1. Economy and Outlook
According to the IMF, Global growth is projected to fall from an estimated 3.5 percent
in 2022 to 3.0 percent in both 2023 and 2024. While the forecast for 2023 is modestly
higher than predicted in the April 2023 World Economic Outlook (WEO), it remains weak by
historical standards. The rise in central bank policy rates to fight inflation continues
to weigh on economic activity. Global headline inflation is expected to fall from 8.7
percent in 2022 to 6.8 percent in 2023 and 5.2 percent in 2024. Underlying (core)
inflation is projected to decline more gradually, and forecasts for inflation in 2024 have
been revised upward.
The global recovery from the COVID-19 pandemic and Russias invasion of Ukraine is
slowing amid widening divergences among economic sectors and regions.
The World Health Organization (WHO) announced in May that it no longer considers
COVID-19 to be a "global health emergency." Supply chains have largely
recovered, and shipping costs and suppliers delivery times are back to pre-pandemic
levels. But forces that hindered growth in 2022 persist. Infiation remains high and
continues to erode household purchasing power. Policy tightening by central banks in
response to inflation has raised the cost of borrowing, constraining economic activity.
Immediate concerns about the health of the banking sector have subsided, but high interest
rates are filtering through the financial system, and banks in advanced economies have
significantly tightened lending standards, curtailing the supply of credit. The impact of
higher interest rates extends to public finances, especially in poorer countries grappling
with elevated debt costs, constraining room for priority investments. As a result, output
losses compared with pre- pandemic forecasts remain large, especially for the worlds
poorest nations.
The recent resolution of the US debt ceiling standoff and, earlier this year, strong
action by authorities to contain turbulence in US and Swiss banking reduced the immediate
risks of financial sector turmoil. This moderated adverse risks to the outlook. However,
the balance of risks to global growth remains tilted to the downside. Inflation could
remain high and even rise if further shocks occur, including those from an intensification
of the war in Ukraine and extreme weather-related events, triggering more restrictive
monetary policy. Financial sector turbulence could resume as markets adjust to further
policy tightening by central banks. Chinas recovery could slow, in part as a result of
unresolved real estate problems, with negative cross-border spill overs. Sovereign debt
distress could spread to a wider group of economies. On the upside, inflation could fall
faster than expected, reducing the need for tight monetary policy, and domestic demand
could again prove more resilient.
In most economies, the priority remains achieving sustained disinflation while ensuring
financial stability.
2. Indian Alcobev Industry
The Indian Alcobev Industry has experienced significant growth in recent years,
positioning itself as one of the fastest-growing beverage markets globally and becoming
the third-largest market for alcoholic beverages worldwide. This growth can be attributed
to increasing urbanization, rising disposable income, raising youth aspirations and
changing consumer preferences. With Indias high population growth rate, a significant
number of drinking-age adults emerge annually, contributing to an increase in alcohol
consumption rates.
The industry had its own share of distress over the past two years due to the pandemic.
Lockdowns and higher taxes had a notable impact. To counter these distribution
bottlenecks, the industry modified its distribution means to comply with restrictions,
introduced new product combinations to meet evolving consumer demands, etc, post-pandemic,
resulting in the industry rebounding and surge in sales. The industry also saw a growing
demand for premium and luxury alcoholic beverages, driven by a rising middle class with
higher disposable incomes, increasing urbanization, and a desire for sophisticated
drinking experiences.
States like Karnataka, Maharashtra, West Bengal, Odisha, Telangana, Delhi, Haryana,
Punjab, among few others are the prominent consuming states for alcobev in India. Liquor
stores are the preferred sales channel for alcobev, primarily due to alcohol consumption
being an outdoor activity, while supermarkets and malls are more prevalent in tier I and
tier II cities.
Beer Industry
Beer, a popular alcoholic beverage made from water, malted barley, yeast, and hops, has
gained popularity among consumers due to changing lifestyles, rapid urbanization, and
increasing disposable incomes. India, being one of the fastest growing and least
penetrated markets, presents a promising opportunity for major players in the beer
industry.
