Institutional Equities said in a recent report. This resulted in a 40% on-year surge in Q4 Ebitda.
Similarly, while United Breweries Ltd saw an overall 5% on-year volume growth, its premium-end products clocked 24% yearly growth and Ebitda rose 31%, according to the report.
Radico Khaitan Ltd, best known for its Magic Moments vodka brand, has also aggressively expanded its P&A portfolio with premium offerings like Jaisalmer Gin, Rampur Indian Single Malt Whisky, and Royal Ranthambore.
Radico has an 8% share in the P&A segment and plans to widen its portfolio further in this segment. This would expand its target user base and improve its confidence on execution, as there is demand for innovative premium products in the market, Motilal Oswal Financial Services said in a note.
Moreover, Radico has only 7-8% exposure to Maharashtra. Hence, its stock price was broadly resilient on Wednesday akin to its beer and wine manufacturing peers'.
Since beer and wine were spared of any excise duty hikes, shares of Sula Vineyards Ltd rose almost 8%, while those of Maharashtra-based GM Breweries Ltd rose 10%.
GM Breweries, which primarily produces country liquor, already receives excise duty concession from the Maharashtra government. 'Now it will also manufacture Maharashtra Made Liquor (MML) for the government. Hence its stock went up" said Shah, the independent consumer sector analyst quoted earlier.
MML, which the Maharashtra government introduced along with its excise duty hikes on premium liquors, is a new category of grain-based foreign liquor to be produced exclusively by local manufacturers. It would be priced higher than country liquor, but lower than the cheapest Indian-made foreign liquor.
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