Bengaluru: United Breweries (UBL) has flagged Telangana, Tamil Nadu and Haryana as markets where the economics of selling beer have become unsustainable, with state-controlled prices failing to keep pace with rising packaging, imported input and logistics costs.“There are three states in particular where business is not viable now because costs have increased significantly, while pricing is controlled by regulators,” CEO and managing director Vivek Gupta told TOI. UBL is sharing cost data with the respective state governments and seeking price revisions to make operations sustainable, he said.Haryana faces an additional structural issue. Gupta said it is one of only two states where beer is not sold under a maximum retail price (MRP) regime. Retailers often sell products above the intended consumer price, affecting affordability and UBL’s business viability. The brewer has consequently reduced trade spending in the state.West Bengal, though not among the three states cited for viability concerns, weighed on UBL’s premium growth during the quarter. The company had been supplying cans to the state from other locations, but rising aluminium and transportation costs made that unviable. UBL expects to have local canning capacity in West Bengal by early next year.Premium volumes grew 17% after excluding West Bengal and Haryana, compared with 7% growth nationally. The company said its premium portfolio became margin accretive for the first time after two years of localising production and improving execution.Gupta said local production reduces freight and tax costs while improving the collection and reuse of returnable bottles. However, premium beer also requires longer brewing cycles, tying up brewery capacity and necessitating additional capital investment.UBL is expanding production closer to key markets. Its first locally produced cans in Telangana reached stores last week. A canning line in Maharashtra is scheduled to begin operations in September, while its Uttar Pradesh manufacturing unit is expected to be commissioned next year.The company is also seeing an early shift in demand after Karnataka moved to an alcohol-content-based taxation system. UBL reduced the price of Kingfisher Premium in the state to Rs 110 from Rs 170, while Kingfisher Ultra is now priced at Rs 250.“We already see a significant jump in consumption of those beers,” Gupta said, adding that mild beer is witnessing strong growth following the policy change.UBL reported a 7% rise in net sales to Rs 3,065 crore in the June quarter, while net profit fell 9% to Rs 166 crore.
