India: Restrictions around general elections disrupt demand for spirits, beer in peak summer month as
Indias spirits and beer segment growth slowed in the peak summer months this year, as restrictions around general elections disrupted demand for liquor in the legal market, the Economic Times reported on July 18.
Sales of beer grew 5% while those of spirits expanded 2% during the April-June quarter, according to GlobalData, a UK-based research firm. A year earlier, the beer segment had grown by 7% and spirits by 3%. While curbs on liquor sales around voting days affected demand, this also coincided with the label registration cycle this time companies need to get approval for and register changes in packaging, warnings, etc., every year something that directly impacted operations and supply chain.
"Elections, contrary to popular belief, are not good for the industry and because it happened in the peak summer season, it is particularly bad for the beer segment," Shekhar Ramamurthy, the managing director at United BreweriesNSE 0.41 % told ET last month. This is because of restrictions on us in terms of number of hours allowed to operate breweries and closure of outlets, he said, adding that some states even had directives that dispatches and purchase of liquor should not be more during election months than the same period the previous year.
The Lok Sabha elections coincided with the Indian Premiere League cricket tournament and summer months, and both have historically boosted demand for beer in this warm, tropical country. The April-June quarter typically accounts for nearly 45% of the annual sales in the beer segment, according to GlobalData.
United Breweries, which makes the Kingfisher beer, said the growth will soon return to normal. "We expect the industry to grow by mid to high single digit this year," Ramamurthy said.
Spirits the segment includes whiskey, rum, brandy, gin and vodka also saw a similar trend. The segment had grown in double digits in 2018, the most since 2012, thanks to fading impact of a ban on sales near highways and increased stability following distribution changes in some states. But the growth rate reduced to 3% in the January-March quarter, due to tax impact in a few states and pre-election-related disruptions, before slowing further to 2% in the April-June period.
"The Indian-made foreign liquor, or IMFL, industry has grown by 5.1% in Q1 FY20 as against 9.1% last year. Also, (sales in) a big state like Andhra Pradesh, which contributes 10% of the IMFL industry, declined 15%," said Ahmed Rahimtoola, the marketing head at Allied Blenders, which sells Officers Choice, the worlds top-selling whiskey brand. "Yet, premiumisation drive that the industry has been witnessing continued unabated with deluxe and above segments growing by over 15%.
A few months ago, United Spirits, the country's biggest liquor maker, and French spirits firm Pernod Ricard had flagged concerns about the general election disrupting sales.
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