Supreme Court's order to ban sale of liquor within 500 metres of national and state highways in the country may have ushered in some bad news for spirits manufacturers.
The apex court ban, which came into force on April 1, has hit the fortunes of domestic as well as multi-national alcoholic beverage companies.
According to a report in The Economic Times, alcohol sales have come down by around 5 per cent post SC's liquor ban on national and state highways.
In April, the industry saw sales of 23.47 million cases (each case is nine 1-litre bottles), down from 24.69 million cases a year ago, ET quoted industry data in the report. These figures translates into roughly 1.2 million cases or more than 10 million bottles.
In a presentation to investors in London, Diageo Plc-owned United Spirits' chief executive Anand Kripalu said the impact from the liquor ban would go through to the first half of the financial year 2017-18, till September. "We expect the impact to be mitigated eventually and where it doesn't get mitigated the consumption will shift to other outlets," Kripalu said in that presentation.
Earlier, Danish brewer Carlsberg reported a contraction in volumes in its Asian operations in January-March 2017, because of the ban in India. If not for the SC ruling, Carlsberg would have grown by at least 2 per cent. Its volumes in India declined almost 20 per cent during the period.
"Despite a good start in all the other countries, in India, because of the implication of the highway ban, we had a negative double-digit volume decline," said Cees't Hart, CEO, Carlsberg at an investor call.
Alcohol accounts for at least 25 per cent of state revenues, according to brokerage Motilal Oswal Securities Ltd., a drop would mean a Rs 5 trillion hit. Alcohol can reach as much as 40 per cent of tax revenue in some states, the Mumbai-based firm said in an note.
Liquor prohibition has not lasted for more than two years in any Indian state other than Gujarat. This may be primarily because alcohol contributes more than 25-40% of revenues for most states, Motilal Oswal said.