Rationalisation Of Taxes Big Challenge For Beer Business: United Breweries CEO
Vivek Gupta, MD and CEO of United Breweries, urged the state governments to rationalise taxes with separate tax structures for beer and spirits.
State governments must rationalise taxation of beer to keep its prices low for the consumers, according to Vivek Gupta, Managing Director and CEO of United Breweries.
“The reality of the beer business is that our net realisation is only 25%, which means if I take a Re 1 cost increase, it translates to a Rs 5 increase for the consumer because 75% is the taxation, which is with the government,” he said during a conversation with NDTV Profit on Monday.
“I think the bigger conversation we need to have with the government is to rationalise taxes. Because if the taxes are not rationalised, any price increase will have a quadruple impact on the consumer. So, a Re 1 increase in Telangana actually goes to a Rs 4 increase for the consumer,” he added.
He advocated separating beer from spirits in taxation regimes.
“We are also very clear that beer has less harm per litre versus spirits. Beer is moderate. Beer is natural. Beer has less alcohol. It is more about socialising and it is extremely important that we separate beer from spirits and have a proper regime which enables us to grow this business,” he said.
Speaking about capex, he said the company is investing in coolers.
“We now have 35,000 coolers in the stores versus 15,000 a couple of years back. So, we will be sufficiently investing in the capex. I think our challenge is not going to be the lack of capex,” the top executive said.
He described the second quarter results as "quite mixed," with strong growth in several states offset by severe disruptions from heavy rains and escalating tax burdens affecting consumer affordability.
He highlighted that around one-third to 40% of the company's business delivered robust double-digit growth. States such as Maharashtra, Goa, Assam, Andhra Pradesh and Jharkhand stood out with impressive volume increases.
However, the picture was starkly different in northern states, where excessive rainfall impacted sales. Approximately one-third of UBL's operations saw volumes drop by nearly 20%, with the beer category in states like Punjab and Haryana plunging up to 40% in certain months.
“Especially in northern India, our business was down close to 20% in volumes. In some months, the category was down 40%, especially in states like Punjab, Haryana. So, the rains had a significant impact, especially in the north and other parts of the country,” he said.
