No Kingfisher in Telangana; Unpaid Dues Soar to ₹3,900 crore

“We have decided to immediately suspend supplies to Telangana Beverages Corporation Ltd (TGBCL) due to significant and ongoing operating losses in Telangana. 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,” says United Breweries Ltd spokesperson.

The new year commenced on a negative note for Telangana as United Breweries (UB), the maker of the Heineken-owned beer giant and market leader in India, has decided to end its production in Telengana.

While India is predominantly a spirits-drinking country, with Whisky leading the pack, beer has emerged as a significant contributor to the alcohol revenue for the state government. Beer has become popular in states including Telangana, Andhra Pradesh, Karnataka, Maharashtra, Rajasthan, Tamil Nadu, and Uttar Pradesh.

Kingfisher’s exit

Vinod Giri, director general, Brewers’ Association of India said, “Payments by the state to the companies since September 2024 have been generally on time between 46-48 days as against the tender credit term of 45 days. The pending dues are from the period of February-August 2024 and for the alcobev industry collectively amount to nearly INR3,900 crore for those months. This is unpaid, still. This is not a disputed amount.”

He added, “The primary issue is price increase, or lack thereof. The ex-brewery price is the lowest for Telangana among all major states. The last price increase happened in 2022 but that was based on the cost of production submitted by suppliers in 2019 for a proposed price increase in 2020. However, during the pandemic that price increase could not be actioned and instead the same increase was given in 2022. So actually the prices in Telangana are currently 5 years old.”

Kingfisher Premium (large) is currently priced at just ₹150 for a 650ml bottle in Telangana as compared to ₹200 in Maharashtra or ₹185 in Karnataka. UB’s proposal for a hike of 33.1%, which makes the price of Kingfisher Premium Large to ₹120, has escalated conflict within the state government.

Jupally Krishna Rao, Telangana’s Minister for Prohibition and Excise, Tourism, and Culture said that such a move would put pressure on consumers. He called this move “leveraging its monopoly to pressurise the government”.

Despite strong volumes, the company is unable to make profits in Telangana. The state continued nearly 15%-17% of the total UB’s sales by volume, as per Nuvama Institutional Equities. Currently, the company holds about 70% market share in Telangana’s beer market.

Brewery bumps and dues

Vivek Gupta, CEO and managing director of UB has said how the company plans to expand its production capacity in Telangana, along with Rajasthan and Orissa.

He said, “Look, it’s an industry issue. It was in Telangana. I think it is still impacting the cash flow and working capital. And we have got an assurance that we will start getting back money. We’ve got some money back, it’s very miniscule. We still have an outstanding more than 6 months of dues, but I think the state government has committed to us as an association as an industry that they will give a repayment plan, and I think we'll know more in a week's time about that (sic).”

The beer market in the country stands at 425-430 million and among states Telangana has the largest share.

Telangana and the Alcohol Beverage Brands: A Tussle

“Most states pay on time. The average payment cycle is much shorter in other states such as Kerala, Karnataka, Tamil Nadu where similar Government corporations do wholesale, the credit terms are in the range of 2-7 days and never more than 14 days, and most states adhere to those timelines.”

The issue came to light because the company is losing money while selling alcoholic beverages.

As per the sources, production cost of a beer bottle is around INR380-INR400 on an average, in Telangana, the selling price is just INR300. Across the neighbouring states, prices of alcohol are almost 50% higher.

Giri remarked, “Logically when the billing prices of companies go up, because most of the taxes are ad valorem, the revenues of the government will also go up. So, the logic of keeping the prices low is difficult to understand.”

Currently, the state owes money to brands including Carlsberg Group (INR40 crore) and AB InBev (INR150 crore) respectively, Reuters reported.

Shares of United Breweries Ltd ended at ₹1,932.50, down 0.81%.