Alcoholic beverage industry seeks price hike amid rising costs from West Asia crisis

New Delhi: Alcoholic beverage makers have sought a reasonable price hike from state governments to deal with pressures arising out of rising can and bottle costs due to supply chain disruptions triggered by the West Asia crisis.

Confederation of Indian Alcoholic Beverage Companies (CIABC) and the Brewers Association of India (BAI) have urged states to allow revisions of IMFL (Indian Made Foreign Liquor), wine and beer products and provide interim relief measures to help manufacturers cope with rising production costs.

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BAI has asked state governments to allow suppliers a price increase of 15-20 percent to partially offset the impact of rising input costs.

In letters sent to state governments, BAI Director General Vinod Giri said the conflict has triggered a sharp increase in input costs across categories.

“Glass bottle prices have risen by around 20 percent, paper cartons have increased by almost 100 percent, and materials such as LDPE, BOPP and adhesives have become costlier by 20-25 percent,” Giri said.

Severe shortage of commercial LNG supply has put glass bottle manufacturers under significant strain, and they too face partial or full shutdowns.

"Supply of glass and cans may be severely strained in the coming months and even years," BAI said.

Moreover, the beer industry, which is also facing issues with the supply of cans, sees it prolonging due to rising aluminium costs.

"Aluminium supplies from the Middle East have been badly hit, and suppliers have warned that prolonged disruption risks not only output but also a shutdown of manufacturing plants," said Giri.

Freight and logistics costs have also increased by around 10 percent, while the depreciation of the rupee against the US dollar has further pushed up import costs, he added.

As an interim relief measure, BAI has also sought a reduction in manufacturing levies by around Rs 3-5 per bulk litre to create a cushion against rising costs.

BAI represents leading players from the brewing industry - United Breweries, ABInBev and Carlsberg - which together account for around 85 percent of the beer sold in the country.

CIABC, which represents IMFL (India Made Foreign Liquor) and domestic wine makers, has asked various state governments to revise the ex-distillery/winery price (EDP/EWP) in its representations.

CIABC Director General Anant S Iyer said the volatile geopolitical situation in the Middle East, which accounts for nearly 20 percent of global crude oil supplies and is a key supply chain hub for India, has intensified inflationary pressures across the industry.

According to the industry body, glass manufacturing units are under severe stress due to restrictions in gas supply to the Firozabad glass manufacturing hub, forcing vendors to shift towards costlier spot LNG or LPG.

“Gas supply to the Firozabad hub is being restricted to 60 percent of contracted quantity, including risk of closure,” CIABS said in its letter to states.

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Glass manufacturers have already increased prices by 10-20 percent, while costs of PET and aseptic packaging materials have also surged, increasing the overall cost of production for manufacturers, it added.

CIABC further said ocean freight rates have also surged, with shipping carriers imposing emergency and conflict surcharges for routes connected to West Asia and the Indian subcontinent.

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