India’s largest beer producer, United Breweries Ltd. (UBL), has taken a strategic step to expand its manufacturing footprint in Andhra Pradesh by entering into a leasing agreement with Ilios Breweries Pvt. Ltd. This move is aimed at boosting production capacity to meet the increasing demand for Kingfisher beer and other offerings in the southern region.

The arrangement became effective on May 20, following excise department approval on May 19. This tie-up underlines the company’s intent to strengthen its supply chain infrastructure, improve distribution efficiency, and support peak-season volumes, especially in one of the key beer markets of India.

Leasing Strategy to Strengthen Southern Market Operations

UBL already operates a wholly owned brewery in Ranasthalam, located in the Srikakulam district of Andhra Pradesh. However, with the rapid growth in demand and changing consumer preferences, one brewery is no longer sufficient to keep pace with the market.

To resolve this, the company has opted to lease an additional facility through Ilios Breweries Pvt. Ltd. This capital-light approach helps scale operations without significant upfront investment, allowing faster ramp-up to support growing demand.

UBL stated that this step is in line with its broader strategy of adapting to regulatory changes favouring lower-alcohol beverages, and evolving consumer taste profiles.

Strong Quarterly Financial Performance Supports Expansion Push

The manufacturing expansion comes on the heels of robust financial performance for the January–March quarter. UBL delivered strong growth across key financial metrics:

• Standalone net profit rose by 20.5% year-on-year, reaching ₹97.4 crore, beating the CNBC-TV18 poll estimate of ₹90 crore.

• Revenue from operations increased 8.9% to ₹2,321.3 crore.

• EBITDA surged 31.2% to ₹186.3 crore.

• EBITDA margin expanded to 8%, reflecting improved cost efficiency and product mix.

This performance clearly indicates that consumer demand is resilient, and the company’s premiumisation strategy is delivering results.

Premium Segment Is Key to Growth Strategy

A notable highlight of UBL’s performance is the growth in its premium beer portfolio, which witnessed a 34% volume jump in FY25. According to Vivek Gupta, MD and CEO of UBL, this trend is likely to continue and drive double-digit growth in both volume and revenue for FY26.

The company is increasingly focused on premium offerings, given the higher margins and rising consumer interest in quality brews over mass-market beers. The Andhra Pradesh expansion will support this strategy by ensuring availability and timely distribution in a critical market.

Regulatory Tailwinds Favour Low-Alcohol, Premium Beverages

India’s alcoholic beverages industry is undergoing a transition, supported by regulatory encouragement for lower-alcohol content products. States like Andhra Pradesh are becoming more receptive to policy changes that favour premium and responsibly consumed beverages.

This trend is not only influencing consumer preferences but also shaping how companies like UBL plan their production capacity, distribution strategies, and investment models. The leasing route helps UBL remain agile and responsive to demand fluctuations and policy shifts.

Investor Sentiment and Market Movement

Despite the positive expansion and Q4 results, United Breweries’ stock closed 1.56% lower at ₹2,022.55 on the BSE on Tuesday. This could be attributed to broader market conditions, short-term profit booking, or investor caution over future regulatory changes.

However, analysts view the long-term outlook as positive, especially with UBL’s strong brand portfolio, Heineken’s strategic backing, and a clear roadmap for premium-led growth.

Conclusion: UBL Set to Ride the Premium Beer Wave

With changing consumer preferences, strong Q4 performance, and a strategic expansion plan in Andhra Pradesh, United Breweries is reinforcing its leadership position in India’s beer market. The tie-up with Ilios Breweries is a calculated step to secure capacity in a growing market, ensuring smooth supply chain operations as the company continues to scale its premium offerings.

UBL’s focus on premiumisation, efficient operations, and innovative partnerships positions it well to outperform in FY26, despite the competitive and regulatory challenges in the alcoholic beverages sector.

As the company builds on this momentum, shareholders, consumers, and market watchers will be keenly tracking its next moves.

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