UBL absorbs Karnataka beer prices amid 3rd tax hike in 18 months
After the Karnataka government implemented a new excise duty hike on beer, effective January 20, Kingfisher-maker United Breweries Limited (UBL) said it would not hike the prices of its beers in Karnataka and would choose to absorb a portion of the increased duties. This is the state’s third tax increase in beer within 18 months.
When the revision of excise duty on beer was proposed in August 2024, brewers opposed the move. However, the duty has doubled now to ₹20 per bulk litre for most beer sold in the state, driving up prices for popular brands to nearly ₹200 per bottle and further accelerating the decline in beer sales, said concerned industry players.
Vivek Gupta, MD and CEO of UBL, said, “Over the past 18 months, Karnataka’s beer industry has faced three consecutive tax hikes, driving up the MRP of beer by ₹10 to ₹60 per bottle across brands. Despite this, we have made the conscious decision to absorb a significant portion of the increased duties, particularly in the mainstream and premium segments, ensuring no price increase for most of our key brands like Kingfisher Strong, Kingfisher Ultra, Kingfisher Ultra Max for our consumers,” adding the company will not increase the consumer prices.
Karunakar Hegde, the president of the Federation of Wine Merchants’ Associations, said beer prices may rise as alcohol sales have shown little progress this fiscal. Speaking to reporters, he noted a potential revenue shortfall, with ₹15,000 crore still to be collected from the ₹38,600 crore target set by the Excise Department for FY25. While the amount may be reached by the end of March, a 10 per cent deficit is expected, which the price hike could help offset.
Vinod Giri, the Director General of the Brewers Association of India (BAI), an industry body representing companies like AB-InBev, Carlsberg, and United Breweries, which account for around 85 per cent of the beer sales in the country, said the tax increase in Karnataka is a matter of huge concern.
“The Beer industry is already reeling under pressure ever since the taxes were reduced on IMFL in September 2024 with no similar reductions in beer, as a result of which beer, which was growing by 12% over last year until then, is now declining by over 10%. Now, the prices for economy beer also have been increased by fixing a minimum selling price. That, along with the fact that the prices for cheap liquor have been held back at the same time, will only incentivise consumers shift away from low-alcohol beer to hard liquor, something that neither health bodies such as the WHO recommend nor should the state policy.”
Anant S Iyer, DG of the Confederation of Indian Alcoholic Beverage Companies (CIABC), explained that when beer prices go up, the popular or mass-segment brands tend to increase, especially the 180 ml SKU.
“State excise therefore earns more excise revenue per ml given that IMFL levies/taxes are always double, triple, or more than that of beer levies/taxes. Karnataka has increased prices to mop up revenues in the last three months of the financial year. Obviously, with prices going up, sales would be impacted to an extent,” he said.
Post Comment