International alcohol firms like Diageo, Pernod Ricard, and Carlsberg are seeking unpaid debts totaling approximately $466 million from the state of Telangana in India, where Heineken has recently ceased supplies in an unprecedented action, according to three industry sources who spoke to Reuters.
Heineken’s United Breweries announced it will stop its supplies to southern Telangana, the largest beer market in India, due to postponed payments, as reported by Reuters. Further, the report said that the absence of government authorization for price increases since the fiscal year 2019/20, has negatively impacted its financial situation.
At a time when the business is under severe examination nationally, the largest beer manufacturer in India made an unprecedented step on Wednesday that caused its shares to drop 7%, according to a Reuters story.
Following a raid on their offices in December, the antitrust watchdog is looking into claims of conspiracy between Anheuser-Busch InBev and Pernod of France to increase market share. Both are working with Indian officials, said Reuters in its report.
In several states, such as Telangana, liquor producers are only allowed to supply state-run depots, which subsequently sell to retailers, requiring the businesses to rely on state governments for payment.
Telangana owed whisky and beer businesses over 40 billion rupees ($466 million) in outstanding debts, according to sources in the alcohol industry who spoke to Reuters under condition of anonymity.
Telangana minister Jupally Krishna Rao reportedly said late on Wednesday that United Breweries, which controls 70% of the state’s market, had halted supply as a “tactic” to pressure for price hikes, which have the tendency to reduce consumer demand.
Although Rao did not specify the precise cause of the delay, he claimed that the state owed United Breweries 6.6 billion rupees ($77 million).
He did not disclose the amount owed to its peers, but according to sources, Carlsberg owes approximately 400 million rupees ($5 million), while AB InBev owes 1.5 billion ($17 million).
Last year, Euromonitor projected that India’s alcohol sales amounted to $45 billion annually, making it the seventh largest alcohol market in the world by volume. The price of alcohol goods, which are a significant source of income for each state, is regulated separately.
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