India’s beer sales expanded at the fastest pace in three years in 2019, but companies said growth had slowed sequentially in every quarter because of increasing taxation and curbs on liquor in a few states.
The market grew 6.9% in the past year compared with 5.7% in 2018, according to GlobalData Plc, a UK-based research firm. However, companies said the year had remained challenging and the pace was significantly slower than the pre-demonetisation period — in 2016, sales had increased 10%.
“The India beer industry had a relatively satisfying year with the first half in particular being positive barring the month of April due to elections. The second half of the year was more challenging owing to the headwinds of Andhra prohibition and adverse weather with an extended monsoon,” said Kartikeya Sharma, the South Asia president at AB InBev, which sells Budweiser and Corona.
The Lok Sabha elections in April-May also coincided with the Indian Premiere League cricket tournament and summer months, which have both historically boosted demand for beer in this warm, tropical country. The April-June quarter typically accounts for nearly 45% of the annual sales in the beer segment, according to GlobalData.While companies expected a pickup after elections, large markets such as Andhra Pradesh, Karnataka, Maharashtra and Kerala have seen either changes to the route to market or price hikes, impacting demand. More recently, AP introduced a new bar policy which includes cancellation of existing bar licences, issuance of new permits from January 2020 and reduction in the number of bars by 40%. The ongoing economic slowdown too is weighing on demand.
United Breweries, which controls nearly half the beer market with brands such as Kingfisher, said unless there was a dramatic turnaround in the economy overall, 2020 would continue to be challenging.
There would hopefully be growth in the first quarter of next fiscal because of the base effect from April-June 2019 when sales were depressed due to elections, said UB managing director Shekhar Ramamurthy. “But that gets negated by the fact that Andhra, which was a large market, will be significantly reduced because of government policies,” he added.
Telangana has also increased excise tax in December, and analysts expect this to affect demand in the ongoing fourth quarter of fiscal 2020, after a bad Q3. “Q3FY20 beer volumes are expected to be one of the worst since demonetisation and the highway ban quarter,” wrote Himanshu Shah of Dolat Capital in a recent investor note.
The alcoholic-beverage industry in India is heavily regulated, with excise and other taxes forming an important source of revenue for state governments, even as the per capita beer consumption at around 2 litres per annum here is materially below other markets.