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Heineken NV’s Indian unit suspended supply of beer to the southern Indian state of Telangana, citing unprofitable prices and missed payments.
Supplies to Telangana Beverages Corp. was stopped as the state-owned firm had not agreed to a price revision since the financial year ended March 2020, United Breweries Ltd. said in a stock exchange filing. There also were “significant” unpaid dues from Telangana Beverages, it added.
“As a result, the continued supply of our beer to TGBCL has been rendered unviable,” United Breweries said in the filing.
Telangana Beverages controls sales and distribution of alcoholic beverages in the state. The suspension will disrupt sales of the brewer’s Kingfisher and Heineken brands in one of the country’s largest beer consuming states. Stagnant prices, coupled with rising cost pressures, have been eroding profits for beer manufacturers.
“This move will have a negative impact over the near term as the state contributes 15-20% of volumes for United Breweries and has an earnings contribution of 10-12%,” Karan Taurani, an analyst at Elara Securities India Pvt., said in a note.
Shares of United Breweries dropped as much as 7.5% after the announcement on Wednesday, the steepest intraday plunge since March 2022. The shares recovered to close 3.6% lower.
In July, the company had said the state agency had run up 9 billion rupees ($105 million) in dues, while outstanding amount for the industry stood at 50 billion rupees.
--With assistance from Ashutosh Joshi.
(Updates with chart)
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