Home >companies >news >No cheer for beer sales in 2018 as policy tweaks keep growth in check

Bengaluru: Policy changes in key beer-guzzling states, including Karnataka, West Bengal and Maharashtra, weighed down growth in beer sales last year. This marks the second consecutive year when beer makers have had to struggle to grow to full potential.

Even as the other alcoholic beverage (alcobev) categories stabilized to a large extent after a depressed 2017, stability in the beer market was slower and tougher to come by. Although it is estimated to have clocked volume growth in high single-digits, the bounce-back from 2017 could have been stronger if not for extraneous challenges, executives say. Still, most aren’t perturbed with the way the year panned out and said the long-term opportunities for growth are intact.

“With India, we say you have to have a 10-20-year horizon to normalize the country. If you just take the last three years, you start to see a bit of a picture emerge—2016 was very good, 2017 was awful and 2018 was normal. So you could call 2017 a one-off. And, if you start to go five years out, you see a very strong story starting to emerge," said Kartikeya Sharma, marketing head, Anheuser-Busch InBev’s (AB InBev) India. In 2017, alcobev companies across categories struggled to eke out growth.

While the lingering effect from the government’s demonetization move in November 2016 dampened sales in the first few months of 2017, the biggest blow came after the Supreme Court banned alcohol sales near highways from 1 April 2017. The ruling led to the closure of several retail outlets, and also briefly hurt liquor sales at hotels and restaurants near highways.

While other alcobev categories recovered to a large extent in 2018, for beer, the woes only continued. At the end of 2017, the Maharashtra government decided to increase duty by 17%. In January 2018, West Bengal increased duties by a whopping 40%. Since then, the West Bengal beer market has shrunk by 40%, according to executives. Over the last four months, Karnataka has also been a challenging market. The state excise department has been promoting spirits over beer, leading to supply constraints, say executives.

“Frequent regulatory challenges are a big hurdle for the industry. They have the effect of destabilizing the industry and do not result in revenue growth for the state governments either," said Ankur Jain, founder, B9 Beverages Pvt. Ltd, which sells the popular Bira 91 beer.

“If you take away the extraneous factors such as weak comparatives and highway ban, we see underlying growth of 7-8%, which we believe will continue into the next 12-18 months," said Shekhar Ramamurthy, managing director, United Breweries Ltd (UBL), the country’s largest beer company.

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