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Vol.
2 :: No. 11 October, 2000 (Aswin-Kartik) |
Sectoral
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Sectoral |
After the government ban this year, pouched liquor is disappearing from the market. It has already been 5 months since the ban was imposed. But we can still find some brands in the market. It shows how big quantity the companies had taken out before the ban came into effect. The stock is not liquidated yet from the market.
The pouched liquor market was tremendously big till last year when its sale was allowed. Every price-conscious consumer of liquor was after this product. It was really popular among low income groups, manual workers, farmers, and villagers. It was believed to be popular among students also because it was easy to carry and easy to hide. At that time, sales of pouches amounted to approximately 24,00,000 cases on a yearly basis. But the contribution towards government revenue was very low due to the taxation system of the government. The excise rate on 65º UP was only Rs. 42 per LP litre while the rate was comparatively very high in other categories - Rs. 235 per LP litre in 25º & 30º UP and Rs. 125 per LP litre in 40º UP, according to the Finance Bill, 2056/57.
What happened to the pouched liquor industry after the ban? To which brands have consumers switched over? Which company gained or lost? What about the government revenue? Is it improving or not? These and many other questions are now being asked.
Following points give a synopsis about the impact on the spirit market after the ban on pouched liquor.
1. Replacement by bottled liquor of the same category
Government has allowed production of liquor of the same category of 65º UP but it has to be packed in bottles. Some of the companies have come out with plastic bottles as the government is still quiet on the use of such bottles for liquor. At the same time, it is rumoured that the government will also not allow use of plastic bottle from next year. The price of bottled 65º UP liquor has gone up mainly because of the production cost hike. Now the manufacturers have to spend more money on the bottle, label, and cap also and labor cost is high as production of bottled liquor is more time-consuming and needs more manpower. Interestingly the government has allowed 65º UP to be packed only in 180 ml bottles while there are many sizes in other categories.
| 2. Encouragement to
home made liquor Many liquor consumers are bound to go for liquor produced illegally by people at home. Their pockets don’t allow them to go for bottled liquor which is almost twice costlier than pouch. The situation is directly hampering the government revenue, public health, the business of organized sector manufacturers, besides causing foodgrain prices to go up. 3. Reduced sales |
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| Consumers are going for home-made liquor or illicit liquor by controlling their consumption of bottle liquor has adverse impact on the industry and sales of individual companies. The companies which have only pouch-filling facility in them are facing great problems. They don't have choice other than installing bottling unit or giving up production. | |
Pouched liquor industry was largely dependent on Indian market though it was not legal to export liquor to India. Around 1/3rd of the total pouched liquor production used to go to India indirectly through different channels as price in India was much higher than in Nepal.
5. Idle pouch-filling machines
Liquor companies had spent huge sums of money in buying pouch-filling machines. Now after the ban, the machines have become idle and a burden. A lot of money has been tied up with these machines. The only option is to sell these machines to dairies and oil mills.
6. Additional investment
Liquor companies should have re-structured their production facility by now. Those that were equipped with bottling facility even before the ban have to increase the capacity to fulfil the market gap. Those that lacked bottling facility had to create it after the ban. Moreover, they had to invest a large amount on input material like bottle, cap, and label. All this means that they have to manage additional funds to keep the company moving.
7. Chances for upliftment of small companies
Yes, there is a chance for small companies to gain market share in bottled liquor market as they had in the pouch market. Other big companies don’t have that capacity to fill the gap created by the exit of the pouch. Should they have bottling plants the small companies can also produce many brands in different categories.
8. Adverse effect on 40º UP industry
Previously, 40º UP used to be packed in glass bottle and was considered to be the cheapest among bottled liquor. Now that 65º UP also is bottled, there is no specific difference in the outlook between the two. The main difference between 40º UP & 65º UP is in the strength of liquor, which the common drinkers are not aware of. There is a high chance of consumers switching over to 65º UP from 40º UP because of the price factor and no difference in presentation.
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