Margins Shrinking, Prices Stuck: ISWAI’s Nita Kapoor Reveals Struggles of India’s AlcoBev Industry

In an Exclusive Mint Interview, Nita Kapoor explains, 'Despite growing, our profits are shrinking

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In a recent interview with Mint, Nita Kapoor from the International Spirits and Wines Association of India (ISWAI) talked about the tough times the alcohol industry in India is going through. She explained that the cost of making alcohol is going up because the materials needed, like extra neutral alcohol (ENA), glass, labels, closures, and packaging, are getting more expensive. According to data shared by ISWAI, the prices of these materials have gone up quite a bit from 2018 to 2023.

Kapoor pointed out that even though the industry is growing, the profits for the people who make and sell alcohol are getting smaller because state governments are not allowing them to increase the prices they charge consumers. The fixed maximum retail price (MRP) is making it hard for businesses. Despite the rising costs of making alcohol, the MRP remains the same, and this is causing a lot of pressure on the companies that make and sell alcohol.

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Kapoor also shared what the alcohol industry hopes from the government. She said that the industry wants things to be easier for them to do business. This includes using technology more (digitization) and making the process of getting licenses faster. Kapoor also suggested having a single kind of outlet for alcohol sales, like they have in Haryana. She stressed that it would be helpful if the government considers the inflation price index when deciding on the prices.

She mentioned that the alcohol industry is facing a big challenge because state governments are not allowing them to increase the prices in line with the rising cost of making alcohol, especially the increasing cost of ENA. Kapoor believes that if state governments allow a price increase based on manufacturing costs, it could be between ₹150 to ₹250. If the MRP changes, consumers might see a 4 to 7 percent increase in prices.

The interview also talked about why the alcohol industry is seeing a trend towards more expensive and premium products. Kapoor explained that after the pandemic, people started wanting better quality products. The industry saw a 12 percent growth in 2022, and in 2023, more people were buying brands that cost between ₹750 to ₹1,000 for a 750 ml bottle. Factors like better infrastructure, increased use of technology, people moving to cities, and more global travel also played a part in this trend.

[Source: Mint]