The International Spirits & Wines Association of India (ISWAI), the apex body of the premium AlcoBev sector, has voiced concern on the increase in the current warehouse margins to 14 per cent and retail margin to 20 per cent for Foreign Made Foreign Liquor (FMFL) spirits and Wine products.

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Nita Kapoor, CEO, ISWAI, said, “The recent announcement of substantially increasing the warehouse and retail margins will have adverse consequences for the consumers and the industry. The move will not generate the expected revenues for the State as the FMFL segment represents only a fraction, which is merely 0.25 per cent of the broader alcoholic beverage industry.

The proposed increase in warehouse and retail margins raises serious concerns of a potential industry contraction and eventually leading to a revenue loss to the State. In this lose-lose scenario, manufacturers/suppliers, and consumers would bear the primary brunt of the impact. The increase in the warehouse and retail margins will have a significant impact on the Maximum Retail Prices (MRPs), which are expected to go up by 26 per cent.

This implies that a brand that sells at about ₹3,000 will now be sold at an increased price of ₹3,800 per bottle. The government’s revenue share of what the consumer pays for his drink will go up from the current 58 to 67 per cent.

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Suresh Menon, Secretary-General, ISWAI, said the sales tax was increased by 35 per cent in 2020 in the wake of the pandemic. However, with the pandemic behind us, it is an opportune time to reassess this increase. If the warehouse margin and the retail margin remain at 14 and 20 per cent respectively, reverting to previous sales tax rates will increase the MRPs by only 3 per cent instead of the 26 per cent that is currently expected.

Nita Kapoor, said, “With such a steep increase in prices, the volumes for this category will collapse, and a further volume drop will cause some brands to exit the market, as it would be difficult for them to sustain their businesses to cater to small volumes. ISWAI, along with its member companies, urges the Kerala government to reconsider the order and find a balanced solution that benefits all stakeholders as well as improves state revenues.”