Depreciation-hit DCSL raises prices

Distilleries Company of Sri Lanka (DCSL) said that it was compelled to raise the prices of its arrack products due to the increased cost of production brought about by the depreciation of the rupee.

The company on Monday (29) increased the price of a bottle of arrack by Rs.10 while the price of a quarter-bottle was increased by Rs.20.
This is the first time in years that DCSL has hiked prices without the cause being an increase in government taxation, and it has been brought about purely due to the currency devaluation’s impact on spirit imports.

“Increase in the production cost is the basic reason that led to this decision. The dollar has gone up so there is an increase in the prices when we import spirits. We need that imported spirit for the blend,” said DCSL Head of Operations Retired Maj. Gen. Mano Perera speaking to The Sunday Morning Business.

However, the price of a half bottle of “Special Arrack” has been decreased by Rs.20 while prices of certain products remain unchanged.
Explaining the reduction in the price of half a bottle, Perera noted that a Special Arrack’s half a bottle blend mixture remained the same and did not incur any additional expenses.

“The volumes are less and the blend remains the same, so it does not need to be increased. But for other products we had to increase the blend, therefore we increased the prices”, he noted.

He added that the prices of six products remain unchanged.

DCSL liquor prices were last revised following the amendment to the Nation Building Tax (NBT) on alcohol products, in August, 2018.
“When NBT was introduced, we did not increase the prices at the beginning and managed to absorb the cost for a long time but then we had to increase it in August, 2018.”

According to Perera, the hard liquor sales in Sri Lanka have been on the decline since a beer tax reduction in 2017.
“When the beer prices were reduced with the taxation being reduced, there was a drop in sales and it has continued. There is around 12-15% drop in sales volume from 2017 to 2018 in the entire industry.”

According to Perera, hard liquor consumption decreased while the soft liquor consumption increased, particularly due to the rising cost of living and lower spending capacity.

“What they do is they buy two cans of beer and mix it up with hard liquor, still trying to achieve the desired effect they want but at a lower cost. As a result, our volumes have dropped”.

He also attributed this decline to illicit alcohol manufacturing that takes place in Sri Lanka.

“What is happening is that there are a lot of illicit alcoholic beverages in the market. These are being neglected by the regulators. So as a result, people are consuming those,” he said.

When asked about statistical data on consumption, he said that he was not sure about the numbers but said: “If the total sales have been increased, that means consumption has been increased.”

DCSL is the country’s largest distillery and is owned by the business tycoon Harry Jayawardena-led Melstacorp PLC.