Beer Sales Unable to Bear Maharashtra Excise Hike

Posted by reenamore on July 13th, 2018

This season, let the mercury rise as it may; there is going to be no respite in the fall of beer sales in Mumbai. If we go by the data released by the excise department, then the fall in beer sales last December has not been recovered so far. When compared, the sales during the same period last year, March 2018 recorded a reduction of 16% and in February 2018, it fell behind February 2017 sales by 13%.

  • Sales had gone up in the city right after the highway liquor ban was removed last year. Yet, quite soon a sales nosedive came. Industry specialist in the liquor industry say that the lifting of the ban was followed by a fall in sales due to rise in Excise Duty.
  • Taking this into account, no new beer company wants to enter the Maharashtra market in an hour of consistent hikes in excise duties and random liquor laws.
  • Maharashtra used to account for nearly 40% of the revenue of a company with a national presence. That is no longer the case. Because of higher duties, the companies cannot sell their products at prices below a particular point. So, there is no revenue generation. Production cost is also on the higher side and there are also these archaic rules pulling the industry down.
  • There has been a massive drop in sales even at  the stores. Beer has become so expensive that people can no longer get the same kind of satisfaction. Customers have to pay anywhere between Rs 160 and Rs 200 for a 650ml bottle of beer. Just three years ago, it used to cost between Rs 100 and Rs 120. The prices went up in November last year due to excise duty revision. But during that time period, most did not feel the pinch because the shops then had just reopened after the liquor ban. Besides, it was winter, a not so good period for beer sales. However, during the summer months the sales continued to drop just as much.
  • Customers have not taken to the price hike. Those who drink at resto-bars and permit rooms continue to tolerate the price hikes, however, customers who bought their liquor to drink at home cannot afford to do so anymore. The very reason they used to drink at home was that it was more economical to drink at home.


A retailer added that after the hike, one can of a popular beer brand now costs Rs 161. Earlier, it sold for Rs. 140. Why would any customer pay an extra Rs. 21 for something as small as a can of beer? Drinker of light beer now refrain from drinking, while strong drinkers have now switched to Indian Made Foreign Liquor (IMFL).

 

What is Excise?

Excise is a tax which is put on certain goods for their production or sale or on license upon specific services.

As an indirect tax it is mostly collected by a retail store or some intermediary body from the consumer, who ultimately bears the weight of paying the tax. After this, the producer of goods pays this tax to the government.

Global Trend in Beer Consumption

  • Around the world, the beer industry is facing one of its great challenge in the past half century. All of a sudden, there is falling consumer demand and increasing competition in the market, together with a tougher market access. This mixing of challenging scenarios is not just a simple roadblock for large beer manufacturers. Rather it’s a tough era for the entire liquor industry.
  • In the United States of America, traditionally beer’s largest market, production volumes fell between 2007 and 2014.
  • In various markets such as Germany, France and the UK, sales came down by roughly 10% over the same time. The per capita consumption of Germans, has dropped by 75% since 1976. This collapse has come in the face of demographic changes and the emergence of alternative beverage categories such as wine, cider and health-oriented drinks, tough regulatory ecosystem and heavier taxation together with a global economic slowdown.
  • This is despite amazing growth rates and increments in the output volume of various emerging markets in recent years.
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