West Asia conflict hits Karnataka breweries; industry seeks price relief

Owing to the conflict in West Asia, the brewery industry has experienced an unprecedented escalation in costs and supply disruption and hence, the Brewers Association of India (BAI) has urged the State Governments to allow suppliers a price increase of up to 15 to 20% to at least partially recover the costs. 

BAI has also sought, as an interim relief, reduction in the manufacturing levies by around Rs 3-5 per bulk litre to create a cushion to absorb rising costs.  “The war has unleashed a massive input cost increase which keeps growing. Glass bottles prices have risen by around 20%, paper cartons have increased by almost 100%, and cost of materials such as LDPE, BOPP and adhesives have gone up by 20 to 25%. Freight and logistics costs have also risen by 10%. Rupee has fallen by almost 4% against US Dollar, adding to the cost of imports,” a letter to various state governments by the BAI said.

That apart, the Aluminium supplies from the Middle East have also been hit and as a result, the Can suppliers have warned the breweries that prolonged disruption risks not only reduced output but could result in a shutdown of manufacturing plants. Severe shortage of commercial LNG supply has also put glass bottle manufacturers under significant strain, brewers said.

As a result of increase in prices of these materials there has been a close to 15% increase in production cost, said BAI Director General Vinod Giri. “The collective impact of these increases is around 15% for brewers. This increase is not a gradual one that can be managed through operational efficiencies. It is a sudden, structural cost shock and judging from the extent of damage to the energy infrastructure in the Middle East, is likely to last for anywhere between three to five  ears. No brewer, however efficient, can absorb such increase in costs within the prices currently permitted by the State,” he said.