India's three largest producers of beer have written to Karnataka government, urging the state to withdraw draft rules that propose a duty hike based on alcohol content classification, adding that the proposal could lead to a 10-20 per cent price hike in mass as well as premium segments.
The Beer Association of India (BAI) has written to Chief Minister Siddaramaiah, also seeking the government to withdraw proposal asking beer manufacturers to declare sugar content on the bottle’s label. Another proposal that seeks to cap the use of sugar to 25 per cent of the weight of malt of grain is also being proposed by the major brewers.
The association comprises of three major brewers, United Breweries (controlled by Heineken), AB InBev and Carlsberg, together accounting for about 85% of India's beer sales.
The draft notification has proposed doubling of excise duty on strong beer to Rs 20 per bulk litre, as well as raising the minimum billing price of beer in the state to Rs 300 per case and setting the Additional Excise Duty (AED) at 195% of the billing price, or Rs 130 per bulk litre, whichever is greater.
"The increase proposed in the draft notification would increase the prices by 10-20 per cent in mainstream and premium segments," BAI has said. The brewers association added that the proposals would make beer 'unaffordable to the masses', if the proposed 35 per cent tax hike for the segment is implemented.
The draft notification by Karnataka government proposed to amend the Karnataka Excise (Brewery) Rules, 1967.
India's beer industry is worth $12 billion at market prices and contributes approximately $8 billion to Government's tax revenue, BAI's DG Vinod Giri recently told World Brewing Alliance, which is slightly less than 20% of the alcohol beverage industry’s tax revenue.
For United Breweries, Karnataka is one of the major states driving volumes, where prices were hiked recently. The company also mentions that its volume growth of 5% in H1FY25 was also helped by Karnataka, among other States. The brewer said during its earnings call that the company remains optimistic about the long-term growth potential of the beer category, driven by rising disposable income, favourable demographics as well as the premiumization trend.
A recent estimate by ICRA projects alcoholic beverages companies may expand revenue by 8-10% in FY25, led by steady demand for beer, along with increasing consumer preference for premium products. Beer is among the faster growing product in the segment, said ICRA. "Beer witnessed higher consumption growth than spirits in FY24 with a YoY growth of ~8%. This was supported by stable demand and higher increase in taxes on spirits in some states. ICRA expects moderate growth of 5-7% for beer volumes in FY2025, on a high base."
In India, the BAI members operate significant capacity with Carlsberg running seven breweries, UB operating 19 while AB-InBev India operating 10 breweries across India.
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