Beer industry in major trouble due to rising costs and price curbs: UBL CEO

United Breweries CEO Vivek Gupta said the Indian beer industry is facing major challenges due to rising input costs, supply shortages and pricing restrictions, urging government support to sustain growth, manage costs and prevent supply disruptions in the sector

Bengaluru: The Indian beer industry is facing “major trouble” amid rising input costs triggered by the war, supply shortages and restrictions on pricing imposed by state governments, said United Breweries Ltd (UBL) Chief Executive Officer and Managing Director Vivek Gupta.

Urging government intervention, he said the lack of regulatory support could stall growth and innovation in the sector and make it difficult to meet commitments.

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“I think the beer industry is in major trouble right now because of the war and the financial impact it has on input costs and the inability to take pricing without government approval,” Gupta told PTI.

The government has to come forward and support the domestic beer industry, otherwise it will stall innovation. The impact on beer is disproportionately higher than on any other industry, he said.

“There is a significantly bigger impact of war on our industry because of the increase in costs of bottles, raw materials, the Indian rupee against the dollar not being strong, exports getting hammered, which was a profitable business, and supply shortages,” he said.

Gupta also flagged regulatory constraints, noting that pricing for beer is largely controlled by state governments through excise policies.

“About 75 per cent of the business is regulated. We cannot even control pricing,” he said, adding that he has been engaging with state authorities for relief.

“I am asking for a 15 per cent increase in my selling price to the government, not to the consumer,” he said, explaining that a large share of realisation goes as taxes. In some states, such as Telangana, he said, United Breweries receives about Rs 330 per case of beer, while government levies amount to around Rs 1,400.

On the can shortage, Gupta said despite the government notification, it is still not resolved and this is going to continue.

“Aluminium prices are increasing significantly. Also, with the gas shortage, can manufacturers have declared force majeure and local can manufacturers are saying that they will not be able to produce fully. Plus, importing cans has become very expensive because of aluminium prices…” he said.

UBL, along with Heineken, is encouraging companies to invest in India so that people can set up their plants, and tie-ups are being signed, but that will take a couple of years, he said.

Earlier this year, the government extended the timeline for BIS certification on imported cans, a move which was expected to help bridge the gap between demand and supply before the arrival of the peak summer season. This move was expected to ease supply constraints faced by companies ranging from cola manufacturers to beer brewers, who had raised concerns over an acute shortage of cans.

Gupta estimated that the war has added at least 15 per cent to production costs, affecting bottles, raw materials and exports. “Even if the war stops today, there is still a minimum impact of six months.”

When asked about the weather and rains in northern India, Gupta said he is “least worried” about it as there is news of a hotter summer this year and, moreover, some southern states have reported early summers, with consumption increasing in some of those states.

“For me, the biggest challenge is the cost increase for suppliers like us, …either they (the government) give us a temporary price increase on our cost or give us some relief on their excise duties,” said Gupta.

Gupta cautioned that rising costs could lead to supply shortages as smaller breweries may struggle to sustain operations. He urged regulators to provide temporary relief through excise duty adjustments or pricing flexibility.

“We do not have deep pockets… if we proactively work together with the government, we will be able to manage working capital and imports,” he said.

On consumption trends, Gupta said downtrading has begun, with consumers shifting to economy brands and smaller pack sizes.

“People are going towards cans because the cash outlay is less. Wallet pressures are pushing smaller sizes and lower consumption,” he observed. However, he added that overall beer volumes have grown 4.5 to 5 per cent in the past two years, with value growth at 7 to 8 per cent.