With the Karnataka government announcing a hike in additional excise duty on alcohol (20% on Indian Made Liquor or IML, and 10% on beer), restaurants in the city are mulling a revision of prices.
The new taxation will kick in from August 1.
“Karnataka is already among the most expensive states when it comes to alcohol. This makes the business, profitability and sustainability even tougher,” says Robin Lazar, general manager at Gawky Goose, Wind Tunnel Road. He believes people will not visit bars as often.
AD Singh, the man behind brands like Cantan, Fatty Bao, and Toast & Tonic, says the news came as a “bombshell”. “The easiest option will be to revise the pricing. Nevertheless, in the long run, it will affect business,” he says.
Expected shift
The price hike will force consumers to look for cheaper alternatives.
Will people instead stock up on alcohol at MRP and drink at home or host house parties? Anirudh Kheny, managing partner at Daysie, M G Road, does not think so. “A restaurant or bar is more than just food and drinks. It is the entire experience that includes the ambience, interiors, music and vibe and these aspects are what sets it apart from house parties,” he says.
Siddharth Bala, partner, Skydeck by Sherlock’s, M G Road, agrees. “Costs are increasing across categories, whether one purchases at an MRP outlet or dines out. However, dining out is an experience, so I assume and hope this may not affect business,” he says.
Consumers will increasingly opt for craft beer from microbreweries which is inexpensive, says Singh.
However, craft breweries, which enjoy a dominant presence in the city’s restaurant scene, are also bracing for a dip in sales. “About 20% to 25% of our sales come from liquor, including Indian Made Foreign Liquor (IMFL),” says Vinay Chandrashekhar, partner at Long Boat Brewing Co, Marathahalli. A lot of people might move to beer and other drinks like seltzers, he believes.
But Mukesh Tolani, who runs Toit Brewery in Indiranagar, is of the view that people are bound to return after an initial few days of cautious spending. “In the short term, people might find the new prices expensive, but it will soon become the norm and they will return to eating out regularly,” he says.
Early days
Though most business owners agree that a price increase will be necessary, they feel it is too early to take a call. Some are yet to receive an official notification from the government. “We are currently evaluating the increase in government pricing and the measures that we must incorporate,” says Kheny.
Shivanth Nishkam, business head at Dock 66, Whitefield, feels that restaurants might have to rework their business plans. Under the duty structure, there are 18 slabs based on the price of the alcohol. Currently, alcohol brands are trying to figure out the slab under which their liquor falls, so restaurants are yet to receive the revised prices. Things will become clearer in a few days, says Tolani, who is also the Bengaluru chapter head for the National Restaurant Association of India.
NEW TAXES
In the new state budget, the excise duty on Indian Made Liquor (IML) has been increased from 150% to 170% and on beer from 175% to 185%.