Alcoholic beverage sector industry body International Spirits and Wines Association of India (ISWAI) has written to all state governments asking them to reduce taxes in upcoming excise policies citing ‘unsustainable’ inflation. “Industry needs a regulatory overhaul, and an inflation-embedded approach to pricing. This would take into consideration various factors such as differences in operating conditions between states, such as state levies, transportation, input costs including cost of glass bottles, extra neutral alcohol – the principal ingredient of alcoholic spirits, caps, cartons, PET bottles & labels, etc. Regular consultations with industry stakeholders are essential to forge a predictable and progressive policy framework, incentivizing higher investments in the sector,” Nita Kapoor, Chief Executive Officer, International Spirits & Wines Association of India (ISWAI), told Financial Express Online. The industry body has also asked the state governments to allow the companies to start home delivery of liquor again and make the delivery models sustainable ‘with immediate effect and proactively.’

Responding to inflation

The ISWAI representation to state governments highlighted the three problems – suppressed volumes, runaway inflation and reducing supplier share of the consumer rupee – which is making it hard for alcobev manufacturers to sustain business operations. “Alcohol manufacturers are unable to raise the prices directly as prices are controlled by state governments through their excise policies that decide the ex-distillery prices (EDPs) and these have not been revised over the years,” she said. The states have been urged to allow alcobev manufacturers to raise prices to offset an overall +10 per cent inflation impact. Otherwise, it may impact “direct employment, social impact programmes and operations”, going forward.

According to estimates by the industry body, wet alcoholic ingredients, such as ENA and Scotch, are now 5 per cent more expensive than last year, while cost of packaging materials such as glass bottles rose by 8 per cent, cartons by 37 per cent, and labels and closures by 5 per cent and 15 per cent respectively in just one year (FY21 and FY22). Additionally, transportation costs have shot up by 68 per cent between FY18 and FY22.

Home-delivery an ideal option

The association maintained that allowing home delivery of liquor to start again will address problem of low retail density which minimizes the reach of brands, there will be no sales of counterfeit liquor at arbitrary prices, no under age consumption, will help licensed retailers who mostly lose business to illicit sellers and authorized home delivery channel ensures that the revenue of the Government is protected as duty paid and genuine products will be sourced from licensed retailers and delivered by authorized agents.

Further, in case of an Omicron surge, home delivery will help the industry retain the recovery process. “If the Omicron variant spreads and there are shut-downs of retail vends again, without home delivery option, the liquor industry will be sent back two quarters; we will not be able to reach pre covid numbers,” Nita Kapoor said.

“Given the demand among citizens in all the states that we have surveyed, we believe that if the service is handled in a mature manner and with all the necessary regulations in place, going forward this could become a potential channel for growth of revenue for states,” she added.

States including West Bengal, Jharkhand and Chhattisgarh had permitted home delivery of liquor the previous year, but there was lack of clarity on guidelines along with steep fees being charged by aggregators. Maharashtra and Kerala too have allowed home delivery of liquor but with various localised restrictions. “We are ready to partner with the states to build comprehensive regulations and safeguards, inculcating a practice of responsible consumption,” the letter said.

ISWAI represents large foreign liquor companies in India including Diageo-United Spirits, Pernod Ricard, Beam Suntory, Bacardi, Brown Forman, Moet Hennessy, Campari and William Grant & Sons.