The Supreme Court has reserved its December 15, 2016 order banning liquor outlets within 500 metres of state and national highways effective April 1, 2017.
The Supreme Court has reserved its December 15, 2016 order banning liquor outlets within 500 metres of state and national highways effective April 1, 2017. No renewal of licenses of such shops would be made thereafter. Several states including Kerala, HP, TN, Arunachal Pradesh, Punjab, Telangana, Haryana and various others had filed a review petition seeking either recall of the order or a modification of the order requesting reduction in the 500-metre distance or extension of April 1 deadline (for example, TN government had moved the Supreme Court to extend time for relocation of liquor shops along highways until the expiry of their license period up to November 28, 2017).
The SC ruling will impact all liquor companies as ~35-40% of liquor outlets are located along NHs or state highways, and will have to shut shop and relocate from April 1 – this will essentially drive destocking in the near-term and will impact volumes in Q1FY18 (may have also impacted Q4FY17 volumes a tad due to lack of clarity over this ruling to date). However, given this is a channel-level issue and not a demand issue, we expect the impact to be material but transitory in nature until shops relocate and restock in Q2/ Q3FY18.
In the interim, we expect bulk of consumer-level demand to be met through compliant outlets.We note several states have resorted to innovative ways to circumvent the SC ban. For example, the Rajasthan government has declared state highways passing through habituated areas as urban or district roads, which don’t come under the purview of this ban.
The Chandigarh government has also declared all city roads as urban roads.The Bengal government has issued in-shop licenses to all existing liquor shops situated within 500 metres of highways; an in-shop outlet allows consumption of liquor on its premises – this move is based on a clarification issued by Attorney General Mukul Rohatgi on SC’s December 15 decision that the ban was applicable only to liquor shops and not on bars and restaurants.