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Beer companies suffer major revenue losses in the peak season

16/04/2020

AIBA appeals to the government to resume manufacturing and open the retail channel that employs over a million people. To allow for delivery and e-commerce for beer within the norms of social distancing and age verification

The All India Brewers Association (AIBA) are requesting the government to allow for beer operations and sales to resume with adequate safeguards incorporated, during the extended lockdown in the country.

“The retail sales value generated by the beer industry in the country is more than INR 65,000 crores per annum (which is larger than soft drinks and juices combined). Through sale of beer, the State Governments generate more than INR 36,000 crores of tax revenue, in the form of excise duties and VAT. This is one of the highest contributors of revenue for most State Governments” said Shobhan Roy, Secretary General, AIBA.

With 83 operating breweries and a volume of over 330 million cases (7.8 ltr / case) annually, the beer industry is one of the largest employers in the country, with over 1 million directly or indirectly engaged in the production, supply, service, or procurement of beer / raw materials. Utilizing about 750,000 MT of agricultural produce per year, comprising barley, rice, wheat, sugar the industry is a key player in the agriculture production and supply chain in the country.

Shekhar Ramamurthy, CEO & MD, United Breweries Limited, along with being the Chairman of AIBA commented – “We’re fully supportive of the Government’s actions in tackling this crisis. We recognize that it is crucial to slow the spread of the contagion and break the chain. Our only request is to work together to find ways in which the economic activity could re-start in a graded manner. “ He further added, “Beer is a seasonal business with almost 50% occurring in the period March to June. A two-month interruption because of the current crisis will result in a loss of INR 16,000 crores of retail sales and around INR 7000 crores for the state governments”.

“The non-availability of beer might also result in the sale of spurious and illicit liquor, which will cause law and order issues and separate, but serious health hazards.” added Mr. Roy.Given the consumer demand and the fact that alcohol has been classified as food under Food Safety & Standards Act of 2006 (FSSAI), the plea is it to apply the same lens and ensure parity to bring alcohol in consonance with food in the list of “Essential items” allowed during this lockdown period. In markets globally, beer comes under essential items and is retailed through supermarkets.

Ankur Jain, Founder CEO, Bira 91 and member of the Board of Directors AIBA said, “Health and safety of the staff involved is paramount and we recommend this to be a good time for the Government to look at allowing home delivery through existing retailers and wholesalers, along with online delivery of beer keeping in mind the social distancing norms”. He further added, “that we’re happy to help the government form guidelines and build a framework keeping all restrictions and norms in mind”.

The All India Brewers Association has requested relief to mitigate and reduce the impact of this crisis on the state and central government with the following:

Re-start beer manufacturing – To allow beer manufacturing plants to restart operations, along with the opening of ancillary sectors that support the manufacture of beer (such as suppliers of malt, barley, cans, bottles etc.) to ensure the business can restart in a holistic manner. This can initially be at a 50% capacity, which will also ensure practising social distancing and applying strict norms for health and safety at these manufacturing facilities.

Permission to open shops in non-hotspot areas – To allow beer and liquor stores to be open in non-hotspot areas ,with social distancing norms. This will result in curbing illegal activities such as bootlegging and sale of spurious liquor.

Sale through E-commerce and Home Delivery – To allow beer to be sold through e-commerce, and allow for home delivery of beer, through existing retailers and wholesalers. Thus, reducing crowding in shops and ensuring beer sales and excise revenue is not impacted adversely.

Working capital relief for suppliers – To extend timelines for label registrations and license renewals, so that fees for the same can be paid in instalments through the year. Further, consider exemption of beer suppliers from payment of excise duties at the time of transfer of goods from the brewery to the corporations/ distributor/ wholesaler depots to support the working capital situation for the beer manufacturers so that they are able to supply to the market, without any disruptions.

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