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Bengaluru: Sales volume at liquor companies have declined between 10% and 19% due to the Supreme Court’s ruling banning the sale of alcohol near all state and national highways.

In December, the apex court banned the sale of alcohol within 500 metres of highways from 1 July 2017. That ban resulted in the closure of around 30% of all outlets across the country, according to industry sources. Of that 30%, 10% of outlets have thereafter reopened, India’s largest liquor firm United Spirits Ltd (USL) said in a conference call with analysts last Monday.

Diageo Plc-owned USL, which sells brands like Antiquity and Johnnie Walker, reported an 18.9% decline in volumes for the April-June quarter on a year-over-year basis. Net sales in its prestige and above segment - its more premium brands such as Royal Challenge and McDowell’s – fell 8% during the quarter since the hit from the highway ban was more pronounced on bars, restaurants and hotels where its premium and luxury brands are consumed more.

Volumes at Amrut Distilleries Pvt. Ltd, a boutique home-grown firm known for its single malt whiskies, have fallen 10% so far due to the ban, according to its executive director Rakshit Jagdale. Even French spirits giant Pernod Ricard SA that owns brands like Royal Stag and Imperial Blue found this year to be particularly challenging.

“In the past, Pernod Ricard India has demonstrated good resilience in a period of several adverse regulatory changes. However, this year has been particularly challenging for the industry as a whole and it has been difficult to continue with the same level of performance," Pernod’s India managing director and CEO Guillaume Girard-Reydet said in an emailed response. But any further impact from the ban will be much lower, Girard-Reydet added.

While there are still about 15,000 stores that are closed, two-thirds of which comprise bars and restaurants or the on-trade segment, with each successive week there are stores either reopening or fresh licenses being issued by state governments who do not want their revenue impacted, USL said in the call last week.

Indeed, Karnataka - one of India’s top markets for liquor consumption - denotified around 1,476.69km of state highways earlier this month. Yet, the southern state is worried that it could be faced with the possibility of missing its excise revenue collection target for the year.

But a month after the ban went into effect, executives at alcoholic beverage firms appear more confident of a return to normalcy in volume growth, starting October.

“When I say that over two further quarters the impact will happen to a lesser extent and go away, I mean…we should get back to normative performance levels and growth levels that we had prior to the highway ban. So it is not just becoming zero, negative becoming zero, but it’s getting back into the positive territory," USL chief executive officer Anand Kripalu said on the call.

Single malt maker John Distilleries Ltd’s chairman Paul John also said the impact of the ban has softened since many states have already denotified state highways, and the SC has suggested that national highways falling within city limits can also be denotified.

On 11 July, the SC dismissed a petition challenging Chandigarh’s decision to denotify national and state highways and convert them into district roads and paved the way for other states to follow suit.

“The Supreme Court’s favourable ruling of allowing sale of liquor on state denotified highways is a positive, but prohibition of sale of liquor on highways will continue to impact volumes (though the impact will recede QoQ) for a couple of quarters," Abneesh Roy, senior vice president at Edelweiss Securities, wrote in a note last Monday.

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