The Hindu Business Line : Beer industry growth slows down

“Except the northern region, beer sales have been declining more because of issues such as the standoff between the industry and the Andhra Pradesh Government and increase in taxes in Maharashtra.”

K. Giriprakash

Bangalore, Feb. 7

The beer industry is finally witnessing a relative slowdown after three straight years of growth and it is not necessarily because of recession.

SABMiller’s Director – Corporate Communications and Affairs and the All India Brewers’ Association Vice-President, Mr Sundeep Kumar, told Business Line that year-to-date industry growth for 2008-09 was 8.5 per cent while for 2007-08, the industry grew 14 per cent. For the first six months of 2008-09, the gap was larger with the industry registering a growth of 6.9 per cent compared with 16 per cent same period last year.

Mr Sundeep Kumar said except the northern region, beer sales have been declining more because of issues such as the standoff between the industry and the Andhra Pradesh Government and increase in taxes in Maharashtra. Also, the severity of monsoon had shortened the peak selling summer season leading to lesser growth.

AP tussle

For SABMiller, the standoff has hurt the company more badly than the rest of the industry given its relative importance in their portfolio. Its growth in the southern market year-to-date (April-December, 2008) was negative while the industry grew 5 per cent in the region. But it made up with higher sales in the northern region with growth of 18.6 per cent compared with the industry average of 12.8 per cent. In the central region comprising Maharashtra, Orissa and Madhya Pradesh, SABMiller’s grew 5.8 per cent compared with 8.5 per cent.

Mr Sundeep Kumar said the unreasonable attitude of the Andhra Pradesh Government had forced SABMiller as well United Breweries to stop supply of beer to the State. “The State Government is being unreasonable by effecting only a negligible price increase since 1997,” he said.

Andhra Pradesh alone contributes 18 per cent of beer consumption in India. Mr Sundeep Kumar pointed out that in Andhra Pradesh, only the State agency, Andhra Pradesh Beverage Corporation Ltd, has the right to purchase alcoholic beverages from companies through quotation. It also fixes the consumer price and supplies beer to private retailers.

Though the actual cost of production, which includes the price of malt, cost of power, salaries and other overheads have gone up multifold, the government has not considered an appropriate revision even to cover up the cost, he said.

In Tamil Nadu, because of the ban on import of beer and with SABMiller not having a brewery, its sales were affected compounded by shortage in supply as well as the local contractor was not able to meet the demand.

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