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Telangana liquor crisis: Global liquor makers demand $466 million in unpaid dues

Telangana liquor crisis: Global liquor makers demand $466 million in unpaid dues

India ranks as the world’s eighth-largest alcohol market by volume, with an estimated $45 billion in annual revenue, according to Euromonitor. Alcohol pricing is regulated at the state level, with these taxes being a significant revenue source.  

Business Today Desk
Business Today Desk
  • Updated Jan 9, 2025 5:28 PM IST
Telangana liquor crisis: Global liquor makers demand $466 million in unpaid duesIn Telangana, liquor companies must supply exclusively to state-run depots, which then sell to retailers, leaving them dependent on state governments for payment.

Global alcohol corporations, including Diageo, Pernod Ricard, and Carlsberg, are demanding approximately $466 million in unpaid dues from Telangana, Reuters reported quoting sources. 

Heineken-owned United Breweries has threatened to stop supplying in Telangana, India’s top beer consumer, due to delayed payments and the lack of government approval for price hikes since FY 2019020, which has negatively impacted its financial performance.  

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Business Today was unable to verify the development independently. 

India ranks as the world’s eighth-largest alcohol market by volume, with an estimated $45 billion in annual revenue, according to Euromonitor. Alcohol pricing is regulated at the state level, with these taxes being a significant revenue source.  

Last year, the Competition Commission of India (CCI) raided offices of alcohol giants Pernod Ricard and Anheuser-Busch InBev (AB InBev) as part of an investigation into alleged price-fixing with retailers. The raids, which occurred in Hyderabad and targeted retailers in Telangana, are considered one of the largest industry crackdowns in recent years. 

The CCI also conducted a raid in 2018, investigating major beer companies, including AB InBev, for potential cartel behaviour. Although the investigation is ongoing, it has raised concerns over the practices of brewers controlling India’s $7 billion beer market, which makes up 88% of the industry. 

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In Telangana, liquor companies must supply exclusively to state-run depots, which then sell to retailers, leaving them dependent on state governments for payment. Telangana owes approximately Rs 4,000 crore ($466 million) to whisky and beer producers, as per the Reuters report. 

On January 8, Telangana Minister Jupally Krishna Rao claimed that United Breweries, which holds 70% of the state’s market share, had suspended its supply as a “tactic” to secure price increases, which can dampen consumer demand. Rao said that Telangana owed Rs 660 crore ($77 million) to United Breweries but did not specify the reasons for the delay. 

As per the Reuters report, Carlsberg is owed nearly Rs 400 crore ($5 million), and AB InBev has outstanding dues of Rs 150 crore ($17 million). Whisky and Scotch producers are owed much larger sums, with Pernod Ricard demanding Rs 1,500 crore ($175 million) and Diageo seeking Rs 1,000 crore ($116.4 million). 

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The Brewers' Association of India and the International Spirits and Wines Association of India recently wrote to the Telangana government, highlighting how the delayed payments have caused significant operational difficulties. The associations claimed that these issues were impacting companies’ ability to sustain and plan investments. By October 3, 2023, the total unpaid dues were estimated at $606 million. In the FY24, United Breweries, a Heineken subsidiary, reported sales of Rs 18,300 crore ($2.1 billion).  

Telangana has fewer than 3,000 liquor outlets, and permits to operate these outlets were distributed through a lucky draw, with 130,000 applicants for the 2023 process. Successful applicants were granted permits in August 2023, allowing them to commence operations by December 2023 and continue until 2025.

Published on: Jan 9, 2025 5:25 PM IST
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