India introduced the nation-wide roadside alcohol sales ban on Saturday

India introduced the nation-wide roadside alcohol sales ban on Saturday

The Indian drinks industry was described as "shocked". And, certainly, the decision by the Supreme Court last Friday to uphold a ban on liquor sales within 500m of state and national highways was surprising.

A number of Indian states - Tamil Nadu and Gujarat for starters - are already officially dry states, but the court ruling covers all of India, including states where local authorities rely on alcohol taxes. For states such as Kerala, where a major slice of state income is from alcohol, it was a troubling blow.

Moves, then, are already afoot to mitigate the fallout from Friday's decision. According to local media, Chandigarh plans to reclassify highways as 'urban' or 'city' roads to allow alcohol vendors to remain in business. Other states look set to follow suit. Meanwhile, according to Societe Generale analyst Laurence Whyatt, Bengal has issued all existing alcohol outlets within 500m of highways with on-trade licences, to avoid the ban.

The Hindustan Times reported yesterday that the Uttar Pradesh Government completed a renaming of its affected roads hours before midnight on 31 March, when the new law came into affect. Uttar Pradesh started work on the project after the Supreme Court's original ruling on 15 December.

What will last week's news mean for alcohol companies operating in India?

The country is a large contributor to the top-lines of the big international spirits producers. Pernod derives 10% of its sales from India with Diageo taking 8%, according to Societe Generale.

Early estimates are that the ban - designed to curb high drunk driving deaths - could hit India's hotel and restaurant revenues by 40%. In Mumbai alone, 500 premises shut down over the weekend, as the order came into effect.

Whyatt estimates that there will be a "short-term hit" to alcohol sales in the country, as uncertainty leads to tentative restocking by retailers. However, he adds, "it is clear that states are incentivised to reduce the negative effects on the alcohol industry".

Morningstar's Philip Gorham said Diageo and Pernod should escape the worst effects of the ban because of their more premium portfolios. "If this was a lower-priced purchase, I'd be more concerned," Gorham told just-drinks. "I think it could affect channels and purchase frequency more than absolute consumption."

A more pressing issue for India's alcohol suppliers in the long-term is what could be construed as increasing government interference in the market. "The regulatory environment is a problem, and there could be more measures like this," Gorham warned.

At the state-level, the country has a history of politicians flying the temperance flag to muster support; India, after all, has jarring levels of domestic abuse and rape blamed by some on drunkeness. In 2015, Keralan social justice minister MK Muneer said 61% of domestic violence cases were linked to alcohol and substance abuse in families

However, Friday's decision came from the Supreme Court, leading some in India to accuse it of judicial overreach. What is more worrying is that the ruling subsumed the Indian Government's opinion - outlined by its Attorney General - that the ban would only affect liquor vendors. In the SC ruling, the court made clear that the law would cover pubs, bars, hotels and restaurants along the highways.

This, then, is an example of India's temperance laws moving from the state level to the national level. The court ruling has set a precedence for country-wide action against alcohol sales; those in India determined to outlaw drink - whether for social or moral purposes - have just been given a major boost.

Expert analysis

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