UBL, SAB Miller sue AP govt on beer price

UBL, SAB Miller sue AP govt on beer price

Mumbai: India’s top two beer producers by revenues, United Breweries Ltd (UBL) and SAB Miller India, have filed a case against the government of Andhra Pradesh for not revising the procurement price of beer in more than a decade, despite a significant rise in costs and a 300-400% increase in the retail price.

In their joint petition filed in the last week of October with the Andhra Pradesh high court, the market rivals have joined hands to complain that the state is using its monopoly in not revising the 1997 procurement price, which is around Rs200 per case of 12 bottles of 650ml each.

In Andhra Pradesh, only the state agency Andhra Pradesh Beverages Corp. Ltd (APBCL) has the right to purchase alcoholic beverages from companies through quotation. It also fixes the consumer price and supplies beer to private retailers. Officials from APBCL weren’t immediately available for comment.

UBL and SAB have market shares of 43% and 37%, respectively, and Andhra Pradesh is the single largest market for both companies. The state contributes about 30% of the total annual beer revenues of SAB and some 18% for UBL.

The price revision committee of the state government has revised the beer procurement prices only once in 11 years, in 2005 after pressure from the industry. That 9% revision from 1997 prices, the industry claimed, was not adequate to cover rising costs.

“Though the actual cost of production, which includes the price of malt, cost of power, and salaries and other overheads has gone up multifold after the fixation of the price in 1997, the government has not considered an appropriate revision at least to cover up the cost till now despite our requests," said one SAB executive, who didn’t want to be named because of the matter is sub judice.

“SAB Miller had closed its brewery in Andhra Pradesh for more than a month early this year as it could not cope with the increasing cost, and it was only after a recent dialogue with the government that it decided to resume operations at this brewery," he added.

The companies, which have set up breweries in the state, are also not allowed to supply to other states without permission from the Andhra Pradesh government.