High costs dampen summer for beverage companies

MUMBAI: Cans or glass bottles, beer or cold beverages- companies are losing their cool over rising costs this summer instead of keeping their spirits high amid what is otherwise supposed to be an El-Nino-induced harsher season, driving more demand.

The war has hit firms on two fronts-for one, soft drink players such as Coca-Cola which use aluminium cans (for Diet Coke and the 300 ml cans tend to sell more in India) are facing supply disruption as the bulk of the imports of such cans are sourced from West Asia. Even packaged coffee companies, some of whom sell smaller 230 ml cans, have a similar issue. D2C coffee brand Sleepy Owl, for instance, is tapping South-East Asian markets for aluminium cans but costs have so far gone up by about 15%. Besides, given the high demand, supplies are also taking time to be procured.

"Going ahead, there will be no option but to pass on the increase to consumers. While for us, the cost of glass bottles is lower, logistics is an issue," said CEO Ajai Thandi, adding that cans make up 25-30% of the company's portfolio.

As far as beer makers are concerned, the cost of both aluminium cans and glass bottles has spiked, despite about 80% of industry supplies being sourced locally.

This is because the war hit production on ground just when the industry builds up on inventory, creating a backlog which is yet to be mitigated. The shortage of LPG then impacted manufacturing operations-can suppliers have increased prices by 15% while cost of glass bottles have gone up by 20%, said Vinod Giri, director general at Brewers Association of India.

"We don't have a supply issue on cans because we have the global network....we have an inflation issue, a cost issue," Vivek Gupta, MD & CEO at United Breweries, which makes Heineken and Kingfisher beers said in a recent earnings call.

Some old stock of 300 ml Diet Coke cans priced at Rs 40 are still available in the market but distributors expect the new stock to be priced higher-by Rs 10 or so, said Dhairyashil Patil, president at The All India Consumer Products Distributors Federation (AICPDF). Queries sent to Coca-Cola and PepsiCo India did not elicit any responses.