The Hindu Business Line : Beer sales expected to be on even keel

Bangalore March 27 After an unprecedented 2006-07 when beer sales in some northern States recorded over 300 per cent growth, the next fiscal is expected to slip back into a normal 15 per cent rate.

"Fifteen per cent is normal. But some States may still lag," the All-India Breweries' Association Director, Mr Sundeep Kumar, told Business Line.

In 2006-07, beer sales are set to post about 31 per cent growth on the back of a 527 per cent growth in Punjab and 209 per cent growth in Haryana during April-May 2006.

States such as Haryana and Punjab recorded huge growths after Governments in these States replaced the auction system with licensing system. The change saw prices of beer drop Rs 20 per 650 ml bottle to around Rs 45-50.

Mr Kumar pointed out that traditional strongholds such as Karnataka and Orissa, in fact, witnessed a drop in growth. Karnataka's share in the total domestic beer market dropped to 8 per cent from 11 per cent during April 2006 - January 2007 as the local government slapped higher levies, which increased beer prices by Rs 5 - 10 per bottle.

In 2005-06, Karnataka recorded a growth of about 33 per cent when the national average was 17 per cent but between April 2006 and January 2007, its growth was nearly flat. "Which means there was a swing of 33 per cent on the negative side," Mr Kumar said.

He said globally taxes on beer are half of hard liquor but in States like Karnataka, it was the reverse. "Therefore, there are no low-cost options available for customers," he said.

"The Governments should in fact de-link beer from hard liquor if the industry has to grow," he said.

Model policy

As per the Food Processing Ministry's model policy for beer, the price of a 650 ml bottle should be between Rs 40 and Rs 45 while the taxes should be around 35 per cent.

Industry analyst Mr Nikhil Vora said industry growth would remain strong. "For the next couple of years, industry growth will be between 18 per cent and 20 per cent," Mr Vora, who works with SSKI Securities, said.

Consolidation

He expected a consolidation in the industry though there could be a few more players joining the race for market share.

For the record, between April 2006 and January 2007, domestic beer sales in volume terms grew to 999 lakh cases recording a growth of 31 per cent.

Andhra Pradesh which leads the beer market nationally with an 18 per cent share, posted 42 per cent growth during the same period, Tamil Nadu recorded 34 per cent, Delhi 30 per cent and Maharashtra 20 per cent.