The Hindu Business Line : UB takes Kerala Malt Whisky off the shelves

THIS is the biggest casualty yet in the Indian Made Foreign liquor (IMFL) industry's struggle with soaring input costs in recent times. The market leader UB Spirits Division (UBSPD) has discontinued its economy label Kerala Malt Whisky, which recorded depletions close to two million cases in 2003-04, citing unviable business conditions.

Kerala Malt Whisky (KMW) mopped up its entire sales in Andhra Pradesh, the country's largest IMFL market. KMW is the most notable and perhaps the biggest brand in terms of volume to be nixed as liquor companies have been taking their economy brands off the shelves following unprecedented rise in extra neutral alcohol (ENA) cost, which more than doubled from Rs 20 to over Rs 40 per litre. "We have sacrificed KMW just like how we discontinued some of our other economy labels," the company sources said.

UBSPD, comprising McDowell & Co and Herbertsons Ltd, had earlier withdrawn Vin Malt Whisky and Majestic Rum and Whisky - two other `millionaire' brands (selling over a million cases annually) - as they turned unviable in the prevailing environment. The predominantly molasses-based IMFL industry has been at the receiving end due to decline in acreage in the cane crushing belts. Further, there has been diversion of ethanol (ethyl alcohol) for purposes of mixing with petroleum products, shrinking the availability of spirits for the IMFL sector.

The economy labels have been hogging the limelight since the late '90s when consumers started downtrading in the southern markets, which accounts for over 55 per cent of the industry's annual depletions pegged at around 88 million cases. For instance, KMW topped the sales chart of McDowell & Co in 2000-01 with 3.7 million cases, pipping even the flagship brand, No.1 McDowell Whisky, before a price war at the low-end market pulled down the regional brand.

The companies have been forced to pull out existing economy labels as most of the State Governments, which control the liquor trade in the South, refused to allow a price revision. "We have no other go but to pull out these labels. We are hoping to substitute the lost volume with fresh labels, as consumers at the low-end are not particularly brand driven. But we need to start a fresh race in a intensely competitive market," the industry sources said. It is learnt that most of the major liquor companies have stopped supplying products priced below Rs 300 per case (containing 12 litre) in the southern markets.

UBSPD's cheapest supply to Andhra Pradesh Beverages Corporation Ltd (APBCL) is now pegged at Rs 335 per case, while it had registered supplies as low as Rs 228 per case before the industry was hit by the molasses crisis.