Heineken`s United Breweries halts beer sales in Indian state over pricing
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Heineken-owned United Breweries on Wednesday stopped supplying beer to Telangana in southern India, following the state's refusal to allow price rises, which the company said have caused it huge losses.
United Breweries, maker of India's most popular Kingfisher brand, is India's biggest beer company and the state of Telangana is India's biggest beer consumer.
"Despite our continuous efforts over the past two years, there has been no increase in the base prices offered for our products. This has resulted in escalating losses, making our operations in the state unviable," United Breweries said in a statement announcing the suspension of supplies.
The stock market disclosure triggered an up to 7% fall in its shares.
In India, strict regulations for the alcohol sector require states to sign off on alcohol industry pricing changes every year.
Officials in India's Telangana state did not immediately respond to a request for comment.
United Breweries did not give detail on the size of the losses, but Karan Taurani, an analyst at Elara Securities, said Telangana state contributed roughly 15-20% of beer sales by volume for United Breweries and around 10-12% of earnings.
United Breweries CEO Vivek Gupta had said in an earnings call last May that it was owed 7-8 billion rupees ($82-93 million) in lost revenue.
Last year, the Brewers Association of India (BAI), a federation of some of the country's largest beer makers urged the state government to allow price hikes for alcoholic beverages to compensate for inflation.
The state of Telangana, according to the BAI, accounts for the sale of roughly 55 million cases of beer a year, or 500 million litres.
The state rejected the request, a government source familiar with the matter told Reuters, speaking on condition of anonymity.
United Breweries competes for customers with global majors, including AB InBev, which owns brands as Budweiser, Hoegaarden, and Corona, and Carlsberg in the fast-growing alcoholic beverages market in India.
Last month, Reuters reported the Indian antitrust body raided the offices of alcohol giants Pernod Ricard, and Anheuser-Busch InBev to investigate accusations of price collusion with retailers in Telangana.
