Restrained Demand Due To High Taxes: Budweiser & Kingfisher
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Restrained Demand Due To High Taxes: Budweiser & Kingfisher

Anheuser Busch InBev and Heineken, two of the world’s largest brewers, said India is one of their top priority markets, but demand has been restrained due to high taxes and a limited number of retail outlets, despite the fact that it is growing at a similar rate as China.

There are few countries in the world that have the same population as China. In India, beer is taxed at the same rate as spirits, and access is relatively limited, with only 80,000 alcohol licences distributed across the country for a population of 1.3 billion people. When compared to China, which has 6 million points of sale, it’s literally 1 per cent, said Budweiser Brewing APAC chief executive Jan Craps at an investor meeting.

India, a warm, tropical country with promising demographics and rising affluence, remains one of the world’s largest beer markets. Heineken, which owns Kingfisher, and Anheuser Busch InBev, which sells Budweiser, control nearly three-quarters of the beer market in the United States. Every year, more than 20 million people in the country reach the legal drinking age.

Strong beer accounts for more than 80 per cent of total volume in India, and many strong beer consumers are also potential buyers of value and low-priced spirits. Price and excise rates are critical in this cross-category competition. According to the IWSR Drinks Market Analysis report, if regulations raise beer prices, the gap between cheap Indian-made foreign liquor and beer closes sufficiently for many consumers to switch.

Furthermore, the country’s beer market is worth Rs 10 billion or 28 million hectolitres (mhl), which is significantly less than the Chinese market, which sells beer worth Rs 65 billion or 488 mhl annually. With a per capita consumption of 2 litres, beer accounts for only 10 per cent of the spirits market.

To work toward a more equitable regulatory environment for beer. Jacco van der Linden, president APAC at Heineken, told analysts during a capital markets event that the beer price is also relatively high and has a lot to do with the excise regime.

There are parallels with China from 20 years ago. India is more of a continent than a country, and in order to understand this massive market, he suggests de-averaging it.

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