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Saturday, July 2, 2022
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MP: Alcobev sector faces inflationary pressures, rising cost of materials

In the state of Madhya Pradesh, excise revenue is not driven by actual sales of Alcobev products; rather, there is higher dependence on the excise collection from retailers, which is not sustainable in the long run.

This model limits the volume and revenue growth potential of the State. Further, the alcobev industry is facing multiple issues of high MRPs, runaway cost inflation, and the highest retail margins in the country.

The cartelisation of the retail shop network (shown in the illustration below) and the bottling fee disparity between national and popular brands within the state players, has resulted in the creation of a monopoly at the retail end of the supply chain – allows retailers and local players higher bargaining power over State Excise.

The Wholesale Price Index (WPI) has further risen to 14.23% in November from 12.54% in October, mainly on the sharp rise in the prices of fuel and power. Though most FMCG firms have increased prices to mitigate the impact of these cost hikes, the same option has not been available to alcobev suppliers.

Alcohol manufacturers are unable to raise the prices directly as state governments control prices through their excise policies that decide the suppliers’ prices (also known as Ex-Distillery Prices or EDPs).

Madhya Pradesh takes the lowest EDP pan-India as the base while fixing suppliers’ EDPs in the state. With most states holding onto historical EDPs citing reasons like elections, pandemic, infiltration, etc., no price increase leeway has been provided to the industry over the years, resulting in the Indian Alcobev sector facing a sustainability crisis.

The above news was originally posted on www.dailypioneer.com

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