MUMBAI: The liquor industry, especially those selling international IMFLs and wines, have requested the state government to allow them a rise in liquor prices — between range of Rs 85 to Rs 125 per 750 ml bottle depending upon the respective segments and brands — in order to cope up with the inflationary trends that according to them have triggered the costs involved in production.
The International Spirits & Wines Association of India (ISWAI), a representative body of the national and international premium spirits & wine brands in India who sell nearly 80% of India’s consumption, has listed out reasons as to how different costs are forcing them to go for a rise. The ISWAI members include global leaders in both the spirits and wine.
As per the ISWAI estimates, wet alcoholic ingredients, such as extra neutral alcohol (ENA) and Scotch, are now 5% more expensive than last year, while the cost of packaging materials such as glass bottles rose by 8%, cartons by 37%, and labels and closures by 5% and 15% respectively, in just one year (FY21 and FY22(est)).
“Additionally, costs of wages and statutory fees are mounting, while the transportation costs have shot up by 68% between FY18 and FY22. As an example, the costs of a fast-moving brand in the value segment have increased by Rs 60 per bottle (750ml) compared to the previous year,” an ISWAI statement said.
Nita Kapoor, CEO of ISWAI said, “Prices are granted by states to manufacturers and unlike the FMCG sector, manufacturers in the AlcoBev industry are unable to share the burden of inflation with the consumers. In many states, the manufacturer’s price — ex-distillery price (EDP) — on liquor has been the same since 2017-18. This has compounded the problem where the inflationary pressure is the highest. While states are keen to maximise their excise revenue from the liquor industry, due attention needs to be paid to manufacturers too. It has, thus, been difficult for manufacturers to sustain operations. States need to consider a balanced approach between supplier prices, volume growth, and taxation.”
Suresh Menon, ISWAI Secretary-General, said “The inflation rate based on the Wholesale Price Index (WPI) increased to a record high of 15.1% last month where almost all the items/products have risen. The liquor sector, which is one of the major revenue sources for any state, is thus facing challenges due to the rising inflationary pressure.” He said that as every direct and indirect cost of goods and services is rising, the industry is facing a triple whammy – high taxes and levies on raw materials like Extra Neutral Alcohol (ENA) -one of the key ingredients for alcohol, glass bottles, caps, etc.
According to ISWAI as the AlcoBev industry is selling and recovering in volumes, manufacturers’ margins are under deep stress. “Rising inflation on all direct materials and the state’s not according any relief on the costs is raising serious concerns in the industry over sustainability of operations in most states. The industry needs a predictable policy, and an inflation index to pricing. An inflation-adjusted index would need to consider various factors such as differences in operating conditions between states, state levies, cost of materials, transportation, route-to-market, etc,” said ISWAI spokesperson.
“Besides recognizing the supply chain and inflationary pressures, the excise policies of the states need to adjust for inflation. This would take into consideration various factors such as differences in operating conditions between states, such as state levies, cost of materials, transportation, etc. Regular consultations with industry stakeholders are essential to forging a predictable and progressive policy framework, incentivizing higher investments in the sector,” spokesperson added.