United Breweries CEO Vivek Gupta has called for a revision in the taxation structure for beer, highlighting the significant impact of high taxes on consumer pricing. This comes as the company reports mixed second-quarter results, with regional variations in performance.

Tax Burden on Beer Pricing

Gupta revealed that taxation accounts for a staggering 75% of beer pricing, leaving only 25% as the company's net realization. This tax structure creates a multiplier effect on price increases:

The CEO advocated for separating beer from spirits in taxation regimes, citing beer's lower alcohol content and social nature as justifications for differential treatment.

Business Expansion and Performance

Despite the challenging tax environment, United Breweries has shown commitment to growth:

The company's second-quarter results painted a mixed picture:

• Strong Performance: One-third to 40% of the business showed double-digit growth in states like Maharashtra, Goa, Assam, Andhra Pradesh, and Jharkhand.
• Challenges: Northern states experienced volume declines of nearly 20%, with Punjab and Haryana seeing category drops of up to 40% in certain months due to heavy rainfall impact.

Industry Implications

The call for tax rationalization by United Breweries' CEO underscores the broader challenges faced by the beer industry in India. The current tax structure not only impacts pricing but also influences consumer behavior and company strategies. As the company navigates these fiscal hurdles, the industry's response and potential regulatory changes could shape the future landscape of beer consumption and pricing in India.

United Breweries Limited (UBL), a key player in the Indian beer market, has announced its growth projections and strategic plans, signaling confidence in the beer industry's future.

Beer Category Growth Forecast

United Breweries expects the beer category to grow by 5-6% in the coming period. This projection is based on the industry's past performance, which has shown a compound annual growth rate (CAGR) of 5% over recent years.

Capital Expenditure Plans

In a strategic move, UBL has revealed plans to increase its capital expenditure:

This planned increase in capital expenditure suggests that United Breweries is gearing up for expansion or modernization of its facilities to support future growth.

Strategy for Improved Profit Margins

During a recent conference call, United Breweries discussed its strategy to improve profit margins. The company is focusing on two key areas:

1. Premium Products: UBL aims to enhance its offerings in the premium segment of the beer market.
2. Local Production: The company plans to increase local production to optimize costs.

United Breweries is working to balance its presence across different market segments while pursuing these margin enhancement initiatives.

Market Implications

The company's growth forecast, increased capital expenditure plans, and focus on premium products could be seen as positive indicators for the beer industry in India. These projections and strategies may reflect UBL's confidence in the market's potential and its approach to capitalize on expected growth while improving profitability.

Investor Communication

In line with regulatory requirements, United Breweries has made its recent earnings call audio recording available to investors. The company hosted an earnings call, and the audio recording of this call is accessible on the company's website, providing transparency and detailed insights for investors and analysts.

Investors interested in understanding UBL's performance and future outlook in greater detail can access the earnings call recording through the provided link on the company's website.

United Breweries continues to maintain open communication channels with its stakeholders, adhering to the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, and ensuring that crucial information is readily available to the investment community.