India’s beverage industry is entering the peak summer season amid significant challenges stemming from rising packaging and energy costs, driven by global geopolitical tensions. The sector, spanning soft drink manufacturers, brewers, and liquor producers, faces supply chain disruptions that have intensified since February, coinciding with increased summer demand.
Heightened tensions in West Asia have led to a sharp rise in energy prices and impeded the supply of critical raw materials such as natural gas, aluminium, and petrochemicals. These inputs are essential for manufacturing glass bottles, aluminium cans, and plastic packaging, placing considerable pressure on India’s packaging and bottling ecosystem. Companies are grappling with balancing production schedules while absorbing escalating costs, a dynamic that is now reflected in retail availability and corporate financials.
Utsav Kedia, vice-president for business growth at Great Galleon Ventures, a bottling partner for Pernod Ricard and Beam Suntory, described the situation as a "demand-supply mismatch," with rising consumer demand outstripping supply capabilities. This imbalance has forced companies to prioritize product availability over customer preferences.
The glass packaging segment has been particularly hard hit. Suraj Mehta, chief strategy officer at Hindusthan National Glass & Industries Ltd (HNGIL), highlighted that energy expenses have surged by 35-40 percent, directly affecting production capacity. Glass furnaces operate continuously at temperatures between 1,400 and 1,500 degrees Celsius and cannot be shut down without risking structural damage, leaving producers vulnerable to fuel supply volatility. Production levels at HNGIL at one point dropped to between 40 and 60 percent of capacity but have since recovered to about 80 percent, still short of ideal output. Mehta noted that price increases have been limited to 10-12 percent, with the company shouldering nearly half the additional costs, a margin squeeze that is unsustainable in the long term.
The broader beverage industry is experiencing similar cost pressures. According to Anant S Iyer, Director General of the Confederation of Indian Alcoholic Beverage Companies, glass bottle prices have risen between 12 and 15 percent, with spikes reaching 20 percent due to gas shortages. Prices for aluminium cans have increased by at least 8 percent, while polyethylene terephthalate (PET) bottles have seen price jumps of about 40 percent. Overall packaging costs have escalated by 30 to 40 percent depending on the product mix.
These factors have compelled beverage companies to adjust operational strategies, increasingly aligning product portfolios with packaging material availability rather than pure consumer demand. Newer entrants like Medusa Beverages have acknowledged strong market interest but face limitations in scaling supply, leading them to recalibrate forecasts, focus on core markets, and revise product assortments.
As the summer season progresses, the Indian beverage industry continues to navigate these supply chain hurdles and cost pressures, with many stakeholders cautioning that sustained margin pressures could impact long-term viability if current conditions persist.