Diageo India bets big on premium demand

Mumbai: Diageo India managing director Praveen Someshwar said demand for premium alcohol in India remains strong despite inflationary pressures and geopolitical tensions, even as the country's largest spirits maker warned that rising packaging and energy costs are beginning to squeeze margins.

"In spite of the West Asia troubles, the combination of macro attainments, a young and expanding consumer base, rising incomes, and increasing premiumisation with significant category headroom creates a compelling opportunity that we are well positioned to capture," Someshwar told analysts on Friday.

United Spirits (USL), controlled by Diageo, said it expects strong double-digit growth in its prestige-and-above portfolio in fiscal 2027, driven by continued premiumisation and resilient demand among affluent consumers.


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"The best is yet to come," Someshwar told analysts, citing rising incomes, premiumisation and the addition of about 100 million legal-drinking-age consumers in India over the next five years.

The company said its prestige-and-above business, excluding Maharashtra and Andhra Pradesh, grew 11.3% in fiscal 2026, while its mid-prestige-and-above brands expanded 17.1%.

But the alcobev industry is entering a tougher margin environment as crude-linked inflation pushes up the cost of glass bottles, PET packaging and other inputs.

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USL chief financial officer Pradeep Jain said packaging inflation could reduce gross margins by 1.25 to 1.5 percentage points in the current quarter, translating into a hit of as much as ₹40 crore. The company said productivity gains and selective price increases would partly offset the impact, though prolonged geopolitical tensions could intensify pressure in coming quarters.