United Breweries’ premium bets take the driver’s seat, but it’s a bumpy road

A significant catalyst for UB Group was when the Uttar Pradesh government revised its excise policy to allow so-called composite liquor shops to operate, selling both beer and Indian-made foreign liquor (IMFL) from the same space. That in effect expanded the Kingfisher maker’s beer stores to about 11,000 outlets from 6,000—a potential game-changer in one of India’s largest consumer markets.

United Breweries has also been scaling up its premium brands Heineken and Amstel Grande. In the December quarter, UB Group’s premium volumes improved 33% year-on-year, cementing premium products as the growth driver for the company. Its overall volume in the Decemebr quarter grew 8% while revenue increased 10% from a year earlier.

United Breweries is also testing new products in Goa and Daman that are aimed at younger consumers, apart from strengthening its overall retail visibility. Its greenfield brewery in Uttar Pradesh is expected to be operational by the fourth quarter of 2026-27 (January-March 2027). 

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The pressure builds up

Despite the favourable decision in Uttar Pradesh, in other states regulatory risks persist for the Bengaluru-headquartered United Breweries. 

Karnataka raised taxes on economy beer brands, leading to a steep 30-35% volume drop in January. To offset this, United Breweries is absorbing some of the excise duty hike to sustain demand for Kingfisher. In neighbouring Telangana, even after a 15% beer price hike, the company’s management believes further hikes are necessary to maintain viability in the state.

Higher duties in West Bengal have also eroded United Breweries’ market share. The company has also lost market share in Rajasthan and Tamil Nadu. 

United Breweries’ profitability is also under strain. Its Ebitda margin in the December quarter fell 93 basis points year-on-year to 7.1%. The sequential hit was steeper, with Ebitda margin down by 360 bps from the September quarter.

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Apart from these issues, competition is intensifying for United Breweries as global players expand in India and domestic brands gain ground in the premium beer segment. United Breweries is responding by ramping up local production of high-end offerings and improving bottle recovery rates to support margin expansion.

The United Breweries stock trades at 66 times its FY26 estimated earnings, as per Bloomberg, which seems pricey. 

Factoring in the possibility that higher-than-expected growth in premium products could hurt bottle return rates, and higher interest costs on account of debt to be taken for capital expenditure requirements, Nuvama Research has trimmed its earnings-per-share estimate for United Breweries by 6% each for FY25 and FY26.

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