Consumers in India are gradually shifting towards beer due to its lower alcohol content
compared to spirits like whisky, vodka, brandy, and rum. The decrease in selling and
distribution costs has further contributed to the growth of the beer industry. The market
has observed product and packaging innovations, with canned beer, draught beer, and craft
beer gaining traction among customers. Canned beer offers convenience and ease of
transportation, while freshly brewed, on-tap beer has shown steady growth. The emergence
of brewpubs in cities like Bengaluru, Gurgaon, and Pune has also contributed to the
overall expansion of the beer market in India.
The pandemic presented challenges to the beer industry, but it has also spurred
innovations and the exploration of new distribution channels. With physical stores closed,
beer suppliers turned to home deliveries and online platforms to sustain sales. The
changing consumer behaviours has opened up new means of reaching out to them fast and safe
in a cost-effective manner.
According to The International Market Analysis Research and Consulting Group (IMARC
Group) a leading advisor on management strategy and market research worldwide, India beer
market size reached INR 383 billion in 2022, and is expected to reach INR 622 Billion by
2028, exhibiting a growth rate (CAGR) of 8.1%.
IMFL Industry
The Indian-made foreign liquor (IMFL) sector in India had a strong growth in FY2023,
with sales volumes rising by 14.0% to reach 385 million cases. This growth can be
attributed to factors such as the gradual economic recovery from the pandemic, increased
disposable incomes among consumers, and the growing popularity of premium alcoholic
beverages. Whisky remained the most popular IMFL category, but there was also significant
growth in the gin segment, which saw a 48.0% increase in sales volumes.
Looking ahead, the IMFL sector is expected to continue growing, driven by the rising
popularity of alcoholic beverages among consumers and the growth of the online alcohol
market. The premium segment within the IMFL sector showed strong growth, driven by the
increasing demand for imported and domestic brands offering a premium experience. The
online alcohol market is also expanding rapidly in India, further contributing to the
growth of the IMFL sector. Overall, the IMFL sector plays a crucial role in the Indian
economy and is expected to maintain its upward trajectory in the coming years.
3. Demand Drivers for the Alcobev Industry
The alcobev industry in India is experiencing remarkable growth and is poised to
continue expanding in the coming years. Following are few key factors that are driving the
growth of the industry:
• Growing urban population: Indias rapid urbanization is contributing to an
increased consumer base for alcoholic beverages. As more people move to urban areas, they
are exposed to a wider range of alcoholic beverages and have greater access to them
• Rising disposable incomes: With the rise in disposable incomes among Indians,
there is an upward trend in the demand for premium alcoholic beverages. Consumers are
willing to spend more on high-quality and innovative products, driving the growth of the
alcobev industry
• Changing consumer preferences: Indian consumers are becoming more discerning in
their choice of alcoholic beverages. They are seeking premium and innovative products that
align with their evolving tastes and preferences. This shift in consumer demand is
creating opportunities for the industry to introduce new and exciting offerings
• Growth of the out-of-home (OOH) segment: The OOH segment, which includes bars,
restaurants, and other social venues, is experiencing rapid growth in India. This
expansion is driving the demand for alcoholic beverages in these settings, further fueling
the growth of the alcobev industry
• Rise of e-commerce: The rapid growth of the e-commerce market in India has
opened up new avenues for the alcobev industry. Online platforms provide an accessible and
convenient way for consumers to purchase alcoholic beverages, expanding the industrys
reach and boosting sales
Further, the relaxation of liquor laws by the government in recent years has played a
significant role in the industrys growth. It has increased the availability of alcoholic
beverages and made them more accessible to consumers.
The alcobev industry in India is responding to these demand drivers by focusing on
premiumization, innovation, and brand awareness. Companies are launching new premium
brands and products to cater to the growing demand for higher quality offerings. They are
also introducing innovative products, such as ready-to-drink cocktails and craft beers, to
capture consumers attention. Marketing and advertising campaigns are being employed to
raise brand awareness and expand the consumer base.
Overall, the alcobev industry in India is thriving and with the demand drivers, the
industry is well-positioned for continued growth and success in the future.
