Beer is a fun drink… but we mean serious business

The All India Brewers` Association (AIBA) is an independent body representing the common face and voice interests of brewing industry of India.Its members account for more than 85% of production and sales of Beer in IndiaAIBA was formed in the year 1977 at Bangalore.Membership also includes malt companies, maltsters and other associates of the brewing industry.AIBA has been at the forefront in addressing the interests of the beer industry through dialogue with stakeholders . Promote policies that are conducive to the beer industry Drive implementation of a rational operating platform for the industry Promote responsible consumption Enhance the image of the industry among the key stakeholders

About AIBA

What is beer!

An agricultural product directly processed into an end product – using barley malted and cereals locally available Beer making is a complex process and requires high degree of sophistication with good manufacturing hygiene standard comparable to dairy /pharmaceutical industry. The industry is capital intensiveThe alcohol content in beer is 5 to 8% only which is lower than wine which is 12% and IMFL which is at 42.5%.Beer is a socially accepted beverage the world over and industry promotes responsible drinking

India at a glance

• Youthful India– 54% younger than 25 years– 1.74 Million enter the drinking age every year

• Rapid Urbanization– 379 million people will be added to urban space in next 40 years

• Societal changes – Social taboos disappearing

– More Out of Home Consumption (DINK/ DISK)• Expansion of Cuisines• Creation of Lounge Bars

– More Women entering Liquor Consumption

– Modern trade/ retail Chains• Ease of purchase

Beer matters

The beer market in India valued at $ 4.13 billion (24000 crore) in 2013

Contributing to GDP & boosting tax revenues Beer contributes more than 15,000 Crore to the states exchequer There are now over 89 breweries in India

Creating Jobs The production and sale of beer creates jobs in agriculture, breweries,

pubs, bars ,restaurants and the wider supply chain Beer is essential for the tourism Industry. Foreigners treat beer as a

refreshing beverage in their countries. In total the sector supports over million jobs.

Supporting Communities Best practice in agriculture More yield & better prices for the farmers Reduction in water consumption by 30%

E&O

Reality Check!

51.00%

0.42%

48.00%

0.56% 0.28%

Beer Imported Spirits Wines RTD

35%

0.29%35%

0.18%

28.8%

0.18%

Beer Wines Spirits RTD Country Liqour Imported spirits

Beer vs IMFL Beer vs IMFL & Country liquor

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50%

20%

20%

10%

AP/TN/Karnataka (Warm throughout)Maharashtra/MP (Seasonal)North - Punjab/Haryana/Rajasthan (Seasonal)WB/North East (Seasonal)

The Indian Beer Market

E&O

Taste and Preference

The industry consists of 15%% mild (5% and below abv) to 85% strong (8% abv).

2009 20140%

20%

40%

60%

80%

100%

40%

15%

60%

85%

StrongMild

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Alcobev: Global vs India

India China Brazil Russia UK USA0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

50

87 8473 75

83

49

10 1217

5

7

1 3 4 1020

10

WineSpiritsBeer

Source: Beeronomics 2013E&O

Taxation Why alcoholic drinks should be

taxed solely on equivalent alcohol content

When it comes to tax, is all alcohol really the same?

• Virtually all countries outside India recognise that there are essential differences between high alcohol content drinks and lower alcohol content drinks like beer. That’s why spirits are taxed at a significantly higher rate In France, it is five times higher and in Germany six times more than beer The reason for this is that hard liquor has greater negative consequences for

public health than beer. In India beer is taxed more than spirits in all states

Germany

France

BelgiumSp

ain

Czech

Republic

EU Avera

ge

Australia

Bulgaria

Sweden

Portugal

Poland

Estonia

USA

Netherlands

Ireland

CanadaIta

ly UKIndia

-4-202468

Source: Scottish Beer & Pubs

Beer is a luxury in India!

In India, a unit/alcohol content basis, beer is more expensive than spirits in India Except Kerala, price of IMFL 180 ml (3 pegs) is lower in price than a Bottle of Beer (State

wise price chart)

Beer has lowest affordability in India Excise duty per liter of beer is the highest globally Since taxation is a state subject, the tax rates differ by state ranging from 25% to 70%*

*UBS

Andhra Pradesh Karnataka Rajasthan Haryana Orissa

1 1 1 1 1

2.29 2.72 2.85

5.7

1.6

IMFL Beer Ratio of IMFL duty to Beer

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Irrational taxes leading to a decline in growth

IMFL Beer0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

21.4%

12.1%13.1%

8.8%9.0%

3.3%

CAGR 2004-13 CAGR 2009-13 CAGR 2012-13CAGR Beer Vs IMFL (hard Liquor)

• The sector is over regulated with sales tax, restrictive excise laws and local/ state taxes

• States have an irrational position on GST and alcohol

E&O / IWSR

AS THE RATIO OF BEER TAXES INCREASE TO SPIRIT TAXES, BEER VOLUMES SHRINK AND SPIRITS VOLUME INCREASES

Negatively impacting the nation’s health

Beer consumption rate is very low

in India

Perception of Beer

Clubbed with IMFL by both - regulator and the consumer is perceived as intoxicating as spirits Beer is a more socially acceptable drink the world over

In India, it should have been an entry level drink Taxed higher than hard liquor The policies are driving new drinkers to hard liquor

Available with only hard spirits outlets All restrictive rules on hard spirits and beer sameYet Beer has 5 % to 8% Abv.

Therefore…

High taxation in beer ultimately compromises beer consumptionLeads to consumption of cheaper high strength spirits High level of alcoholism & addiction with spirits Serious public health crisis

Driving the new drinkers to Hard Liquor

Beer with rational taxes and liberal positioning can help the state wean people away from hard liquor and achieve

a reasonable social objective

Our Recommendation for Andhra Pradesh

Rationalize Tax on beer rate of duty on beer alcohol and spirit alcohol to be balanced Currently Beer alcohol is taxed 2.29 times Spirit ABV Basis - not to subsidize spirit alcohol tax by taxing beer more - after all beer has only 5 to 8% abv - revenue from beer is only 15% of state gross earnings - Will prevent youth and others from hard liquor - Social and Health issues

Beer Distribution

2. Whole Sale with Government Corporation - with reasonable margins on beer and free pricing

Retail to be Private - to avoid brand pushing - customers needs fulfillment

3. Widen Distribution by increasing availability thru

- low alcohol Beer Shoppes Stores only - low alcohol beverage Restaurants Beer bars - low alcohol beverage Modern Trade Shops

4. Age of consumption to be 21 years

All alcohol has inherent risks when it comes to excessive consumption, yet it is widely recognised that the

consequences of over-consumption are greater for hard liquor products!

Thank You

For All India Brewers’ AssociationShobhan Roy

Director General