Your favourite whisky could soon cost you 15-20 per cent more. Following a sharp hike in the cost of molasses, the raw material for alcohol, in the last six months, leading liquor companies are raising their prices in order to protect their profit margins.
"We have already increased prices in Maharashtra by around Rs 50 to Rs 75 per case. We will soon do the same in all other states as well," said Vijay Rekhi, managing director, McDowell and Company.
In Delhi, the price increase will take effect from July 1 when the government renews the liquor sales contracts.
Sources in Shaw Wallace & Co, too, said that the company was looking at ways and means to fight the increasing pressure on its margins caused by rising molasses prices. This could include revising the price tags of its leading brands.
The heat is being felt in the country liquor market too. Radico Khaitan has increased prices of its country liquor brands, Jhoom and Masti, in Uttar Pradesh, by around 15 per cent. "Our margins were getting badly squeezed," said Abhishek Khaitan, executive director, Radico Khaitan.
Saraya Distillery, the second largest distillery in Uttar
"We were carrying a huge stock of molasses and that brought us a lot of relief," the company's president, Gurmeher Majithia, told Business Standard.
The price hike is due to a sharp drop in the supply of molasses countrywide. This season, the sugarcane crop turned out below projections in key states like Uttar Pradesh, Andhra Pradesh, Karnataka and Maharashtra.
While molasses' prices in Uttar Pradesh have shot up by almost 200 per cent since the beginning of 2004, prices in other states have hardened by almost 100 per cent.
In addition, the availability of potable alcohol has consistently been on the decline in the country for the last few years.
"Now almost 50 per cent of the molasses produced in Uttar Pradesh, goes towards the production of medicinal alcohol. A significant portion of alcohol is also being used for gasohol, which is a blend of ethanol and petrol," said Deven Narang, president, All India Distillers' Association.
According to Narang, there is currently a margin erosion of Rs 60 for every case sold.
