UT administration needs to urgently establish an inflation-based pricing index for AlcoBev industry

Only 2% supplier price increase accorded in the last 4-5 years

Chandigarh, December 12, 2022:  The International Spirits & Wines Association of India (ISWAI), the apex body of the premium AlcoBev sector, expresses its concern to the Chandigarh Administration that a meagre 2% supplier price increase accorded to the industry once in the last 4-5 years, is insufficient, given the double-digit inflation that is prevailing in all direct input materials such as Extra Neutral Alcohol, also known as ENA (12%), Glass (24.9%), Mono Cartons (19%), etc.

Voicing concerns on inflation, Nita Kapoor, CEO, ISWAI, said, “There has been a double-digit increase in cost of inputs in the last 4 years with no price increase since 2021, even though the Chandigarh excise policy has instituted a 4% supplier price increase every year. ISWAI estimates an increase in input costs of about 20-25% has been borne by the AlcoBev suppliers on account of the runway inflation across the globe and seeks an Immediate relief of around 8-10% in the supplier price as the key ask from the state government.”

Suresh Menon, Secretary-General, ISWAI, said, “Over the past 4 years, taxes, levies, and consequently, consumer prices, have increased. But supplier prices have effectively remained by and large static. This will impact industry volumes and margins amid cost pressures, creating a triple whammy for the industry.”

Suggesting a viable win-win solution, Kapoor stated, “The most crucial reform that the AlcoBev industry needs is having an inflation-based index that links the product sale price to fluctuating cost of inputs, which will be fair to consumers and manufacturers alike. Clearly, the sector direly needs a policy rehaul”.

Commenting further, Kapoor said, “The benefit of establishing such an index would be that it will establish a transparent price fixation mechanism that can be efficiently introduced for both the government and the industry. It will help the industry to predict product prices in advance, which will help drive investments in manufacturing and distribution. The need for such an index is imperative at a time when retail inflation has jumped to a five-month high in September to 7.4 %, while the wholesale price index has remained in double digits for the last 18 months. The price rally has been driven mainly by food and fuel prices, which are key ingredients for liquor manufacturers”.

Two of the largest input costs for manufacturers of Indian Made Foreign Liquor (IMFL)—glass bottles and Extra Neutral Alcohol (ENA)—are up by 24.9% and 12% respectively from last year. The cost of ENA is set to go up further by at least another 5% following the government’s announcement to raise the purchase price of ethanol in its bid to advance its target date under the program for blending green fuels with petrol gasoline by five years to 2025-26.