West Asia Conflict Drives Up Packaging Costs for Indian Alcohol Industry

The ongoing conflict in West Asia has triggered a surge in energy costs, significantly impacting packaging expenses for alcoholic beverage manufacturers in India. This escalation is putting additional pressure on profit margins as materials like glass, aluminum, and plastics become more costly.

Rajesh Khosla, CEO of AGI Greenpac Limited, a leading packaging supplier serving approximately 70% of India's major beer and spirits companies, highlighted that packaging prices have risen by roughly 13 to 14 percent over recent months. This increase has been primarily driven by elevated fuel costs and the rising price of fuel-linked inputs, including plastic packaging components and other commodities.

AGI Greenpac's clientele includes a mix of global multinational brands operating within India alongside prominent domestic producers. Khosla explained that disruptions stemming from geopolitical developments in West Asia have affected gas supplies and shipping routes, adding to the challenges. Glass manufacturing, an energy-intensive process requiring continuous operation, is particularly vulnerable to fluctuations in fuel availability and prices. India's reliance on imported natural gas and soda ash, combined with currency exchange variations, has further intensified cost pressures.

Glass packaging has experienced significant cost hikes due to its dependence on energy and soda ash. Aluminum cans have also been affected by rising metal prices and energy expenses. Meanwhile, plastic packaging costs have climbed because higher crude oil prices increase the cost of polymer resins.

Khosla noted that in primary packaging, both paper and plastic prices have increased, while secondary packaging materials like aluminum have moved upward in line with London Metal Exchange trends, alongside glass. Generally, packaging materials with high energy demands or reliance on imports have seen the sharpest price increases.

He suggested that if current trends continue, packaging costs could rise by as much as 20 percent. However, if gas prices stabilize and soda ash supplies improve, costs could ease. His company is focusing on enhancing energy efficiency, boosting the use of recycled glass (cullet), and strengthening sourcing strategies to mitigate volatility for its customers.

Dilip Banthiya, Executive Director and CFO of Radico Khaitan, confirmed that the West Asia conflict has influenced the cost of packaging materials, especially glass bottles, PET resin, and laminates. During the company's Q2 FY27 earnings call, Banthiya reported a gross margin of 48 percent, marking an increase of 440 basis points year-on-year but a sequential decline of 109 basis points. The margin growth was largely driven by product mix improvements and premiumization, contributing 510 basis points, alongside price increases adding 85 basis points. However, these gains were partially offset by a ₹27 crore impact from higher packaging material costs in Q2, compared to ₹30 crore in Q1, representing roughly 1.6 percent of net sales.

Banthiya explained that the company invested in working capital during Q2 to support growth in the premium segment, new product launches, and to secure key raw materials amid price volatility. This inventory build is expected to normalize in the second half of the fiscal year.

Similarly, Amit Dahanukar, Chief Strategy Officer at Tilaknagar Industries, mentioned during their Q2 earnings call that persistent geopolitical tensions have driven inflationary pressures in packaging inputs, particularly glass. These factors have increased packaging expenses over the last two quarters. Dahanukar also pointed out that towards the end of Q2 FY27, prices for Extra Neutral Alcohol (ENA) began rising due to increased fuel and grain costs, which put pressure on gross margins. Despite this, the company’s ongoing cost optimization initiatives have helped protect profitability.

In a related development, Allied Blenders and Distillers Limited (ABD) recently started commercial operations at a new bottling facility in Uttar Pradesh. The site, with an initial capacity of 6 million cases annually, was part of assets acquired in January 2026 for about ₹70 crore and upgraded with an additional ₹40 crore investment. This facility strengthens ABD's internal bottling capabilities in a key market, improving service efficiency and reducing costs through increased in-house production and lower franchise fees.

Amar Sinha, Managing Director of ABD, mentioned during their earnings call that the company is undertaking value engineering efforts with packaging materials to identify cost-saving opportunities during challenging times.

The increase in packaging costs for India's alcoholic beverage sector reflects broader trends in global commodity markets and energy supplies. Companies are adapting by focusing on efficiency improvements and internalizing production where possible to manage rising expenses. How these challenges evolve will depend heavily on geopolitical developments, energy markets, and currency fluctuations in the coming months.