On April 19th, it was reported that the war had led to soaring costs, and price controls had put the Indian beer industry in a major predicament.
Vivek Gupta, CEO and General Manager of United Breweries of India (UBL), stated that the Indian beer industry is facing "significant challenges" due to rising costs caused by war, supply shortages, and price restrictions imposed by state governments.
He urged the government to intervene, stating that the lack of regulatory support may hinder the growth and innovation of the industry and make it difficult to fulfill commitments.
Gupta said, "I think the beer industry is currently in a difficult situation because of the skyrocketing costs caused by war and the inability to price without government approval
The government must step forward to support the domestic beer industry, otherwise it will hinder innovation. He stated that the beer industry has been more affected than any other industry.
He said, "The impact of war on our industry is much greater because of rising costs of bottles and raw materials, poor exchange rate of the Indian rupee against the US dollar, heavy damage to exports (which were originally a profitable business), and supply shortages
Gupta also pointed out regulatory restrictions and stated that the price of beer is largely controlled by state governments through consumption tax policies.
About 75% of the business is regulated. We can't even control prices, "he said, adding that he has been negotiating with state government departments for help.
I am requesting the government to increase the purchase price by 15% (beer companies sell beer to state governments, which then sell it to consumers), instead of making consumers pay, "he explained, stating that most of the income is used to pay taxes. He pointed out that in some states, such as Telangana, Union Beer Company earns about 330 rupees per box of beer, while the government levies taxes and fees of up to 1400 rupees.
Gupta stated that despite the government's announcement, the shortage of cans has not been resolved and this situation will continue.
Aluminum prices have risen sharply. In addition, due to natural gas shortages, can making companies have declared force majeure, and local can making companies have stated that they cannot produce at full capacity. In addition, the rise in aluminum prices has led to very high costs for imported cans... "he said.
United Brewery and Heineken are encouraging canning companies to invest in India. In this way, people can build factories, and we are signing cooperation agreements with them, but this will take several years, "he said.
Earlier this year, the Indian government extended the BIS certification period for imported cans, aiming to help alleviate the gap between supply and demand before the peak summer sales season. Previously, several companies, including cola producers and beer brewers, had expressed concerns about the severe shortage of cans, and this move is expected to alleviate the supply pressure faced by these companies.
Gupta estimates that the war has increased production costs by at least 15%, affecting bottles,easy open end, raw materials, and exports. Even if the war stops today, the impact will continue for at least six months
When asked about the weather and rainfall in northern India, Gupta said he was "not worried at all" because there were reports that summer would be hotter this year, and some southern states also reported that summer came earlier, with some states experiencing an increase in consumption.
Gupta said, "For me, the biggest challenge is the increase in costs for suppliers like us... either the government temporarily raises our purchase price or waives our consumption tax
Gupta warns that rising costs may lead to supply shortages as small breweries may struggle to maintain operations. He urged regulatory agencies to provide temporary relief measures through adjusting consumption taxes or providing price flexibility.
We don't have sufficient funds... If we actively cooperate with the government, we can manage our operating capital and imports well, "he said.
Gupta stated that in terms of consumer trends, downgraded consumption has begun, with consumers shifting towards economy brands and smaller packaging specifications.
He said, "People are turning to canned beer because they have less cash expenditure. Economic pressure has prompted people to choose smaller packaging, thereby reducing beer consumption." However, he added that in the past two years, total beer sales have increased by 4.5% to 5%, and sales have increased by 7% to 8%.
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