India Beer Industry Faces 'Major Trouble' Grip Amid War-Fueled Cost Surge and State Price Curbs

India Beer Industry Faces 'Major Trouble' Grip Amid War-Fueled Cost Surge and State Price Curbs​

Bengaluru, Apr 19 (PTI) The Indian beer industry is grappling with what United Breweries Ltd (UBL) has termed "major trouble." The sector is being squeezed by escalating input costs driven by global war impacts, critical supply shortages, and stringent pricing restrictions imposed by various state governments.

United Breweries CEO and Managing Director Vivek Gupta highlighted that the lack of proactive regulatory support threatens to stifle both innovation and overall growth potential within the domestic beer market. He emphasized that the industry’s challenges are disproportionately higher than those facing other sectors.

Global War Elevates Production Costs​

Gupta pointed to the significant financial repercussions of the war, stating that it has added at least 15 per cent to overall production costs. These increased costs affect multiple critical areas, including raw materials, bottling, and export viability.

The impact is compounded by the fluctuating exchange rate and challenges to profitable export business. He noted that even if the geopolitical conflict were to cease, the sector would still face a minimum impact of six months due to accumulated cost pressures.

Regulatory Constraints Control Pricing​

A major obstacle cited is the state-level control over pricing, as approximately 75 per cent of the business remains regulated through state excise policies. Gupta explained that controlling the final consumer price is virtually impossible for industry players.

He detailed the immense tax burden, sharing an example from Telangana where UBL receives about Rs 330 per case of beer, while government levies are estimated to amount to around Rs 1,400. This regulatory squeeze makes sustainable operations difficult without government intervention.

Supply Chain Snarls Threaten Production Output​

The industry is also battling acute supply chain constraints. Gupta warned that the shortage of aluminum cans persists despite government efforts, citing rising aluminum prices and gas shortages.

He explained that local can manufacturers have declared force majeure, and importing cans has become prohibitively expensive due to volatile aluminum pricing. While the government previously extended the BIS certification timeline for imported cans to ease immediate pressure, the shortage remains a core operational risk.

Economic Headwinds Force Consumer Downtrading​

Market-side pressures are also evident, with Gupta observing that downtrading has begun among consumers. Wallet pressures are pushing consumers toward smaller pack sizes and choosing economy brands.

This shift indicates that volume growth, while robust, is accompanied by a behavioral change. Despite these economic headwinds, however, the overall beer market volume has shown steady growth of 4.5–5 per cent over the past two years, with value growth recorded at 7–8 per cent.

Plea for Government Support and Price Relief​

To sustain operations, Gupta issued an urgent appeal for temporary government relief. He stressed that the core challenge is not market demand but the escalating cost from suppliers.

He implored regulators either to provide a temporary increase on input costs or offer relief on excise duties. Gupta concluded by urging authorities to proactively collaborate with the industry to help manage working capital and essential imports.

Source:​

View attachment 21746