He called for government action, stating that the absence of regulatory support could hinder growth and innovation in the industry and complicate fulfilling commitments.
“I believe the beer industry is in serious trouble currently because of the war and its financial repercussions on input costs, along with the requirement to seek government approval for pricing,” Gupta shared with PTI.
The government needs to step in and assist the domestic beer industry, or else innovation will stagnate. The burden on the beer sector is significantly greater than that on other industries, he noted.
“Our industry is hit harder by the war due to rising costs of bottles, raw materials, unfavorable exchange rates for the Indian rupee against the dollar, and a decline in exports, which used to be a profitable venture, alongside supply shortages,” he explained.
Gupta also highlighted regulatory challenges, stating that beer pricing is primarily governed by state governments through excise regulations.
“Approximately 75% of the business is regulated. We lack control over pricing,” he mentioned, noting his efforts to engage with state authorities for relief.
“I am requesting a 15% increase in my selling price to the government, not to the consumer,” he explained, indicating that a substantial portion of revenue is consumed by taxes. In states like Telangana, he mentioned that United Breweries receives about ₹330 per case of beer, while government charges are around ₹1,400.
Regarding the can shortage, Gupta stated that despite government notifications, the issue remains unresolved and will likely persist.
“Aluminium prices are rising sharply. Additionally, due to the gas shortage, can manufacturers have declared force majeure, and local manufacturers are indicating they cannot achieve full production, while importing cans has become very costly due to aluminium price hikes…” he noted.
UBL, in collaboration with Heineken, is encouraging investments in India, “So that companies can establish their facilities, and we are formalizing partnerships, but that will take a couple of years,” he added.
Earlier this year, the government extended the deadline for BIS certification on imported cans, which was anticipated to help alleviate supply shortages as the peak summer season approached. This decision was expected to ease supply constraints impacting various businesses, including cola producers and beer brewers, who had voiced concerns over a severe can shortage.
Gupta estimated that the war has increased production costs by at least 15%, affecting bottles, raw materials, and exports. “Even if the war were to end today, there would still be a minimum six-month impact.” When asked about weather conditions and rains in Northern India, Gupta expressed he was “least worried,” noting predictions of a hotter summer this year and reports of early summers in southern states, where consumption is rising.
“For me, the primary challenge is the rising costs from suppliers like us; …they (the government) either need to provide a temporary price increase on our costs or offer some relief on their excise duties,” Gupta remarked.
He warned that escalating costs could result in supply shortages, as smaller breweries might find it challenging to continue operations. Gupta urged regulators to consider temporary relief via adjustments in excise duties or pricing flexibility.
“We do not have deep pockets… if we collaboratively work with the government, we can better manage working capital and imports,” he stated.
On consumption trends, Gupta observed that downtrading has commenced, with consumers opting for economy brands and smaller pack sizes.
“People are leaning towards cans as the cash outlay is less. Financial pressures are pushing towards smaller sizes and decreased consumption,” he noted. However, he added that overall beer volumes have increased by 4.5–5% in the last two years, with a value growth of 7–8%.
