Premium sales surge in second quarter following amendments to Karnataka's liquor rules

Significant changes made by the Karnataka state government in liquor sales and taxation rules have led to a notable growth in the sales of premium brands in the state. According to a report by Businessline, policy changes implemented in the state have brought new momentum to the liquor market in the second quarter (Q2), benefiting several large companies.

In May 2026, the Karnataka government introduced a new 'alcohol-in-beverage-based' excise duty system. This new system has replaced the previous bulk-liter taxation mechanism. As part of these reforms, the government has reduced the number of liquor price slabs from 16 to 8. Additionally, the government has liberalised the state-controlled price determination process, providing manufacturing companies with greater flexibility in pricing their products.

The direct impact of these policy changes has been reflected in the companies' results. United Breweries (UBL) recorded growth of over 50 per cent in the beer category in Karnataka during the second quarter. The company's own volume increased by more than 60 per cent, and its market share in the state rose by approximately 250 basis points (bps). Vivek Gupta, Managing Director and CEO of United Breweries, stated during the company's earnings conference call that the growth in this category in the state was primarily driven by their company.

Strong growth has also been observed in the premium spirits sector. Praveen Someshwara, MD and CEO of United Spirits (USL), stated that due to the progressive tax policy, the company's volume in Karnataka increased by approximately 28-30 per cent, while value growth was recorded at 32-34 per cent.

Tilaknagar Industries has also gained significantly from these changes. Amit Dahanukar, Chief Strategy Officer of the company, informed during the earnings conference call that Imperial Blue Whisky recorded its highest-ever quarterly volume in Karnataka. The market share of this brand has crossed 40 per cent, representing a quarter-on-quarter increase of 900 bps. Furthermore, in September 2026, Mansion House Brandy emerged as the highest-selling brandy in the state.

However, the impact of these policies has not been uniform across all portfolios. Pradeep Jain, Executive Director and CFO of United Spirits, stated that the 'popular' segment, which accounts for approximately 6 per cent of the company's total revenue in the second quarter, has been negatively affected by policy changes in both Karnataka and Maharashtra. Radico Khaitan also cited policy changes in these two states as a partial reason for the decline in volumes in their 'regular' segment.

On the other hand, Maharashtra has increased the excise duty on IMFL from three times the declared production cost to 4.5 times. Simultaneously, to support local producers and increase the state's excise revenue, a new grain-based category named 'Maharashtra Made Liquor' (MML) has been introduced.

Meanwhile, Tamil Nadu is also becoming an important hub for liquor manufacturing companies. The market is opening up due to regulatory changes and new brand registrations. With a monthly market size of over 50 lakh cases, Tamil Nadu could become a major growth centre for the industry. Amar Sinha, Managing Director of Allied Blenders and Distillers (ABD), stated that the market is already opening up due to the registration of new brands.