India’s alcoholic beverages industry is grappling with one of its sharpest cost shocks in recent years, as the ongoing Middle East crisis disrupts global energy flows, inflates input costs, and threatens supply chains. With margins under severe pressure and production economics turning increasingly unviable, the Confederation of Indian Alcoholic Beverage Companies has now urged state governments to allow a “reasonable price revision” for Indian Made Foreign Liquor (IMFL) and wine.In representations sent to states, CIABC has flagged a cascading impact of geopolitical instability on virtually every key input — from crude oil and packaging materials to logistics and energy — warning that the situation risks destabilising the entire manufacturing ecosystem if not addressed through timely policy intervention.
A Perfect Storm of Costs
At the core of the crisis lies a surge in crude oil prices and disruption of key supply routes. The near-blockage of the Strait of Hormuz — a critical artery for global oil and petrochemical shipments — has triggered supply shortages and volatility. India’s crude basket has climbed to $112.47 per barrel as of May 6, almost doubling from $69.01 in February.For an industry heavily dependent on petroleum-linked inputs — from plastics and resins to transportation — the ripple effects have been immediate and severe. Adding to the pressure is currency depreciation, with the rupee weakening to around ₹95 per US dollar, significantly raising the landed cost of imports.CIABC Director General Anant S Iyer has underscored that the “highly volatile geopolitical environment” has created inflationary pressures across supply chains, making it difficult for manufacturers to sustain operations under current pricing structures.Packaging Inflation Turns AcuteOne of the most visible stress points for the industry is packaging, where costs have surged across materials.Polymers such as polypropylene (PP) and high-density polyethylene (HDPE), widely used in caps and closures, have seen cumulative price increases of nearly 30% since February. PET resin prices have risen by about 20%, driven by higher crude-linked feedstock costs.Paperboard — essential for cartons and outer packaging — has also become significantly more expensive due to global fibre shortages and a spike in freight rates for imported wastepaper. With India reliant on imports from the US and Europe for recovered fibre, logistics costs have surged sharply, further inflating prices.Glass, another critical input for both liquor and beer, is under severe stress. Gas supply constraints in key manufacturing hubs like Firozabad have forced producers to depend on expensive spot LNG and LPG. As a result, glass prices have increased by 10–20%, with risks of further escalation if fuel shortages persist.Energy, Metals and Logistics Add to the BurdenThe cost pressures extend well beyond packaging. Aluminium prices on the London Metal Exchange have risen to around $3,406 per metric tonne, impacting the cost of caps and cans. Coal prices, particularly Indonesian grades used for industrial energy, have surged over 20%, pushing up manufacturing costs across the supply chain.
Domestic energy costs have also spiked. The price of commercial LPG cylinders has jumped from around ₹1,800 before the crisis to nearly ₹3,000 now, significantly raising operational expenses for glass and other input manufacturers.Meanwhile, global shipping disruptions have led to a sharp increase in ocean freight rates. Carriers have introduced emergency “conflict surcharges” for routes linked to the Middle East and Indian subcontinent, further escalating logistics costs for both raw materials and finished goods.Brewers Flag Structural Impact, Seek ReliefThe stress is equally pronounced in the beer segment, with the Brewers Association of India warning of a “sudden, structural cost shock” that cannot be absorbed through efficiencies alone.Representing companies such as AB InBev, Carlsberg and United Breweries, the association estimates that input costs for brewers have risen by around 15%.Director General Vinod Giri has highlighted steep increases across key materials: glass bottle prices are up about 20%, paper cartons have nearly doubled, while inputs such as LDPE, BOPP and adhesives have risen 20–25%. Freight and logistics costs have climbed another 10%.More critically, the association has warned of emerging supply risks. Disruptions in aluminium supplies could impact can production, while LNG shortages threaten to curtail glass manufacturing. With summer being the peak demand season for beer, these constraints could translate into supply shortages in several states.Policy Ask: Price Flexibility With Limited Consumer ImpactAgainst this backdrop, CIABC has called for revisions in Ex-Distillery Prices (EDP) and Ex-Winery Prices (EWP), along with corresponding adjustments in excise slabs. The industry maintains that such calibrated changes would have only a limited impact on retail prices while ensuring the financial viability of manufacturers.The Brewers Association of India has gone further, seeking a 15–20% price increase to offset costs, along with interim relief in the form of reduced manufacturing levies by ₹3–5 per bulk litre.Industry executives argue that without such measures, companies may be forced to prioritise supplies to states that permit price revisions — a move that could disrupt availability in more tightly regulated markets.A Longer-Term Disruption?What is particularly concerning for the industry is the likelihood that the current disruption may not be short-lived. With significant damage to energy infrastructure in the Middle East, companies expect elevated costs and supply uncertainties to persist for the next three to five years.For state governments, the challenge lies in balancing consumer sensitivity around price increases with the need to sustain a sector that is a major contributor to excise revenues and employment.As the crisis unfolds, the Indian alcoholic beverages industry finds itself navigating a complex intersection of global geopolitics and domestic regulation — with pricing flexibility emerging as a critical lever to weather what could be a prolonged period of cost volatility.
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