In a significant decision, United Breweries (UBL) has suspended supply of it’s beer to Telangana Beverages Corporation Limited (TGBCL) with immediate effect.
(TBCL is a public sector company that controls the sale of alcohol in Telangana. It has a monopoly on the wholesale and retail sale of alcohol in the state, including IMFL and beer)
Two reasons mentioned by the Company –
- TGBCL has not revised the basic price of the Company’s beer since 2019-20, resulting in huge operational losses; and
- significant overdues remaining unpaid by TGBCL for the past supply of beer by the Company
In a media statement, UBL highlighted the unviable nature of its operations due to stagnant base prices for its products over the past five years. The absence of price revisions, coupled with rising costs, has led to significant financial strain on the company. “Despite our continuous efforts, there has been no increase in base prices, resulting in escalating losses. With each beer sold at a loss, continuing our operations in the State has become unsustainable,” the company stated.
UBL claims to be contributing Rs 4,500 cr annually to the State’s revenues. UBL has appealed to the State government to take immediate steps to address the situation.
In a statement with CNBC-TV18, Telangana’s Excise Commissioner refuted the claims made by UBL, insisting that there were no dues pending to the beer industry since September 2024.
- “We have been following 45-day cycle for releasing the payment. Dues are pending for April-August 2024 and submitted to finance department. For price revision, fixation committee is looking into that matter,” the Excise Commissioner said.
Whether this is negative for UBL?
Telangana is a big state for UBL. In terms of volume market share, Telangana could contribute anywhere between 15%-20% of volumes for UBL. It has about 60%+ plus market share in Telangana.
So in short term it’s surely negative.
However, these kind of regulatory setbacks are quite common in the liquor industry and get resolved in couple of months.
Once resolved, it would help improving the margins of the Company.