Beer manufacturers are facing the adverse effects of Inflation:Carlsberg India
Beer is a drink of moderate alcohol and one of the most preferred beverages among young consumers in India. After over two years of disruption from Covid, the beer industry has bounced back strongly to exceed pre-covid volume. This has benefitted consumers, the trade, brewers and generated significant revenues for the state excise.
However, the continued fracture of the global supply chain due to covid, which has been further compounded by the war in Europe has led to steep increases in the price of commodities. Therefore, compared with prior year, the price increase of barley is up 98%, rice 23%, glass 44%, bottle caps 67%, cartons 24%. The steep rise in inflation is severely straining the financial viability of the brewers in the states. In India, the alcobev sector does not have the flexibility to pass on the cost increases to the consumers due to state excise price controls.
From the price consumer pays for a bottle of beer (MRP), 60-80% accounts for various duties, taxes, and levies dependent on the state. The balance 40-20% is shared by the trade and the brewers, with the brewers share as low as 17-20% in number of states. This is not sustainable for the brewers due to the requirement of state-by-state brewery operations and the associated burden of high fixed costs. The brewers, including Carlsberg India brings significant economic value to the state with direct and in-direct employment for many of the citizens of the state and sustains other supporting sectors like trade partners, suppliers, and farmers of barley.
Carlsberg India Private Limited is a leading player in the beer industry with a brewery footprint spread across India and has large number of employees across country.
Commenting on the challenges facing the beer industry, Nilesh Patel, Managing Director at Carlsberg India said, “The policies of the state excise should take into consideration the rise in inflation every year, including any one-off shock in steep inflation, and have a balanced approach of collecting revenues and compensating the brewers every year to recover inflationary costs because without this change, the very survival of beer sector is at risk”