BEER SALES NOSEDIVES IN KARNATAKA

Beer volume in Karnataka is approximately 119 lakh cases (F-06). Growth of the mild segment is stable and overall growth being driven by the strong segment growing at a CAGR of 17.5%, whereas the total industry grew by 10% (F-99 to F-06).

Traditionally Karnataka has been a very high potential market for beer. However, with the new excise policy which was announced a few months back, Karnataka has witnessed a huge drop in sales for the period April – May 2006 over the same period last year.

• Excise duty on beer up from Rs. 4 per bulk litre to Rs.5 per bulk litre
• Additional excise duty on beer up from Rs.22 per bulk litre to Rs.29 per bulk litre
• Policy is not at all in line with international trends where preference is given to beer. Hence this is a regressive policy in technical sense.

The drop in volume can be related to the Price Elasticity of Beer in the state of Karnataka which is (-1.18).

Interestingly due to the progressive approach taken by governments of Punjab, Haryana and Rajasthan, sales have increased – thus increasing the revenues to the exchequer. The same is not the case with Karnataka.

The table below will clearly give you an indication of what we are talking and the kind of slide that the state of Karnataka has seen as compared to the mammoth growth witnessed in the states of Delhi, Punjab and Haryana.