4. Business Overview
SOM Distilleries & Breweries Limited, is a leading alcoholic beverages manufacturer
based in Bhopal, India. The company primarily is in the production of beer and the
blending and bottling of Indian Made Foreign Liquor (IMFL). With a diverse product
portfolio, the company offers a broad line of products to cater to the varied preferences
of consumers, including beer, rum, brandy, vodka, and whisky.
The company takes pride in its three key millionaire brands - Hunter, Black Fort, and
Power Cool. These brands have achieved impressive sales volumes of more than 1 million
cases per annum, showcasing their popularity among consumers. Additionally, in FY2020, the
company launched Woodpecker Wheat Beer, which is Indias first filtered wheat beer, adding
innovation to its product offerings.
The company focuses on introducing new products with seasonal themes to enhance
consumer traction and engagement. This strategy includes the introduction of Hunter Pint
Beer and various flavors of ready-to-drink (RTD) drinks. By continuously innovating and
expanding its product range, the company aims to capture evolving consumer preferences and
boost brand loyalty.
An advantage of the company is being the only listed company in India that has both
beer and IMFL segments. This complementarity reduces the risk of seasonality and provides
marketing efficiencies. The combination of beer and IMFL allows the company to cater to a
wide range of consumer preferences and capture opportunities in both segments.
The company is committed to maintaining its market position as a leading player in the
alcoholic beverages industry in India. By offering a diverse product portfolio, focusing
on innovation, and leveraging its unique position with beer and IMFL, the company aims to
drive growth, increase market share, and deliver value to its stakeholders.
| Capacity (In million cases) |
SDBL (Bhopal) |
Woodpecker (Karnataka) |
SDBOPL (Odisha) |
Total Capacity |
| Beer |
15.2 |
9.0* |
6.0* |
30.2 |
| IMFL |
0.6 |
2.7 |
0.6 |
3.9 |
* Expanded Capacity
BEER Portfolio
• Hunter Refreshing Strong Premium Beer
• Black Fort Super Strong Beer
• Black Fort Lager Premium Beer
• Woodpecker Lager Beer
• Power Cool Beer IMFL
• Pentagon Gold Edition Whisky
• Milestone Blue Whisky
• Legend Premium Whisky RUM
• Pentagon XO Premium Rum
• Black Fort XXX Matured Rum Vodka
• White Fox Triple Distilled Vodka
• White Fox Triple Distilled Vodka Naughty Green Apple
• White Fox Triple Distilled Vodka Naughty Orange Brandy
• Legend Rare Brandy
• Milestone VSOP Brandy RTD
• White Fox Refresh Cosmo Cranberry Vodka Mixed Ready to Drink
• White Fox Refresh Tangy Lemon Vodka Mixed Ready to Drink
• White Fox Refresh Naughty Orange Vodka Mixed Ready to Drink
• White Fox Refresh Wild Passion Fruit Vodka Mixed Ready to Drink 5. Threats and
Concerns
The Alcobev industry in India faces several threats and concerns that can impact the
operations and growth of companies in the sector. These challenges include:
1. Regulatory Hurdles: The Alcobev industry in India is heavily regulated, with a
complex web of laws and regulations governing production, distribution, and sale. This can
make it difficult for companies to navigate the system and can lead to delays and
bureaucratic red tape. Compliance with regulatory requirements is crucial, and companies
must stay abreast of any changes in regulations to ensure smooth operations
2. High Taxes: The Alcobev industry in India is subject to high taxes, which can drive
up the cost of production and reduce profit margins. In addition, taxes can vary widely
from state to state, making it difficult for companies to plan and budget effectively. The
burden of high taxes can also impact the affordability of alcoholic beverages for
consumers and affect overall sales
3. Changing Consumer Preferences: As Indias economy grows and consumer tastes evolve,
companies in the Alcobev industry must adapt to changing trends and preferences. For
example, there is a growing demand for premium and craft spirits, as well as low-alcohol
and non-alcoholic beverages. Companies need to stay attuned to consumer preferences and
invest in research and development to meet the evolving demands of the market
4. Distribution Challenges: The distribution system in Indias Alcobev industry is
highly fragmented and can be difficult to navigate, particularly for small and
medium-sized companies. This can make it challenging to get products to market and can
limit the reach of companies in the industry Developing an efficient and robust
