Beer truths: Let it flow freely

Deepak Chaudhuri

The per capita consumption of beer in India is amongst the lowest in the world at a meagre half-a-litre compared to around 100 litre in most emerging markets. Nevertheless, prospects in India are indeed bright. The tropical climate, growing disposable income with the invasion of satellite TV, the Internet and information technology coupled with one billion plus population having a mega-chunk of the youth segment in it, adds further fillip. Even the world’s per capita consumption stands at 22 litres.

Beer, traditionally, the world over has never been tagged with whiskies, rums, vodkas or gin. It has always been targeted as a mild alcoholic drink for the young generation. But, in India beer is the most expensive beverage in terms of alcoholic contents. Moreover, strong beer is taxed more heavily than mild ones. This is ridiculous as the difference in the alcoholic contents between mild and strong is barely two to three per cent.

In fact, globally, beer is classified along with aerated drinks. In contrast, in India though beer is classified as a food item under food processing industry, it attracts levies as that of an alcoholic beverage. And, unfortunately beer is neither treated as a food item nor levied at par with hard liquor which is taxed on alcoholic content instead higher levies are imposed.

Beer, a light, healthy drink, is still classified in India at par with IMFL (Indian Made Foreign Liquor). There are thus strict rules and licenses for selling beer. But there are hefty excise and tax levies. These levies are more severe on beer because they are based on volume and not on alcoholic content as in the case of IMFL. This makes whisky or rum cheaper compared to beer and tends to be value for money in terms of alcoholic strength to the consumers. Alarmingly, the youth are shifting to cheaper methods of intoxication. Beer really needs to be psychologically removed from the liquor segment. Most advanced countries treat beer, which has a low alcoholic content ranging from 4 to 8 per cent, as a beverage that can be sold in any store without any special licence. For example, in Singapore, a can of beer can be bought from a gas filling station while waiting for gas refilling.

In fact, on that score, long ago beer was shifted from the liquor category to be a food and beverage item. Unfortunately, the government has done nothing yet. If they had moved actively to de-license the beer sector or to reduce taxation dramatically, the industry would have grown a lot faster. The advantage would have been quite obvious. Beer would have taken away some of the illegal and unhygienically produced liquor, and easily accessed that market.
This can be done if the duty comes down, like in China for instance; beer prices are about a third of what they are in India, thanks to the low taxation, making the need for spurious and cheap liquor irrelevant. In fact, cola and beer are almost at same price in most emerging and advanced countries across the world. And, those are going to be the drivers for the future of the industry and revenue.

Beer is a health drink and no external alcohol is added in it. It is made from ingredients of agricultural origin such as barley, malt, sugar and hops It is also non-cholesterol, and very low in calories. Besides, beer contains proteins, carbohydrates, and minerals. Statistics show that the country’s beer consumption at 6.8 million hectolitre (mhl) is insignificant compared to China and the U.S. whose beer consumption is at 215 and 230 mhl respectively. Germany’s 110 mhl, Japan’s 70 mhl and Russia’s 65 mhl speak volumes. Even South Korea, Thailand, Philippines and Vietnam are way ahead of India with 19, 13, 12 and 9 million hectoliter consumption.

Moreover, in value terms, only five per cent of alcoholic beverages consumed in India are in the form of beer in contrast to over 65 per cent, the world over, especially in the world’s largest beer consumer, the US.

Low alcoholic beverages are not unknown to India. Toddy is drunk all along the coast. Tribals drink Handia, a drink quite like the Tibetan chhung. All these drinks have all along been known for their health-giving qualities, and never categorised as vices.

Hence, the government should formulate a new alcohol policy to regulate the liquor industry to make beer more affordable vis-a-vis hard liquor. There is a huge potential for the government to earn greater revenue from beer in India. The world market for beer is popping up with over 1,400 million hectolitre. Whereas, the market for beer in India is a paltry 5.6 million hectolitre.

The success mantra to generate greater revenue is to have dramatically reduced duty structure as the same for both mild and strong beer and to waive off sales tax completely. Cheers!

(Deepak Chaudhuri is director, Shaw Wallace Breweries Ltd)