
United Breweries Limited (UBL), the producer of popular beer brands such as Kingfisher and Heineken, has suspended its beer supply to Telangana, India's leading beer-consuming state. This decision stems from the state's refusal to approve price increases and significant unpaid dues, rendering UBL's operations financially unsustainable.
Financial Strain and Unpaid Dues
Telangana accounts for approximately 15-20% of UBL's beer sales and 10-12% of the company's earnings. Despite this substantial market share, beer prices in the state have remained unchanged since 2019. UBL has repeatedly requested a 33% price hike to offset rising operational costs, but the state government has declined these appeals, citing concerns over consumer burden.
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The lack of price adjustments has led to escalating losses for UBL. Additionally, the Telangana Beverages Corporation Limited (TGBCL), the state-run entity responsible for alcohol distribution, owes UBL approximately ₹658.95 crore in overdue payments. These financial strains have compelled UBL to halt supplies, as continuing under current conditions is economically unviable.
Market Impact
Telangana's Excise Minister, Jupally Krishna Rao, has acknowledged the pending dues but remains firm against approving the requested price hike. The minister argues that a 33% increase would significantly impact consumers, raising the price of a beer bottle from ₹150 to around ₹250. He also criticized UBL's suspension of supplies as a pressure tactic, emphasizing that the government will not yield to such measures.
UBL holds a dominant position in Telangana's beer market, with a market share of approximately 69%. The suspension of supplies is likely to create a significant void. This could lead to beer shortages. Retailers and consumers may feel the impact. The state’s refusal to adjust prices adds to the issue. UBL’s decision to halt supplies may disrupt the local beer industry’s balance.
Industry-Wide Concerns
UBL's predicament is not isolated. Other major alcohol companies, including Diageo, Pernod Ricard, and Carlsberg, are collectively owed approximately $466 million by the Telangana state. These firms have expressed concerns over delayed payments and the lack of price revisions, which are adversely affecting their operations and financial planning.
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The standoff between United Breweries and the Telangana government highlights challenges in the alcohol industry. Stringent price controls and delayed payments add to the strain. Both parties are firm in their positions. The immediate future of beer availability in Telangana remains uncertain. This could impact consumers and the broader market.