The Ukraine crisis may disrupt barley supplies which will impact the price of beer, a brokerage said on Tuesday. Ukraine is among the top five producers of barley, a crucial ingredient in the making of beer.
A report from Motilal Oswal said Indian brewers barring some premium brands largely source barley locally. But prices in the country could move in tandem with the global trend if there is a disruption in supplies.
The projection comes ahead of the peak summer season demand from April which witnesses the maximum demand for the beverage. Unlike other agri-commodities, which have witnessed relatively modest inflation, barley prices have been rising for the better part of the last 10 months.
Prices have shot up 62.5 per cent from a year ago in the present quarter.
The Ukraine crisis just ahead of the peak season could see companies such as United Breweries witnessing significant raw material inflation, the report noted.
“Even if beer companies have a blockbuster first quarter 2022-23 — something that they missed out in both the first quarter of 2020-21 and the first quarter of 2021-22 due to disruptions to mobility from the first and second Covid waves — they could lose their sheen, if margins get significantly affected due to substantial raw material cost inflation’’, the brokerage said.
The first quarter contributes 35-40 per cent to the full-year earnings before interest, tax, depreciation and amortisation.
“If the prices go up internationally, there would definitely be an impact on microbreweries,” said Gaurav Karnani, founder, Grid.
“In microbreweries, generally the quantity of base malt is procured locally. But in case of ale or stout, the specialty malt has to be imported. In India base malt is available in adequate quantities,” Karnani said.
Large beer makers source most of their produce from the domestic market and barley prices have been on an upward trajectory. Rajasthan, Haryana and parts of UP and MP are the major growers of barley.
France, Denmark, Argentina and Ukraine are among the leading exporters.
(With inputs from Calcutta Bureau )