The Hindu Business Line : High bottle prices hit beer brewers

THE domestic beer industry's woes with glass bottles continue. Despite coming off the peak consumption summer months, the average cost of beer bottles remained at a high of Rs 4.50, mostly due to hoarding by the recycled bottle dealers that has forced the brewers to go in for significant infusion of fresh bottles. The scenario could well push most brewers into the red, industry sources claimed.

The brewing industry sources said fresh bottles, each costing Rs 5.50, accounted for 35 per cent of the current production roll out for major players such as United Breweries (UB) and Shaw Wallace Breweries Ltd, now managed by SABMiller. This rather high incidence of usage of new bottles compares alarmingly with the industry norm of 10 to 15 per cent.

The glass bottle industry's monthly supply of nearly three crore beer bottles is lapped up by these brewers in their bid to keep the recycled bottle cost under control, and prevent distribution shortages. The availability factor is still key in the case of the domestic beer industry, with annual depletions estimated at 82 million cases.

"The current recycled bottle cost is pegged between Rs 3.80 and Rs 4, against what used to be the Rs 3-3.25 price band at this time of the year when beer sales tend to soften. The weighted average cost of glass bottle in the production cycle is about Rs 4.50, which means most of us are in the no-profit zone," the industry sources said.

The supply of recycled bottles are in the hands of a few key dealers in each State, who have hiked their holding capacity after tasting blood, in the wake of the bottle shortages leading to the last summer levels. "The normal time for a recycled bottle to get back into the production system used to be two months. Now, it can stretch to over six months, as the trade is in the hoarding game," sources added.

Sources claimed that in the three important States of Andhra Pradesh, Karnataka and Maharashtra alone, the recycled bottle vendors were holding on to over eight crore bottles, as they have already started hoarding to release it at a much higher price when the production lines get ready for the summer months.

"A bottle crisis" in the run-up to the summer this year saw costs soaring over Rs 7, forcing the main players to even look at the option of importing bottles. In fact, UB disclosed that the spiralling bottle costs shaved off Rs 30 crore-40 crore in its operations during the last financial year, 2003-04.

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