Covid cess hurting sales, say beer makers

The decline in sales, according to Ishank Gupta, Regional Sales Director- East, AB InBev South Asia, was due to two reasons- lockdown and the covid cess on beer sales, which has rendered the beer segment unaffordable to many

By   |  Published: 10th Jul 2020  12:29 amUpdated: 10th Jul 2020  12:31 am
(file photo)

Hyderabad: Covid has left beer companies high and dry with peak season- March, April, May and June seeing drastic reduction in sales due to lockdown. Also, the covid cess, levied by many States including Telangana, has left a bitter taste, both for the beer companies as well as consumers, according to AB InBev, a brewer and makers of global brands Budweiser, Hoegaarden, Corona.

The decline in sales, according to Ishank Gupta, Regional Sales Director- East, AB InBev South Asia, was due to two reasons- lockdown and the covid cess on beer sales, which has rendered the beer segment unaffordable to many. Beer sales have fallen 70 per cent in May and about 50 per cent in June compared to the previous year, he said.

“We have two breweries at Sangareddy and production is low as sales are not on expected lines. Between the two units, we are sitting at eight per cent capacity utilisation. We really need the product to start moving again to start producing again at earlier levels,” he said.

Excise duty on beer increased in December. With that, a 650 ml unit priced Rs 100 earlier was revised to Rs 120. With the Rs 30 covid cess imposed, the unit price has touched Rs 150. About 60 per cent of the industry sits in this segment. For premium beers, the price has gone up from the earlier Rs 150 to 210 due to the combined impact of increase in Excise and levy of covid cess.

“It is now a lose-lose-lose situation for all. The State is not realising the expected revenues as volumes are down. Companies are bleeding as sales have slumped and lastly the customers are spending more for the same product,” he said. “The loss is too huge to make up. We request the Government to not deepen it for the industry. The December increase can remain.” Gupta said.

While it requests the State Government to remove the covid cess, it is ready to launch super mild beer (alcohol by volume of 3.5 per cent) if a new tax structure is evolved that is based on the ABV and not on unit size. This will lower the price for consumers, said Gupta. In an ABV-based tax structure, Excise duty will be the highest for the strongest beer and this structure is ideal for the beer industry.

Haryana has recently introduced a super mild beer (with ABV less than 3.5%) category. The tax for this is 20 per cent lower compared with other categories. Products to fit this definition will come shortly, he said. The company is in talks with Odisha, Kerala and other States to introduce a super mild beer under the new category.


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