distribution network is crucial for companies to effectively distribute their products
across different regions
5. Competition: The Alcobev industry in India is highly competitive, with several large
players dominating the market. This intense competition can make it difficult for new and
innovative companies to gain a foothold and compete effectively. Companies must
differentiate themselves through product quality, branding, marketing strategies, and
innovation to stand out in the market and capture consumer attention
6. Geopolitical Uncertainty: Geopolitical factors, such as trade disputes, changes in
government policies, and international relations, can introduce uncertainty and impact the
Alcobev industry in India. Fluctuations in import/export regulations, tariffs, and
diplomatic tensions between countries can disrupt supply chains, hinder market access, and
affect the overall business environment. Companies must closely monitor geopolitical
developments and proactively adapt their strategies to mitigate potential risks
Addressing these threats and concerns requires proactive measures such as engaging with
regulatory bodies, advocating for industry-friendly policies, optimizing production and
distribution processes, conducting market research to understand consumer preferences, and
fostering innovation to stay ahead of the competition. Additionally, closely monitoring
geopolitical developments and building resilience to navigate uncertainties becomes
crucial for companies in the Alcobev industry to ensure long-term success in the dynamic
Indian market.
6. Performance Review
In FY2023, SOM Distilleries & Breweries achieved exceptional growth and delivered
impressive financial results. The companys annual volume had a growth of 2.1x, reaching
149 lakh cases compared to the previous fiscal year. This significant increase in volume
can be attributed to the strong demand for the companys products and its commitment to
delivering high-quality offerings that align with customer preferences.
The performance of two key products, Hunters and Power Cool, was particularly
noteworthy. Hunters volume nearly doubled from the previous fiscal year, indicating a
robust market demand for this product. This growth is a testament to the companys ability
to identify market opportunities and meet customer needs effectively. Similarly, Power
Cools volume had seen remarkable growth of over 2.8x, showcasing the companys success in
capturing market share and satisfying consumer preferences.
Financially, SOM achieved remarkable results in FY2023. The companys total income
increased to Rs 8,080 million, reflecting a year-on-year growth of 121.1%. This
substantial increase in income highlights the companys ability to generate higher revenue
through its strong market presence and favorable customer response. Revenue from beer was
Rs. 7,303 million and revenue from IMFL was Rs. 659 million. Of the total revenue 91.0%
(FY2022: 88.0%) was contributed by beer and remaining 9.0% (FY2022: 12.0%) was contributed
by IMFL. In FY2023, realization per case for beer and IMFL was Rs. 488 and Rs. 744,
respectively.
| Ratios |
FY2023 |
Comments |
| Debtor Turnover (Days) |
31 |
Lower debtor turnover due to prudent working capital management |
| Inventory Turnover (Days) |
27 |
Strong sales and low inventory holding costs signal better operational efficiency |
| Interest Coverage (x) |
5.4x |
Higher interest coverage ratio indicate capacity to meet interest payments with
operating profits |
| Current Ratio (x) |
1.2x |
Higher current ratio demonstrates improved short- term liquidity and ability to cover
current liabilities |
| Debt to Equity (x) |
0.65x |
A decrease in the debt to equity ratio indicates improved financial leverage and lower
dependency on debt financing, potentially enhancing long-term financial stability |
| Return on Equity (%) |
18.17% |
ROE improvement was due to higher sales vis-?-vis last year |
| Net Profit Margin (%) |
7.5% |
Increase in profit margin is on account of increase in sales vis-?- vis last year
which was impacted by the pandemic. |
Additionally, the companys EBITDA surged to Rs 1,034 million, indicating a growth
of 5.2x compared to the previous year. This significant improvement in EBITDA showcases
the companys enhanced profitability and operational efficiency. The net profit margin
stood at 7.5%, resulting in a net profit of Rs 603 million.
7. Liquidity
As of 31st March 2023, total debt stood at Rs. 2,422 million and cash and cash
equivalent were Rs. 126 million, resulting in a net debt of Rs. 2,296 million. Gross Debt
to Equity ratio was 0.65x.
