BR Research recently sat down with Mr. Isphanyar M. Bhandara, who is the CEO of Murree Brewery Company Limited - one of the oldest public limited companies in Pakistan. Mr. Bhandara is also a member of National Assembly from PMLN on the seat reserved for minorities. During the discussion, he sheds light on the regulatory issues faced by liquor industry and over all food and beverage industry in Pakistan. Below are the edited transcripts of the interview.
BR Research: Tell us about the regulatory environment concerning liquor industry?
Isphanyar M. Bhandara: Liquor is already heavily taxed. If my bottle is for Rs100, the Government of Pakistan is taking Rs70-80 in various forms. We are not against this duty. We are against the duty being charged by the Punjab government. The government of Punjab has secured Rs650 million from us since July 1, 2015. It's not going from my pocket; my customers have to pay for this as my prices have increased.
One truck of liquor, which contains 700-800 crates of liquor, has been made expensive by Rs600,000. Ultimately, no one is suffering except the customer.
We've challenged this double duty in Lahore High Court. Sindh. Wine Association has also challenged it and the government does not have a case; they have managed to dodge it because they don't turn up. It's been nine months. The government manages to find a way to adjourn and prolong the case. I've made appeals to CM, Minister of Finance, Minister Excise Taxation, but my applications are pending.
BRR: How adversely has this affected your business?
IB: Around 60 percent of Murree sales are in Sindh and Baluchistan have been affected. First, my customer in Sindh has to pay a certain heavy duty on liquor. He has to deposit that in the Sindh treasury. Now, that gentleman is forced to deposit another duty of Rs600 per gallon to Punjab excise department.
Our competition only had 5-10 percent market share before this black law, but now they are enjoying 30-40 percent market. It's not because they are better; my quality is much better. But the government of Punjab has made them cheaper.
The damage is also to Sindh government because less liquor from Murree means less sales tax for Sindh. But there are vested interests in Sindh. Sindh excise wants Murree Brewery to have lower sales. They aren't concerned with the revenue. Liquor is highly compromised - vested interests of government officials are with liquor. That's why they are not making any hue and cry even though their sales tax is low.
BRR: How is the business in the rural economy doing?
IB: I think Food and Beverage market is enjoying good revenue in all cities of Pakistan.
BRR: How is Murree's non-alcoholic revenue stream? How are the exports?
IB: Food and beverage business, which includes liquor, is on a jump, as is evident by all multinationals and National firms. They have had 15-20 percent growth year-on-year for the past five years.
Around 60-65 percent of Murree Brewery's revenues are from liquor. Ten to 15 years ago, it was 80 percent. All things being constant, I see the juice and non-liquor taking over eventually. We are one of the first manufacturers of glass in Pakistan as well, which is in KP.
We are very slow in exports; we need a lot of improvement. We do export Tops to Afghanistan, the UK, some African countries, and very few to Europe. Some of the companies are doing really well on exports,, whereas I am more focused on capturing our Pakistani market right now. There is tremendous growth here.
BRR: How is the situation in KP?
IB: Liquor used to go there up until 2002. When Musharraf's MMA government came, they made the same mistake that Bhutto made in 1977. It made KP liquor dry. But even today if you go there, you can find our products. It's being smuggled there. Chars, afheem, ganja, everything is available there. You were getting revenues from legal sales, and you banned that in 2002!
BRR: How is Sparklets faring in the market?
IB: We acquired Sparklets 4 to 5 years ago. We struggled in the first year, but God has been kind; we have had fantastic sales due to our quality and commitment to the product. You'll see our water in all the hotels and shops. We are still less than Multinationals or the big players, but I can safely say that in the Pakistani brand, we are somewhere at the top. We're giving competitions a hard time.
BRR: Should the government allow import of liquor?
IB: It is an Islamic republic; the whole system was banned in 1977-78: Open liquor, import-export, bars, and discos, wine shops in Punjab, all were banned. Only the door of local consumption by non-Muslims was left open.
Suggestion to Government is to away from the business. The government does not understand business. When you want to change business laws, consult the stakeholders. Keep the government and business separate. This is my message to the government.
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