India: Beer consumption drops by 10% in 2017

India’s beer sales dropped last year after a ban on liquor sales near highways and rise in prices in a few states, the Economic Times reported on March 16.

Volume of beer consumed in the country fell by 10% to 259.19 million cases in 2017 from 287.99 million cases in 2016, according to industry officials, citing excise department data.

This is the second consecutive year of decline and the worst performance of the beer industry since at least two decades, said companies involved in making the beverage. In 2016, the industry fell for the first time with a decline in volume of 0.4% at 287.9 million cases, compared with the mid-single digit growth between 2013 and 2016

“There was an impact of demonetisation and highway ban in the first half of the year. The second half was better and is still recovering,” said Ben Verhaert, head of India operations of world’s largest brewing company Anheuser-Busch InBev. “Despite industry declining, there is a strong trend of premiumisation which we expect to further accelerate this year.”

While the Supreme Court order forced nearly a third of all outlets to shut shop in April, most distributors had reduced orders since February last year due to lack of clarity on the enforcement. Post the highway ban, a significant portion of outlets didn’t re-open or relocate until the last quarter.

In October last year, Maharashtra, one of the biggest states in terms of beer consumption, raised excise duty on beer by 17%. Companies say clarity on the revised pricing structure was obtained only after mid-December. “During this period, UBL did not sell its main brands. However, the matter has since been successfully resolved and business resumed at the end of the quarter,” said United Breweries in its quarterly performance statement last month.

Danish brewer Carlsberg posted a 2% decline in volume in India in 2017, a sharp drop from 16% growth a year ago. “In India, 2017 was a very volatile year due to the highway ban and the introduction of GST,” Cees ’t Hart, global chief executive officer, Carlsberg, told analysts at an investors’ call last month. “India with all the kind of regulations and changes, will remain a rocky road, and therefore that could make or break our yields in India,” he said.

Since 2016, Kerala, Bihar and Tamil Nadu — they account for 20% of India’s alcohol consumption — have banned liquor either completely or in a phased manner. Apart from this, policy changes in West Bengal, Chhattisgarh and Jharkhand to allow liquor sales only through government-owned corporations, similar to Delhi, Rajasthan, Kerala and Tamil Nadu, added to the uncertainty.

Yet, companies are upbeat about a demand pick-up. “The beer market is being driven by a small uplift in consumption across segments. Within this trend, the super-premium segment has grown in strong double digits,” said Samar Singh Sheikhawat, chief market officer at Heineken-owned UB that controls half the beer market. Last year, the maker of Kingfisher beer launched nearly half a dozen global premium brands in the country, including Affligem, Desperados, Dos Equis, and Sol.

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