Finance minister Arun Jaitley has taken the fizz out of the Indian beverage industry. While his Budget proposal of raising the excise duty on 'aerated drinks with added sugar' initially appeared to have targeted only carbonated sugary drinks such as, Coke and Pepsi, the fine print in the Finance Bill seems to suggest that it will also apply to energy and sports drinks and other flavored drinks with sugar or sweeteners.
In the firing line are many brands including Gatorade, Diet Coke and Diet Pepsi, Appy Fizz, B'lue, Red Bull and Tzinga. While Coca-Cola India and PepsiCo India executives refused to comment on individual brands in their portfolio, an industry expert, who did not wish to be named, acknowledged that the 5% hike in excise duty will have a deep-reaching impact on the beverage industry.
Aerated sugary drinks' and energy drinks' prices may or may not go up. It should not matter. Excise duty has never been this low and 5% hike could not deter volume growth. More likely, recent slow-down in off-take has been more about 2 year business cycle downturn. Auto sales is up in May significantly (finally!) and so is manufacturing. Agriculture may not grow this year but Government focus on agricultural price remuneration, loan subvention for farmers, targeted subsidies may help rural consumption this year too. More than likely that soft drinks including energy drinks see a double digit growth in July-September 2014 quarter; something that has been eluding this broad segment. recently
Plus when did we face this hot a summer last!