$466 mn debt: Telangana's liquor crisis is no happy hour for global brands

Global giants like Diageo, Pernod Ricard, and Carlsberg have suspended supplies to Telangana, which owes $466 million in unpaid dues

The alcoholic beverage industry in India is witnessing a standoff as global giants, including Diageo, Pernod Ricard, and Carlsberg press Telangana state for unpaid dues amounting to $466 million, reported news agency Reuters.

 

India’s booming alcohol market  

 

India, the world’s eighth-largest alco-bev market by volume, generated an estimated $45 billion in annual revenue last year, according to Euromonitor. State governments rely heavily on alcohol sales for revenue, regulating prices and controlling supply chains. In Telangana, the largest beer-consuming state in India, these regulations are now at the heart of the crisis.  

 

Heineken takes a stand  

 

United Breweries, which holds a 70 per cent market share in Telangana state, stopped beer supplies citing overdue payments and a freeze on price hikes since fiscal 2019-20. The company says these delays have strained its financial position.  

   

“United Breweries has used this as a tactic to press for price increases, which could dampen consumer demand,” said Telangana Minister Jupally Krishna Rao. The state owes the brewer Rs 660 crore, he confirmed, though reasons for the delay remain unclear.  

 

Widening fallout  

 

The crisis isn’t limited to beer makers. Whisky and scotch producers are also grappling with mounting unpaid dues. Sources told Reuters that Pernod Ricard is owed Rs 1,500 crore, while Diageo is seeking Rs 1,000 crore.  

 

Carlsberg and Anheuser-Busch InBev (AB InBev) are also in the red, with Telangana owing them nearly Rs 40 crore and Rs 150 crore, respectively.  

 

While none of the companies have publicly commented, the Brewers’ Association of India and the International Spirits and Wines Association of India issued a joint letter to Telangana’s government, expressing their concerns. They cited ‘tremendous difficulties for companies’, particularly in sustaining operations and planning future investments.  

 

Telangana’s system under fire  

 

The crux of the problem lies in Telangana’s state-run supply model. Liquor companies must deliver their products to government-operated depots, which then distribute them to retailers. This forces alcohol companies to depend on the state for payment.  

 

Sources also suggest Telangana’s total outstanding dues to whisky and beer makers could be as high as Rs 4,000. As of October 3, industry groups estimated that the total unpaid amount across the sector had reached $606 million.  

 

A brewing industry in turmoil  

 

The timing of the crisis couldn’t be worse. The alco-bev industry in India is already under scrutiny, with the antitrust watchdog investigating allegations of collusion between AB InBev and Pernod Ricard to gain market share. Both companies have cooperated with the authorities following office raids in December.  

 

Meanwhile, Telangana’s delayed payments and price freeze policies have intensified financial pressures on alcohol companies, jeopardising their ability to operate in one of India’s most lucrative markets.  

 

Telangana accounts for 15 per cent to 20 per cent of United Breweries’ annual sales volume, Elara Capital estimates, making it a critical market for the Heineken subsidiary. The suspension of supplies risks not only United Breweries’ bottom line but also beer availability in the state.