E-Malt.com News article: India: Beer excise hike to affect negatively United Breweries’ volumes in the state of Maharashtra

The Maharashtra government has announced a hike in excise duty on liquor products, that for beer sold in the state increasing by over 100%, Money Life communicated on March, 25.

The excise duty has been hiked by Rs18/bulk litre for mild beer and Rs22/bulk litre for fermented beer (or beer with alcohol content higher than 5% v/v).

This hike, industry experts say, would obviously result in a rise in the prices of liquor products, because the price hike would most probably be passed on to the end customers. It would also likely impact the volumes and margins of liquor players in the state. IDFC Securities, in its event update report has stated, "The increase in duty will surely lead to a material increase in the price of liquor products in the state."

As per the same report, for the IMFL segment, the pricing impact will be sharper for lower-end brands. "Regular and economy segment brands will see a 25-35% price increase, while the impact on premium and above segments will be 10-15% (for a 750ml bottle)," it says.

On the pricing of beer post the hike, the report states, "The average price for a mild beer bottle of 650ml stands at Rs60. We estimate a 20% increase in the MRP per bottle on the back of the duty hike for mild beer. For strong beer, the pricing is estimated to range from Rs65 to Rs90 per bottle. Thus, the price increase is estimated to be to the tune of 20% for lower value strong beer and 13%-14% for the premium/ultra category."

For the beer market leader in the state, United Breweries, post the hike the volumes are expected to be impacted. The IDFC report says, "With respect to beer, the industry leader, United Breweries, Maharashtra, is the largest volume contributor and forms 17%-18% of its total volumes. Thus, we see the excise duty hike impacting volumes for UBL."


30 March, 2011