Heineken’s United Breweries halts beer supply in Indian state

Heineken-controlled United Breweries suspends beer distribution in Telangana, citing unviable operations amid complex state liquor laws. 

United Breweries, the maker of Kingfisher beer and owned by Heineken, has stopped supplying its products to Telangana’s state-run beverages corporation. The decision will halt the availability of popular brands such as Heineken and Kingfisher in one of India’s largest alcohol-consuming states.

The company said it has incurred significant losses because it has not revised static base prices for two years. “Despite our continuous efforts over the past two years, we have not increased the base prices of our products,” United Breweries told Reuters.

Shares of the company dropped 7% following the announcement, marking their steepest single-day fall in nearly four years. Telangana contributes a significant portion of United Breweries’ revenue, making this decision a high-stakes move.

In addition to pricing woes, United Breweries is part of a group of global alcohol firm0s, such as Diageo, demanding $466 million in unpaid dues from the Telangana government. The state, which controls alcohol distribution, has reportedly delayed payments to suppliers. The issue has strained relations between the government and major beverage producers, with companies arguing that the financial delays are unsustainable, Reuters reported.

The nature of India’s liquor laws

India’s liquor laws are highly complex and differ from state to state, with Telangana following a state-controlled liquor distribution model. This adds layers of regulation and restricts companies’ pricing flexibility, often forcing them to operate on thin margins.

High demand in Telangana, one of India’s top alcohol markets, compounds the regulatory challenges. This makes it crucial for companies to maintain a presence despite operating hurdles.

United Breweries’ suspension follows recent antitrust allegations against Pernod Ricard in Telangana, reflecting growing friction between multinational alcohol companies and state authorities.

This suspension highlights the ongoing challenges in navigating India’s fragmented and intricate state-level liquor regulations. It remains to be seen whether this pressure will prompt policy changes in Telangana, but both consumers and the state’s revenue streams are likely to feel the immediate impact.

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