Slowdown catches up with the Indian Beer Industry

The effect of global slowdown has caught up with the Indian Beer Industry as well. The Beer industry which had been growing with a CAGR of 14% has slowed down to 8-9%. The southern market has shown a dismal market growth of 5% and the Northern region with a growth rate of 12.8%. The central region realized a low figure of 8.5% growth mainly on account of the extended monsoon which curtailed the peak selling summer season. The reasons may not be solely related to recession but then the effect has percolated, with people curtailing their liquor related expenses. The bars and pubs in the metros have witnessed foot-falls falling by 15-20% .

One of the main reasons for the lower growth rate is the standoff between the two major Indian brewers UB, SABMiller and the AP government. AP forms the largest beer market in the country contributing to nearly 18% of the total beer consumption. The input prices have risen substantially over the past few years however, the AP government has not revised the prices since 1997, this is despite the fact that the retail prices have more than trebled in the same time period. Following the same the two brewers had suspended production in the peak month of April; this has left a severe dent on the overall growth of the Industry

An increase in the raw materials used for the production of beer is also having a downward pressure on the bottom line of the brewers. For e.g. consider the price of sugar, one of the raw materials used in beer production has seen almost 66-75% increase in price. The retail price of sugar was quoting in the range of Rs15-17/Kg last year, this year the price has shot to the Rs22-23/Kg range. Apart from sugar even malt used in beer production has seen an increase in its price. With the cost of other over heads like power, salaries also shooting up the brewers are trying hard to remain in the green.