8. Major Corporate Developments Product Success:
• Genius Prestige whiskey gains 46.0% market share in Karnataka segment within 3
months of launch
• Legend Brandy and Pentagaon Whisky approved for nationwide supply by Canteen
Stores Department (CSD)
Expansion Plans:
• Execution of an expansion plan of a Capex outlay of Rs 850 million for the new
canning facility at the Bhopal Plant and expanding the Brewing Facility in Hassan Plant.
This expansion has enabled increased production capacity and support the companys growth
strategy
• The expansion of the Odisha Plant has been completed in June 2023 at a capex
outlay of Rs. 350 million. This expansion has enhanced the companys presence in the
region and cater to the growing demand for its products
Operational Achievements:
• The Karnataka unit achieved the highest sales ever recorded in a single month in
January, demonstrating strong market demand and effective sales strategies
• A contract was signed with Radico Khaitan during Q3 FY2023 to manufacture their
IMFL and Ready to Drink brands at the companys plant in Hassan, Karnataka. This
partnership will not only drive increased production and revenue but also optimize the
utilization of the companys IMFL facility
Efficiency:
• The Bhopal plants beer dispatch in January 2023 has doubled compared to the
previous years corresponding period, highlighting the companys improved operational
efficiency and ability to meet growing customer demand.
9. Business Strategy
Portfolio Premiumisation: The Company predominantly caters to the strong beer
segment. The Companys mainline brand ‘Hunter caters to customers in the premium
strong beer segment. In FY2021, the Company launched ‘Woodpecker wheat beer in
select markets in Northern India, which is Indias first filtered wheat beer. In addition,
the Company has also launched new variant / limited editions of its existing brands on an
ongoing basis to enhance its customer experience.
Exports: The Company is focused on expanding its exports portfolio. Recently,
SOM signed a Memorandum of Understanding (MOU) with Indian Fashion FZE, based out of the
UAE for export of Beer and IMFL for West and Central Africa. Initially, the Company plans
to start supply of ‘Blackfort beer and based on the traction will gradually start
supplying other brands over the period.
Pan India Expansion: The Company has a well-defined business strategy to expand its
customer base and outreach. The Company has a vision of becoming one of the top brewing
companies in India. SOM regularly revisits its brand portfolio to cater changing consumer
taste and this has helped the Company to continuously re-innovate their existing portfolio
as well as launch new products to match the customer preferences.
10. Human Resources
SOM is known by its people who are the biggest assets. Their collective knowledge and
skills combined with the right attitude to win, sets us apart. We continue to evolve as an
organisation with a conducive workplace environment and people-oriented policies having a
relentless focus on health and safety. Our people strategy is guided by our core values,
high performance, collaboration, continuous improvement and passion to win. To ensure that
our people have a rewarding experience, we focus on areas like talent acquisition,
workplace culture and developing the skills & competencies in line with our business
needs.
We ensure that we have a talent pool who have been nurtured to tackle the challenges of
tomorrow while helping deliver on organisational goals today. The Company believes in
people-friendly workplace policies and constantly updates and refines them based on
feedback received from employees.
The Company has well-documented employee-friendly policies to enhance transparency,
create a sense of teamwork, oneness and trust among employees and align employees
interests with the organisations strategic goals. These policies assist in providing a
holistic workplace environment and play a key role in the right talent onboarding, talent
retention and leadership development.
The Company ensures equal access to opportunities in the areas of recruitment, learning
& development, career progression and advancement. This is regardless of gender, age,
racial/ethnic background, religion, or social status.
We organise regular employee engagement and career development initiatives to equip
them for ever evolving landscape. As on 31st March 2023, 426 employees are on our payroll
with diversified workforce structure at all levels.
Owing to the cordial rapport between management and employees, there was no industrial
unrest causing loss in production across all manufacturing facilities. Our employees take
pride in their workplace.
