India: Beer sales plummet across states
Tipplers forming long queues at Indian liquor stores failed to bring respite for the beer industry as volume sales fell sharply in several states in the first two weeks after reopening of outlets, the Economic Times reported.
Excise data sourced from officials indicated that volume sales of beer declined about 60% in Telangana, Karnataka and Rajasthan, while the fall was steeper at more than 80% in West Bengal and Madhya Pradesh.
The April-June quarter typically accounts for nearly 45% of annual beer sales in the warm, tropical country. "One of the key factors is the steep rise in consumer prices on account of exceptionally high special taxes that have been imposed by most states," said Shekhar Ramamurthy, managing director of United Breweries that controls more than half the countrys beer market.
Many state governments, which saw their revenues plummet amid the lockdown to contain the Covid-19 pandemic even as their expenses shot up, have increased tax on alcohol by up to 75% of maximum retail price to boost their coffers since the Centre allowed reopening of liquor shops in the first week of May. We do hope that states are able to roll back some of the tax increases so that the beer business can sustain itself, Ramamurthy said.
Brewers fear the additional tax would damage the category already impacted by the lockdown, and a cutback in discretionary spends. AB InBev, the second-largest brewer, said existing taxation structure for beer at the same rate as hard spirits is short-sighted and the resulting drop in sales for the industry will require considerable time for recovery.
Summer is the peak season for beer and the introduction of additional tax with an oversized impact on beer will lead to missed revenue opportunities for the states and cause distress across several segments of the economy including farmers, said Kartikeya Sharma, president South Asia at AB InBev.
In India, several state governments control liquor retailing or wholesale distribution or both, and taxes form a major source of their revenues. More than 50% of the retail price of liquor goes to state and central governments by way of VAT and excise duty. Price tag of a 650 ml bottle of mainstream beer brand increased to Rs 190 from Rs 110 in Delhi after the state imposed 70% Corona cess while it went up to Rs 170 from Rs 125 in West Bengal that increased tax by 30%. Uttar Pradesh, Telangana and Haryana opted for flat price increases of between Rs 5 and Rs 30. The hike was steepest in Andhra Pradesh where retail price surged to Rs 220 from Rs 130 earlier.
Last year, the Indian Premiere League twenty20 tournament and summer months, which have both historically boosted demand for beer, failed to revive the segment which was hurt by the general elections and consequent dry days.
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