The Indian unit of Anheuser-Busch InBev (ABI), the world’s biggest beer company, said it is facing supply shortages after a few states restricted shipments to neighboring markets until their internal sales are served despite an unprecedented surge in demand across the country.
In fact, the maker of Budweiser and Hoegaarden has revised its initial sales estimates by an additional 10-12%, expecting the industry to witness its highest-ever sales volume.
“We have faced stock-outs, not because of capacity constraints but due to our ability to serve as several states had policies to limit exports to other markets. For instance, the export restrictions by Haryana for us caused a reasonable amount of stock-outs in Delhi and UP. Even Telangana had a policy where exports were restricted until their internal demand was met and there was a slight impact in states such as Odisha, Maharashtra, Jharkhand, and West Bengal,” said Kartikeya Sharma, president – India & South East Asia, AB InBev. “There is so much underlying momentum that we are seeing in the market in terms of revenge consumption or a combination of consumer demand and progressive policies.”
The pandemic outbreak hit beer and spirits makers as bars, restaurants and pubs across the country operated with low footfalls and restricted travel over the past two years. The beer category was particularly unlucky with the timings of both the 2020 and 2021 coronavirus waves, especially during the March-July period which accounts for 40-45% of annual beer sales. The situation has completely reversed now, said ABI.
“Our internal budget estimates have been reset after the bullishness that we have actually seen in the market. There is so much underlying momentum that we are seeing in the market in terms of revenge consumption or a combination of consumer demand and progressive policies. Our estimate is that the industry sales numbers in 2022 will start comping the 2019 level, which was the biggest year by volume,” added Sharma.
Having fallen 40% in 2020, beer sales were back up 18% in 2021 with sales of 205 lakh hectolitre million cases (nine-litre cases), data from global alcohol market analysts IWSR show.
In India, alcohol prices are controlled by individual states, and companies are seeing a surge in prices of barley, the key ingredient for lager, as well as inflated packaging and transportation expenses. ABI said it is an extremely challenging environment, which has been an unintended benefit for the company since its portfolio is largely skewed towards premium and has a greater ability to withstand transitionary pressure.
“From an idea of inflationary pressures from a consumer choice-making of premium and then downgrading, we feel a little more validated through COVID when there was that much uncertainty and still not the kind of trading down that should have played out but didn’t. So it was a lot of validation that current inflationary levels are not necessarily an area that might impact us because of the way our portfolio is structured,” added Sharma