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Hic Hic Hurray! Raise a toast to 2007
Trideep & Deepak Sharma in New Delhi
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December 22, 2007
As the sun sets on 2007, tipplers will be raising a toast to a year, which gave them a plethora of global brands to choose from. For every peg they gulp down, they would be thankful to the year which saw the prices of imported spirits going southward, as the government removed additional customs duty.

Wider choices of purchasing point, with many of the liquor firms (both domestic and multinational) tying up with big retailers to take advantage of the booming sector, gave the consumers another cause to cheer.

While Diageo entered into arrangements with Reliance [Get Quote] Retail, other players like UB Group and Champagne Indage [Get Quote] were scouting for partnerships with the likes of Shoprite and the Future Group.

With brands like Bouvet Ladubay, Romanov diet Vodka, Four Seasons (from United Spirits [Get Quote]); Nillaya Blossom Hill and Piat-d'or (Diageo); Masterstroke (Diageo Radico); Bourbon Whiskey and DYC Whiskey (Beam Global) and Apple Rum (Bacardi) making their debut in the Indian market, the choice was wider than ever for consumers.

Moreover, domestic players like Globus Spirits also forayed into Indian made foreign liquor (IMFL) segment with a range of brands, while Champagne Indage launched Tiger wines.

In the beer segment, the market saw the entry of global players such as Carlsberg, Budweiser and Heineken, while other prominent brands such as Molson Coors and Kirin are also seen exploring opportunities in India.

When it came to expanding the horizons, it was the King of Good Times -- Vijay Mallya who walked away with the honours after United Spirits successfully acquired Scottish whisky company Whyte & Mackay for 595 million pounds (Rs 4,819 crore).
The deal, which took place in May, was the largest by an Indian company in the liquor space.

The buyout of the Glasgow-based manufacturer gave USL brands such as Whyte & Mackay scotch, Dalmore, Glayva, Isle of Jura and Cluny and Claymore, thereby making United Spirits promoter UB Group the world's second-largest liquor maker.

Post-acquisition, United Spirits consolidated sales moved up to 75 million cases per annum.

Without any doubt, what stood out for the customers during the year was the government's decision to honour its commitment to the World Trade Organisation (WTO) to remove additional customs duty (ADC) on imported wines and liquor.

The Centre decided to remove the ADC of up to 150 per cent on imported liquor after India was dragged to the WTO by US and the European Union for flouting the international trade body's rules.

India, however, increased the basic customs duty on wines to 150 per cent from 100 per cent. Under WTO regulations, the country is permitted to impose 150 per cent customs duty on imported wines and spirits.

Since 2001, India had imposed ADC on imported liquor and wines ranging between 150 per cent and 550 per cent, which was over and above the basic customs duty of 150 per cent allowed by the WTO.

As a result of it many states, including Maharashtra, Himachal Pradesh and Haryana, decided to cut various levies imposed on imported spirits, thereby prices came down by about 25-30 per cent.

Such a move would not have been better timed for the tipplers as premium drinks like Johnnie Walker Black Label saw a drop in price by 11-37 per cent. In fact in Haryana, the price of a 750 ml bottle was as low as Rs 1,996 compared to the earlier price of Rs 3,168.

This, however, created a rift in the industry with domestic manufacturers raising concern that it would lead to dumping of cheap liquor, which they said would affect the health of the market.

In the beer segment, some multinationals decided to set up shops here either through partnership with local partners or through stake acquisition in local brewers, while existing players went for capacity hikes.

For instance, Anheuser-Busch, makers of the legendary Budweiser -- that calls itself the king of beers � announced its India entry through a 50:50 joint venture with the Hyderabad-based Crown Beers.

Carlsberg announced setting up of a greenfield brewery in Rajasthan and Maharashtra to produce 4,50,000 hectolitres each, while also acquiring an undisclosed stake in Parag breweries in Kolkata.

Similarly, SAB Miller also decided to uncork Rs 500 crore (Rs 5 billion) in the next five years to increase its production. UK-based Cobra Beer also announced it was setting up a Greenfield brewery in Punjab with an investment of about $10 million and another at Hyderabad at a similar investment.

These investments were not at all surprising considering the fact that beer consumption in the country during the year nearly doubled compared to 2002 as per a report by global beverage consultant Canadean.

The report said during 2002-07 beer consumption growth at 90 per cent in India far exceeds that of Brazil (20 per cent), Russia (50 per cent) and China (almost 60 per cent). Within the country, beer consumption growth was driven mainly by Punjab, Haryana and Rajasthan, which took full advantage of reduced taxes and more liberalised distribution policy.

The party that began this year will carry on to the next one, perhaps in a bigger scale as all signs indicate a boom for the sector in future.


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