BEER CONSUMTION TRENDS

In 2004, annual consumption volume in the world recorded 19 years of consecutive growth. The growth rate against the previous year exceeded 4% for the first time since 1987. The reasons to the expansion of the beer market are attributed to the global economic recovery and high temperature caused by record-breaking heat waves.

The Chinese market, which topped the list for 2 straight years, grew at a more rapid pace than the previous year (up 6.4%), getting a lead of 4o.67 million HL on the US. Its growth was attributed to a population increase and improved standard of living due to economic growth. The beer market in China is characterized by market growth centered on urban areas as well as aggressive market entries by foreign breweries.

Due to changes in economic policies and a growing health consciousness since the late 1990’s, Russia jumped to 4th in 2004 from 9th in 1994, sharing its position with Brazil.

Of the southeast Asian markets, Thailand (up 10%) and the Philippines (up 15.6%) showed remarkable growth.

Japan remained in the same position on the list, but consumption increased (by 0.7%) for the first time since 2001 after a 2-year decline, which was attributed to the heat-wave and introduction of new genre.

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.