India: United Breweries in talks to 'allay the government’s fears’ about home delivery of beer

United Breweries, the country’s largest beer company, is in talks with multiple states to 'allay the government’s fears’ about home delivery of beer, the company’s managing director Rishi Pardal said in an interview, adding that the ongoing Russia-Ukraine conflict was adding to existing inflationary environment and companies were dealing with steep increase in prices of barley and supply disruptions, The Economic Times reported on March 1.

“We are in talks with various state governments to allow home delivery of beer and allay their fears on social concerns and tax leakages. We did see some headway in some states, but it’s like two steps forward, one step backwards,” he said.

With the onset of pandemic, many states invoked the Disaster Management Act to include the home delivery provision of alcoholic beverages in their excise acts. Both offline and online models of home delivery were enabled by a few states, but the model hasn’t taken off owing to multiple logistical and regulatory hurdles.

“We want consumers to buy beer in the same way they are buying other products. It’s a constant dialogue we are having with the states, and wherever we have had permission, we have shown that we are responsible,” Pardal said.

While West Bengal, Odisha and Jharkhand adopted an aggregator-based model for delivery from licensed retail stores to consumers, Maharashtra adopted a direct retail-to-consumer model with the retailer having to fulfill orders (both online and offline). Chhattisgarh and Kerala, on the other hand, created their own government run portals where orders could be placed online and picked up through a token system.

UBL, majority owned by Dutch multinational brewer Heineken NV, had reported a 28.4% decline in consolidated net profit at Rs 91.02 crore for the quarter ended December, impacted by inflationary pressures. However, it reported year-on-year and sequential growth of 19% and 10% respectively, seeing quarterly volumes back to pre-covid levels.

Pardal said the ongoing geo-political situation could lead to further inflationary pressures. “We have already been operating in a high inflation environment. With the current crisis, we foresee the pressures of inflation and supply chain disruptions accelerating in the short term.”

The company that sells Kingfisher under the Blue, Ultra and Ice Beer labels, is actively working towards mitigating the impact through a combination of productivity, cost control, optimisation and judicious price increases. “There will be a lot of focus on cost actions in the next few months. This kind of inflation is generational,” he said.

Rising costs of barley, glass and packaging material have already been impacting domestic beer companies. Barley accounts for close to 30% of raw material costs for the company.

The global unrest comes at a time when the alcobev sector forecast a strong summer revival after two pandemic-hit years that saw bars, restaurants and pubs either shut or operating under severe restrictions, and consumer mobility hit.

He said the company’s flagship brand Kingfisher, which is operating in an underpenetrated market, is being premiumised as a strategic priority, and added the company was evaluating which brands to bring in from its Heineken portfolio. Heineken, a majority shareholder of the company, increased its shareholding in UBL from 46.5% to 61.5% last year.

01 March, 2022