Beer and wine makers are likely to gain from Maharashtra’s excise duty exemption, as sales could grow by at least 10% year-on-year, industry executives told FE.
The state government on Tuesday raised the excise duty on Indian-made foreign liquor (IMFL) from three times to 4.5 times the manufacturing cost, which works out to a hike of around 50-60%, industry executives said. This could prompt alcohol consumers to shift to cheaper liquor variants at the lower end of the market. Beer and wine could gain at the upper end of the market, as consumers look at options beyond IMFL. Maharashtra, for perspective, contributes around 7-10% in terms of overall volumes to the country’s 408-million-cases-strong domestic liquor market (IMFL market).
“The taxes on beer are already very high in the state. In the last 10 years, excise duty on beer has gone up by 32% compared to just 9% on IMFL. It is not surprising that the beer industry has remained flat in the state over the last decade, whereas sectors like IMFL have grown at a compounded average growth rate (CAGR) of 7% year-on-year,” Vinod Giri, director general, Brewers Association of India, an apex body of beer companies in the country, said.
Executives at Sula Wines said that the policy of the state to promote wines was a welcome move as a significant chunk of the country’s wineries are in Maharashtra. Also, a significant number of farmers who supply grapes to wineries are based in the state. There is a need to protect the industry from price shocks, officials said.
While Maharashtra contributes about 45 million cases or about 10-11% in terms of volumes to the country’s 440-million-cases-strong beer market, growth rates have been just about 1%, industry experts said. Consumption of wine in Maharashtra, meanwhile, is nearly half (1.5-2 million cases) of the overall wine market in India, which stands at 4 million cases.
Shares of companies such as Sula Wines jumped 13% on the BSE on Wednesday following the Maharashtra government’s move to exempt wine and beer from excise duty.
Among other gainers on Wednesday were companies such as GM Breweries, a country liquor maker, whose shares jumped nearly 18% on the bourses. The state government announced the creation of a new Maharashtra-made liquor (MML) category, which is a grain-based alcohol that will be made by local manufacturers. GM Breweries could be one such MML maker, experts said. Also, the cost of a 180-ml bottle of MML will be at a minimum of Rs 148, the state government said, aimed at aiding its growth in the future.
The cost of IMFL currently ranges between Rs 120 and Rs 150 for 180 ml, which will now go up to a minimum of Rs 205. Premium brands will cost a minimum of Rs 360 for 180 ml as against their current rate ranging between Rs 210 and Rs 330. The price of 180-ml bottles of country liquor has gone up to Rs 80 from the current price of Rs 70.