The ongoing economic meltdown coupled with high raw material costs will make your favourite spirit dearer by 8-10 per cent in the next financial year.
Bottled or branded alcohol industry prices are regulated by the government. Manufacturers are supposed to submit their labels along with the maximum retail price (MRP) to the government in February/March every year. They get the clearance in April, after which the price is effected for a year.
“There will be an increase of 8-10 per cent in the price of bottled spirits (rum, vodka, whisky and brandy) across the industry in the coming financial year as there seems to be no let down in input costs even in the coming year,” said India Glycols President I B Lal.
The increase in input costs were due to multiple reasons: Price of molasses, which constitutes 81 per cent of the alcohol, increased to Rs 600 a quintal from Rs 350 in February/March; packaging costs have also risen by 15-20 per cent, and the service tax net has widened to include security, distributorship agencies being levied a 12.36 per cent tax.
“The sugarcane crushing season has been delayed this year also and hence there will be a shortfall in the production of molasses by 20 per cent,” Lal said.
The delay in the crushing season is due to dispute over the state minimum price (SMP).
The SMP is Rs 81 a tonne, whereas the government had increased it to Rs 140, up from Rs 125 last year. The mill owners have lodged a complaint and said that crushing will resume after the court ruling on November 18.
In the current financial year, companies and lower-end brands are already taking a big hit.
“Profit margins of the industry have been reduced by 5-10 per cent in the first half of FY09. Additionally, lower-end brands that operate on profit margins of less than 5 per cent are making losses. These brands account for 30 per cent of the 190 million cases spirits industry,” Lal says.
At India Glycols, the lower-end brands make up 40-45 per cent of its branded spirits portfolio.
