Beverage Industry Seeks Price Increases Amid Rising Costs Linked to West Asia Crisis

Alcoholic Beverage Makers Seek Price Hike Amid Rising Production Costs

The Confederation of Indian Alcoholic Beverage Companies (CIABC) and the Brewers Association of India (BAI) have urged state governments to allow revisions of Indian Made Foreign Liquor (IMFL), wine, and beer products in response to rising production costs triggered by supply chain disruptions caused by the West Asia crisis.

According to the BAI, suppliers are seeking a price increase of 15-20 per cent to partially offset the impact of rising input costs. In letters sent to state governments, BAI Director General Vinod Giri highlighted the sharp increase in input costs across categories. Specifically, glass bottle prices have risen by around 20 per cent, paper cartons have increased by almost 100 per cent, and materials such as LDPE, BOPP, and adhesives have become costlier by 20-25 per cent.

The severe shortage of commercial LNG supply has put glass bottle manufacturers under significant strain, leading to partial or full shutdowns. The beer industry, which is also facing issues with the supply of cans, expects the shortage to prolong due to rising aluminium costs. Aluminium supplies from the Middle East have been badly hit, and suppliers have warned that prolonged disruption risks not only output but also a shutdown of manufacturing plants.

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Freight and logistics costs have also increased by around 10 per cent, while the depreciation of the rupee against the US dollar has further pushed up import costs. As an interim relief measure, the BAI has sought a reduction in manufacturing levies by around Rs 3-5 per bulk litre to create a cushion against rising costs.

The BAI represents leading players from the brewing industry, including United Breweries, ABInBev, and Carlsberg, which together account for around 85 per cent of the beer sold in the country. The CIABC, which represents IMFL and domestic wine makers, has asked various state governments to revise the ex-distillery/winery price (EDP/EWP) in its representations.

According to the CIABC, the volatile geopolitical situation in the Middle East, which accounts for nearly 20 per cent of global crude oil supplies and is a key supply chain hub for India, has intensified inflationary pressures across the industry. Glass manufacturing units are under severe stress due to restrictions in gas supply to the Firozabad glass manufacturing hub, forcing vendors to shift towards costlier spot LNG or LPG.

Comparison of Raw Material Price Increases

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Glass manufacturers have already increased prices by 10-20 per cent, while costs of PET and aseptic packaging materials have also surged, increasing the overall cost of production for manufacturers. The CIABC further stated that ocean freight rates have also surged, with shipping carriers imposing emergency and conflict surcharges for routes connected to West Asia and the Indian subcontinent.