Home / Companies / News /  India's liquor makers are in a bind over pricing

NEW DELHI : Liquor companies are appealing to state governments to allow them to raise prices amid surging costs of inputs ranging from tamper-proof caps to extra-neutral alcohol, the primary raw material.

Though distillers decide the prices of their products, they need to get them approved by state governments.

With many alcohol companies being forced to absorb cost increases, liquor makers have been seeking revision in the prices of alcoholic beverages.

Devans Modern Breweries, which sells Godfather and Six Fields beers, said it witnessed a steady increase in costs in the past few quarters.

“The overall increase is as high as 20% in the past 15 months alone," said managing director Prem Dewan. “Though the maximum retail price of beer has increased, the ex-brewery price has remained constant in many states resulting in losses," he said.

Even for large liquor makers, rising input costs, especially for packaging, raw materials and shipment, have started hurting.

“We urge policymakers to recognize the supply-chain pressures and allow alcohol beverage manufacturers to avail price increase," said Anasuya Ray, vice-president, corporate affairs - South Asia for AB InBev, which owns brands such as Budweiser and Corona.

Companies said the need of the hour is more flexible regulatory processes to ensure that the businesses in this sector are viable.

The Confederation of Indian Alcoholic Beverage Companies (CIABC), a body representing homegrown liquor companies, has sent representations to at least nine states in November, requesting price increases to account for inflation in input costs, especially extra-neutral alcohol, or ENA, which is the primary raw material for making alcoholic beverages.

Not just that. Even the price of tamper-proof caps that make alcohol bottles non-refillable has gone up by about 15% in a year, according to the International Spirits and Wines Association of India (ISWAI).

Outer carton costs have escalated by 37%, said ISWAI chief executive Nita Kapoor.

“The existing regulatory framework means we have to keep the overall price of the product constant. This has an impact on the overall working margins for the market," said Mohit Bhagchandani, founder of Mumbai-based 7InkBrews, which launched Copter7 beer in 2021 during the second wave of the pandemic.

Bhagchandani said costs on all fronts have been on the rise, be it raw materials, tax, trade, logistics, or manufacturing.

Material and packaging costs have increased by around 15-20%, impacting overall production outlay.

Kasturi Banerjee, founder and director at Stilldistilling Spirits, which makes Maka Zai Rum out of Goa, said that value-added tax and excise duties on raw materials increased during the covid pandemic have still not been reviewed or reduced.

Abhishek Khaitan, managing director at liquor maker Radico Khaitan, said that although the operating environment has improved significantly from last year, it saw unprecedented levels of input cost inflation, impacting the profit margins, particularly for the company’s non-Indian-made foreign liquor (IMFL) business.

Vinod Giri, director-general of CIABC, said the beverages lobby has provided an itemized list of cost increases to the state governments.

“We mentioned all the recent cost increases plus the cost increase that happened in the last couple of years, which is primarily led by extra-neutral alcohol," he said.

Giri said the association has met with many government officials to apprise them of the issue. “We were assured that when the next policy is being framed, this will be kept in mind," he said.

However, he does not see any change happening before 1 April when the new excise policies come into effect.

“Many governments have not given any price increase in the last two to three years. We have got a lot of assurances, but we don’t know unless we see it," he added.

Varuni Khosla
Varuni Khosla is a journalist with close to 14 years of experience in writing business news stories for mainstream newspaper companies like Mint and The Economic Times. She reports and writes on luxury and lifestyle brands, hospitality and tourism news, the business of sports, the business of advertising and marketing and alcohol brands.
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