Karnataka beer price hike: Why pub owners are in low spirits and sales may drop

A glass of beer

As the government's steep hike in duties on various categories of beer took effect on January 20, beer lovers in Karnataka are drinking with heavier hearts.

According to a Times of India report, a 650ml bottle of beer is now costlier by Rs 10-45. Despite record sales earlier this financial year, the government says the hike aims to address a revenue shortfall in the excise department.

The additional excise duty, according to the report, has increased from 185% to 195% of the billing price or Rs 130 per bulk litre, whichever is higher. While the price of a bottle of beer that previously cost Rs 100 is now Rs 145, one that used to cost Rs 230 is now available for Rs 240.

Liquor vendors fear that beer sales may drop by at least 10%. The duty hikes have come at a time when market conditions are unfavourable, and the increase in beer prices will burden buyers, said Karunakar Hegde, president of the Federation of Wine Merchants Associations.

"For the past week, there was no supply of beer due to the price hike. Even a week before, breweries began slowing production, and now they will need to realign their processes. As a result, there's a shortage, the market is dry, and business is taking a hit,” Hegde said. “Purchases have already dropped 10%, and the lack of stock is impacting sales significantly.”

A pub chain owner in Koramangala, as quoted by TOI, said the government's decision to increase prices is another blow to the industry at a time when "there has been a noticeable drop in party-goers across the city."

"Because of job insecurity and lay-off fears, people are cautious about spending. Many pubs are struggling to recover their investments as expenses continue to rise by nearly 10% annually, while profits keep shrinking," he said.

“The pub industry is currently going through a tough phase due to intense competition and financial constraints, and government policies, including funding cuts, are adding to the challenges. Pubs are unable to absorb the losses or pass on the price hikes to customers," he added.

"Because of the price change, all manufacturers have halted production to change the rate slips on bottles and other packages. As a result, for 45 days from January 20, there will be less beer stock in the market," Hegde said, lamenting, “We're left with no beer to sell and no way to make money. The situation is dire, and the industry is struggling to stay afloat.”

The January 20 duty hikes were part of a policy decision announced in the state budget in March 2024, according to a senior excise official. The hikes aimed to update taxation policies that had not been revised for several years, with a focus on beer duties, which had remained unchanged for a long time compared to Indian-Made Liquor (IML), he said.

To address this gap, the government invited objections and suggestions from stakeholders, including the public and merchants, before finalizing the notification. These inputs were thoroughly reviewed before issuing the revised policy, the official added.