HYDERABAD: The road towards Mallepally village near Sangareddy in Medak district, some 30 km from the city, isn’t unusual but the first thing that is sure to pique your curiosity en route are the innumerable commercial vehicles zooming past either way, all laden with cartons of beer bottles.
For, Mallepally is home to five large breweries including those set up by multi-nationals like Carlsberg, Budweiser and Sabmiller. Telangana, perhaps, has the highest number of beer-making plants across the southern region. Andhra Pradesh has only one plant.
And, in case you are not aware, TS and Andhra Pradesh guzzle beer like no other state in the country -- both states account for 31 per cent of the country’s total beer consumption!
No wonder then the plants in Mallepally brew more beer than any other state in the southern region. For instance, TS and AP together produce and consume nearly 60 million cases per annum. Of this, 60 per cent is from TS and 40 per cent from AP.
States like Tamil Nadu consume 30 million cases, Karnataka 26 million cases and Kerala 15 million cases. Overall, south is a dominant market as far as beer consumption contributing over 50 per cent of the total beer sales. In terms of volume, Tamil Nadu, united AP, Karnataka and Maharashtra drive 55 per cent of the industry.
Beer, like any spirituous beverage, is a state subject and is governed by respective state governments. “There are multiple taxes, duty slabs and inter-state levies on stock movements. This leaves us with wafer-thin margins,” Harmanpreet Singh, general manager, United Breweries Ltd, says. The Vijay Mallya-led firm, which retails beer under the flagship Kingfisher brand, operates one of its largest breweries in TS producing over 18 million cases every year or 7,20,000 bottles a day.
The leading beer market TS is one of the most-expensive states as far as brewery licences are concerned. TS levies Rs 25 lakh per year for a large brewery.
“Hypothetically, if a bottle of beer costs Rs 100, Rs 20 goes to the trade, Rs 60 to the government and the manufacturer is left with less than the retailer’s margin,” Shobhan Roy, Director General, All India Brewers Association (AIBA) told Express.
He said that sales of beer in both TS and AP contribute over 20 per cent to the state’s excise revenue. There are over 89 breweries operating across the country contributing more than Rs 15,000 crore to the states’ exchequer. “In India beer is taxed more than spirits in all states. Since taxation is a state subject, the tax rates differ in each state ranging between 25 per cent and 70 per cent,” said Singh adding, “Excise duty per liter of beer is the highest globally.” The sector is over regulated with sales tax, restrictive excise laws and local and state taxes.
According to trade body AIBA, in spite of high level of taxation, the revenue from beer is only 15 pc of the gross alcohol revenue. Therefore, there is a case to rationalise beer taxes.
Though beer tax contribution is just 15 pc of the alcoholic beverage industry contribution but the duty structure makes beer a luxury product. United Breweries dominates the beer market with over 50 per cent market share followed by SAB Miller at 25 per cent, Carlsberg at 10 per cent and AB Inbev at 2 per cent. Besides, there are local brewers with local brands. In TS and AP there are no micro breweries.
“Alcohol content in beer is much lower compared to hard liquor. That’s why, globally, it is sold alongside FMCG products,” expalined Singh.