11. Internal Control Systems & Their Adequacy
SOM has a comprehensive internal control framework to ensure requisite control to its
operations. The Company believes an adequate internal control system is a prerequisite for
ensuring sustainable operations of the Company. Stringent and comprehensive controls are
put in place to ensure the optimal and efficient utilization of resources and to ensure
safety and protection of all assets. This ensures that the Companys assets and interests
are carefully protected, and operations are conducted within a framework of appropriate
checks and balances. The system helps mitigate and reduce risks that may prevent the
Company from achieving its business objectives and to provide reasonable assurance that
all material misstatements, frauds or violations of laws and regulations will be
prevented. The existing controls have been designed to provide reasonable assurance with
regard to recording and providing reliable financial and operational information,
complying with applicable statutes, safeguarding assets from unauthorized use, executing
transactions with proper authorization and ensuring compliance with corporate policies.
The Statutory Auditors also conduct the limited review as part of the listing
obligations and the reports are placed before the Audit Committee and forwarded to the
regulatory authorities. The observations of the Audit Committee with regard to the
efficacy of audit report and the effective remedial measures that have been taken by the
Company are placed before the Board for their consideration. The Company undertakes
periodic review of its internal control practices and its adequacy and presents its
findings to Audit committee with recommendations to enhance the control measures.
12. Corporate Social Responsibility
Corporate social responsibility forms an integral part of the Companys business
activities. SOM actively contributes to the social, economic and environmental development
of the community in which it operates, ensuring participation from the community and
thereby creating value. The Companys CSR policy outlines its strategy to bring about a
positive impact on the society through various initiatives relating to poverty, education,
environment protection and healthcare. SOM endeavours to serve the society and achieve
excellence. The Company continues to remain focused on improving the quality of life and
engaging communities through ensuring environment sustainability, promoting healthcare,
promoting education and many more activities.
The annual report on Corporate Social Responsibility activities as required under
Sections 134 and 135 of the Companies Act, 2013 read with Rule 8 of the Companies
(Corporate Social Responsibility Policy) Rules, 2014 and Rule 9 of the Companies
(Accounts) Rules, 2014 is provided in the Annexure forming part of this Report. As per the
section 135 of the Companies Act, 2013, a CSR committee is in place.
13. Information Technology (IT)
SOM views IT as a necessary business enabler. The Companys operations are increasingly
dependent on IT systems and there is a need to manage the information effectively. A
strong IT infrastructure is critical as it binds the Companys varied operations into a
cohesive unit. SOM is embracing digitisation to create engaging customers experiences. IT
has been one of the key factors driving robust growth of the Company and facilitating it
to effectively manage its network of distribution channels. The Company use technology in
a big way to service its customers better and establish more efficient channels of
communication not only within the Company but also with the distributors and channel
partners. The IT platform encompasses all core business processes and provides
comprehensive data and analytics that enables better decision making. SOM continuously
invests in upgrading to the latest technology enhancements to deliver business
efficiencies. The Company runs ERP system across the manufacturing units and depots. This
enables further strengthening of the supply chain efficiencies, with increased qualitative
control. Processes have been standardised across the Company to ensure streamlining of the
systems across the operational value chain.
14. Supply Chain Management
An effective supply chain system is a critical ingredient for ensuring smooth business
operation and distribution of products. Having a robust supply chain is essential for SOM
to adjust more dynamically to the fluctuating economies, improves responsiveness to the
customer requirements and leads to a mutually beneficial relationship with our suppliers
and dealers and hence is a core focus for us. The Company has set up centers of
excellence, engaging in strategic sourcing and improving cost efficiencies. This will
significantly benefit the Company, given the ongoing volatility in the macro economic
environment.
15. Cautionary Statement
Statements in the Management Discussion and Analysis describing the Companys
objectives, expectations, predictions and assumptions may be ‘forward looking within
the meaning of applicable Securities Laws and Regulations. Actual results may differ
materially from those expressed herein, due to uncertainties related to the business
model. Important factors that could influence the Companys operations include global and
domestic economic conditions affecting demand, supply, price conditions, change in
Governments regulations, tax regimes, other statutes and other factors such as litigation
and industrial relations. The risk related information provided is not exhaustive and is
for information purposes only. Readers are advised to refer to related disclosures in the
Companys regulatory filings and exercise individual judgement in assessing risks
associated with the Company.
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