In an unprecedented move, Heineken’s Indian subsidiary, United Breweries, has suspended beer deliveries to the southern state of Telangana due to the state’s refusal to approve price hikes. The company argues that the lack of price revisions has led to significant financial losses, making operations in the state unsustainable.
United Breweries, which is majority-owned by Heineken with a stake exceeding 60%, is India’s largest brewer. Telangana, with a population of 40 million, is one of the country’s largest beer-consuming regions, making this move particularly impactful as the state heads into the peak summer season, a time when beer sales typically surge.
Price Freeze and Financial Strain
On January 8, United Breweries officially announced that it had stopped supplying beer to Telangana Beverages Corporation, the state-owned entity responsible for wholesale and retail alcohol sales. The company cited the state’s failure to adjust the base price of beer since the 2019-2020 financial year, which it claims has resulted in large-scale financial losses. Additionally, Telangana Beverages is reportedly behind on payments for previous beer deliveries, with debts totaling millions of dollars. The Kingfisher brand, which dominates beer sales in the state, accounts for 60% to 70% of total beer sales.
State-Controlled Pricing and Industry Concerns
The Brewers Association of India has called on the Telangana government to address industry-wide challenges, particularly rising production costs. The association claims that Telangana’s beer suppliers are paid 47% less than their counterparts in other states. While the state has raised the consumer price of beer, it has not correspondingly increased the amount paid to manufacturers, leading to a situation where brewers argue they are underpaid and facing financial strain.
Karan Taurani, an analyst with Elara Securities India, warned that United Breweries’ move could negatively impact its earnings, as Telangana accounts for up to 20% of the company’s total beer volume and 10% to 12% of its earnings.
Unpaid Dues and Broader Industry Impact
United Breweries is not alone in its claims of unpaid dues. In July, the company revealed that Telangana Beverages Corporation owed approximately $105 million. Other major global drinks companies, including Diageo, Pernod Ricard, and Carlsberg, are reportedly owed a combined $466 million by the state.
In response, Telangana’s excise minister has rejected the allegations regarding overdue payments, instead accusing United Breweries of monopolistic practices. The minister argued that the company’s demand for a 33% increase in beer prices, which would raise the cost of a bottle from INR 150 to INR 250 ($2.90), would place an undue burden on consumers. The excise department, which oversees alcohol sales, is a key source of revenue for the state government.
As the dispute unfolds, industry watchers will be closely monitoring its potential impact on both the local market and the broader brewing sector.
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