Shares of United Breweries rose by 5% on January 20 following the company’s announcement that it would resume the supply of its popular Kingfisher beer to Telangana Beverages Corporation Limited (TGBCL), effective immediately.
In a filing with the stock exchanges, United Breweries described the decision as an “interim” measure aimed at benefiting consumers, workers, and other stakeholders. The company stated that discussions with TGBCL had been constructive, with TGBCL assuring it would resolve issues related to pricing and outstanding payments in a timely manner. As a result, the company has decided to restart its beer supply to TGBCL, pending further developments.
Following the announcement, United Breweries’ shares surged over 5%, reaching Rs 2,052 by 11:18 am on January 20. This recovery comes after a 4% decline in the company’s stock price on January 8, when it had suspended its beer supply to TGBCL due to unresolved pricing and payment issues. Over the past year, the company’s stock has risen by approximately 10%.
The suspension of supply on January 8 was prompted by United Breweries’ concerns about the lack of price revisions since 2019-2020, which had led to significant financial losses. Additionally, the company cited substantial overdue payments from TGBCL for past deliveries.
Sources familiar with the matter revealed to CNBC-TV18 that United Breweries reversed its decision after receiving a commitment from the Telangana government to implement a price increase for alcoholic beverages within 30 to 45 days. The report also indicated that the outstanding dues would likely be cleared in installments over the next 12 to 13 months.
In July 2024, during a post-Q1 earnings call, United Breweries CEO Vivek Gupta revealed that the company was awaiting Rs 900 crore in dues from the Telangana government, which had been impacting its working capital. Gupta noted that the government had assured the company that a repayment plan would be provided.
Last year, the Brewers Association of India (BAI), representing major beer makers, urged the Telangana government to approve price hikes for alcoholic beverages to offset inflationary pressures. However, the state government rejected this plea.
TGBCL, a state-owned public sector enterprise, holds a monopoly on the wholesale and retail distribution of alcohol in Telangana.
United Breweries faces stiff competition in the Indian alcoholic beverages market, including from global giants like AB InBev, which owns brands such as Budweiser, Hoegaarden, and Corona, as well as Carlsberg.
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