Scotch sales in Andhra may suffer setback

'Sales to come down by 25% due to new excise policy'

The sales in the Scotch whisky segment is expected to receive a huge setback in Andhra Pradesh on account of the new excise policy.

The government's recent decision to increase the sales tax on premium and the Scotch segments to 90 per cent from the existing 70 per cent along with the increase in both excise duty and the margin of the Andhra Pradesh Beverages Corporation Limited, the sole distributor, has resulted in a steep increase in retail prices.

"Sales will come down by at least 25 per cent due to the new excise policy," said Harish Mulchandani, managing director of the Allied Domecq Spirits and Wine (India) Private Limited of Teacher's fame.

According to market sources, the impact of the new price structure will be far more serious on this niche segment as it allows bootleggers, both inside and across the state borders, to have a field day. Moreover, it will also act as a deterrent on sales.

Mulchandani said the Scotch whisky segment is growing in leaps and bounds with around 15,000 cases being sold annually from just 700 cases a couple of years ago in neighbouring Karnataka.

Unfortunately, Andhra Pradesh, which has been a leading consumer in this segment in the south all these years, is now going backwards due to government's policies.

According to Mulchandani, a bottle of Teacher's whisky, which is currently available at Rs 1,200 in the local market, will cost Rs 1,750 once the new price structure comes into effect, for no fault of the company's.

"When the price committee asked us to maintain the same EDP (ex-distillery price) of our brands, which were unchanged since 1997, we replied in the affirmative. But when we received a letter informing us about the new retail price structure, we were really taken aback," Harish told the media here on Wednesday.

Allied Domecq's business is going to be affected more as its flagship brands "� Teacher's and Teacher's 50 "� alone account for 40 per cent of the state's market share in the Scotch segment. The '100 Pipers' whisky is the second largest selling brand in this segment in the state.

At present, the sales in the Scotch whisky segment in Andhra Pradesh is estimated to be 8,000 cases a year, which is a minuscule volume as compared to the sales of more than 1 lakh cases in the premium Indian Made Foreign Liquor (IMFL) segment in the state. The total IMFL sales in Andhra Pradesh has been a whopping 2.4 crore cases during last year.

But what prompted the government to raise taxes and duties on these higher segments?

While the government terms the move as part of its efforts to mop up more revenues, Mulchandani sees the hand of 'premium IMFL players' behind the government's decision.

"With so much difference in prices of premium IMFL and the Scotch whiskys, we both can grow without affecting each other's market as is the case in Goa. But the IMFL companies think otherwise," he said.