Carlsberg, Heineken and other giants are demanding $466 million in arrears from India
According to data from Euromonitor International, India is the eighth largest alcohol market in the world (by volume) with an estimated annual revenue of $45 billion. Alcohol pricing is regulated at the state level and these taxes are an important source of revenue.
In Telangana, liquor companies must supply only to state-run warehouses, which then sell to retailers, making liquor companies dependent on the state government for payments.
According to sources, global alcohol companies such as Diageo, Pernod Ricard and Carlsberg are seeking about $466 million in arrears from Telangana.
Heineken's Allied Breweries has threatened to stop supplying EOE beer to Telangana, India's largest beer-consuming region, as payment delays and price increases that have not been approved by the government since the 2019-20 financial year have negatively affected its financial results.
Last year, the Competition Commission of India (CCI) raided the offices of alcohol giants Pernod Ricard and AB InBev as part of an investigation into alleged price-fixing by retailers. The raids, which took place in Hyderabad and targeted retailers in Telangana state, are believed to be one of the biggest industry crackdowns in recent years.
The Competition Commission of India also conducted a surprise inspection in 2018, investigating whether major beer companies, including AB InBev, were guilty of cartel practices. While the investigation is ongoing, it has raised concerns about the conduct of brewers who control India's $7 billion beer market, which accounts for 88 percent of the industry.
In Telangana, liquor companies must supply only to state-run warehouses, which then sell to retailers, making liquor companies dependent on the state government for payments. Telangana reportedly owes whisky and beer producers around Rs 40 crore ($466 million).
On January 8, Telangana Minister Jupally Krishna Rao claimed that the Union Beer Company, which has a 70% market share in the state, had suspended supply as a "tactic" to ensure that prices would rise, thereby curbing consumer demand. Telangana owed 6.6 billion rupees ($77 million) to Union Beer, Rao said, without specifying the reason for the delay.
The Telangana government owes Carlsberg nearly 4 billion rupees ($5 million) and AB InBev 1.5 billion rupees ($17 million). Whisky and Scotch producers owe even more, 15 billion rupees ($175 million) to Pernod Ricard and 10 billion rupees ($116.4 million) to Diageo.
The Winemakers Association of India and the International Spirits and Wine Association of India have recently written to the Telangana government, stressing that the delay in payment will cause serious operational difficulties, which affect the ability of companies to maintain and plan investments. By October 3, 2023, the total amount owed is estimated at $606 million. In the 2024 fiscal year, Heineken's United Beer Company reported sales of Rs 18,300 crore ($2.1 billion).
There are fewer than 3,000 liquor outlets in Telangana, and licenses to operate them are issued through a lottery, with 130,000 applicants for 2023. Successful applicants were granted licenses in August 2023, allowing them to start business by December 2023 and continue until 2025.
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