In a move that could have significant implications for India’s second-largest beer-consuming state, the Karnataka government has directed beer manufacturers to cease third-shift operations at their breweries. Citing a shortage of permanent excise officers and staff across the state, the decision has raised concerns among beer producers, who fear a potential shift in consumer demand towards hard liquor if supply constraints persist for their brands.

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The notice, dated December 4, has been issued exclusively to beer makers, leaving spirits manufacturers for their distilleries unaffected. Companies such as United Breweries, AB InBev, Bira, and Carlsberg, collectively owning seven breweries in Karnataka, currently operate in three shifts, representing some of their largest facilities in the country.

Expressing concern over the decision, a representative from a leading beer company stated, “We sincerely urge policymakers in the state to reconsider the decision to cancel the third-shift operation in the brewery. This decision will significantly impact the state’s thriving beer industry, jeopardizing employment and causing a shortage of beer during the peak demand period around Christmas, New Year, and beyond, which is the peak season for beer.”

In Karnataka, where state governments often control liquor retailing and distribution, taxes on liquor constitute a major portion of their revenues. Beer, accounting for 15% of the state’s alcohol excise revenue, has witnessed a doubling in revenue over the past two years, reaching Rs 4,500 crore. The state’s beer consumption stands at 3.8 million hectoliters annually, contributing to 13% of India’s overall volume sales.

The potential fallout of the decision extends beyond economic concerns, with industry insiders warning of a possible shift toward stronger alcoholic beverages. Anonymously, one of the top brewers in the state remarked, “This will also potentially steer retailers and consumers towards stronger alcoholic beverages which have been growing but not as rapidly as beer.”

India, known for its promising demographics and increasing affluence, ranks as one of the largest beer markets globally. However, the industry faces challenges due to heavy taxation and regulatory complexities. The Karnataka government’s recent move adds to the hurdles faced by brewers, prompting concerns about the evolving regulatory landscape in the country’s alcohol industry.