 "AP, Telangana to witness contrasting trends in liquor business")
Dominant players have already initiated steps to consolidate their position by availing themselves of fresh opportunities for capacity enhancement in the respective states.
With a 44.35 per cent market share, USL tops volume-wise in Andhra Pradesh while staying at the second position with a 25.87 per cent market share in Telangana. On the other hand, ABD holds the number one spot in Telangana with an overall IMFL market share of 28.56 per cent and has 16.26 per cent share in Andhra. However, there is not much gap between the top two market players in Telangana, unlike in AP.
Pan-India, the undivided AP and Tamil Nadu accounted for the highest share of 21 per cent share in the IMFL space, followed by Karnataka with 18 per cent. These three geographies account for a major 60 per cent of the total IMFL sales in the country, according to a report published by Societe Generale on July 8.
State division has given a fresh impetus to the IMFL market, which otherwise has seen marginal growth in the last couple of years, as the scope for market expansion has been created for a variety of reasons. In this round of volume expansion, both AP and Telangana may together bypass Tamil Nadu to become the largest IMFL market in the country.
Post bifurcation, Andhra Pradesh has found itself in a sharp deficit in distillery capacity as a majority of distilleries are located in and around Hyderabad.
Earlier this year, AP had initiated steps to achieve self-sufficiency in distillery capacity. A government committee, which was constituted to scrutinise and offer fresh licences, had assessed an immediate shortage of 80.6 million proof litres (PL) of distillery capacity - equivalent to 12.4 million cases (a case is a container of 12 full bottles) of IMFL, based on the consumption recorded in 2014-15.
While the present capacity in AP is 122.8 million PLs (18.9 million cases), it saw sales of 187.1 million PLs (28.8 million cases) in 2014-15, which means it requires an additional capacity of 64.3 million PLs in IMFL, according to industry estimates.
The committee had permitted four existing distilleries to add a little over 80 million PLs (12.30 million cases) capacity or equivalent to the existing capacity gap. Of this, Pearl distilleries, which has a collaboration with the USL, was given an additional 54.23 million PLs. This puts a total 78.3 million PLs (12.04 million cases) or 38.6 per cent of the total permitted capacity in AP in the hands of USL, according to market sources.
Two other distilleries, which work for the Tilaknagar Industries (TIL) group, have an additional 30 million PLs capacity. Tilaknagar is now expected to hold about 19.30 per cent of the total permitted distillery capacity, giving it scope for bigger growth. AP Wineries and Distilleries Association president Nirannjan Lal Agarwal says almost all the additional capacity has been given in favour of these two companies.
The applicants that failed to get licence in the first round also include ABD, which had sought for 40 million PLs capacity. The committee, however, promised to have a next sitting to consider other applicants as it estimates an annual growth of over 20 per cent in IMFL consumption in the next few years.
On the other hand, Telangana has a licensed distillery capacity of 164.1 million PLs equivalent to 25.2 million cases, as against the actual sale of 20 million cases in 2014-15, leaving a surplus capacity of 33.7 million PLs or 5.2 million cases.
Recently, ABD had announced the acquisition of Shasta Bio Fuels, an integrated grain spirit distillery located in Mahabubnagar district of Telangana, for a consideration of Rs 200 crore. Being the first grain distillery of the company, the acquisition would help ABD extend its presence in Telangana, the company said. The surplus capacities are expected to be put to a maximum use as and when the government’s plans to introduce a new category liquor below the existing regular variety comes into market later this year.
According to a senior revenue official, AP now ranks the lowest in per capita consumption among other south states, an indication that there is enough scope for the expansion of IMFL market. The state government recently asked the companies to sell a portion of their supplies in smaller quantity tetra packs.
Though the move would push IMFL volumes higher, analysts expect it would work against the ‘premiumisation’ trend as the regular category brands are expected to be sold tetra packs, thus putting pressure on the margin growth of the market leaders.
In Telangana, toddy forms a substantial portion of liquor consumption in rural areas. The government now wants to introduce a new category liquor, below the regular category priced around Rs 35 per 180 ml, in a bid to shift the lower strata consumers away from toddy, which is often allegedly mixed with chemicals that can cause serious health problems.
IMFL sales volumes in 2014-15 (all figures denote million cases)
| Andhra Pradesh (Total: 28.3) | Telangana (Total: 20.08) | |
| USL | 12.79 | 5.2 |
| ABD | 4.7 | 5.7 |