The Hindu Business Line : Beer prices to head north as bottle costs hit record high

Karnataka, one among the key guzzlers in the country, is expected to see beer retail price move up by roughly Rs 3 on 650-ml bottles from next month even as major brewers are pushing for similar increase elsewhere to absorb the cost pressure.

The industry information suggests that prohibitive price of recycled bottles — currently pegged at Rs 6.30, almost doubling from Rs 3.20 a little over a year ago — has grievously dented the bottom lines of all brewers as the bottle input cost now account for 35 per cent of the beer production cost.

Karnataka State Beverages Corporation (KSBC), which controls the wholesale trade of alcoholic beverage products, has agreed to a upward revision in both basic price and bottle deposit fee following representations made by leading brewers, United Breweries (UB) Ltd and Shaw Wallace Breweries Ltd (SWBL) managed by SABMiller, and an announcement is pending approval by the excise department.

Mr Richard Rushton, Managing Director of SWBL, said the company is pushing for price hikes across the country as it could absorb the cost pressure on account of the spiralling bottle price. "We have not been able to take the cost pressure. It is as simple as that and there is nothing more to it," he added.

The UB President, Mr Kalyan Ganguly, said the brewing companies are pushing for an increased bottle deposit as it would make the consumer pay up for the container and not just the content as was the case till now.

As price moves up in Karnataka, which is a "free-price" market, it is not yet clear how price revision is possible in other controlled markets and whether the companies would take a hike in the peak consumption summer months.

Informed sources said consumers in Karnataka after the price revision could claim a deposit refund of Rs 5 upon return of the 650-ml bottle to the retail trade.

The move could somewhat offset the increase in retail price and also help attracting bottles back to the industry. This scheme is already in place in the 330-ml segment where deposit fee of Rs 3 on a retail price of Rs 21 is refunded upon the return of the bottle.

Incidentally, the companies have decided against taking a price increase on 330-ml segment, which has been the volume driver in recent years. This low-priced segment controls nearly 22 per cent of the sales in Karnataka.