United Breweries loses its fizz United Breweries, the maker of India's Kingfisher Beer, has swung to a second-quarter loss, weighed down by a swath of regulatory roadblocks, heavy monsoon rains, and rising input costs. The Indian brewer reported a net loss of Rs186m ($3m) for the three months to October, compared with a profit of Rs342m for the same period last year. United Breweries said its beer volumes sales had declined by about 2 per cent year-on-year in the first half of India's April to March financial year. The company blamed its weaker sales both on the heavy monsoon rains - which reduced beer demand - but also a 20 per cent drop in sales in Tamil Nadu, an Indian state that has historically been a strong market for alcohol. US said that Tamil Nadu's government agency that operates all the state's liquor shops had cut back its orders from UB as part of a policy of trying to promote new, local brands. The brewer also said its bottom line had been hurt by a new rule in Maharashtra state that had prohibited the longstanding use of recycled bottles for beer. The rule had raised the company's input costs by Rs460m in the six months to September 30. However, the Maharashtra government has now reversed the policy, allowing recycled bottles to again be used, which UB said would "reduce input costs to lower levels." The swing to the red for UB, which is jointly owned by Vijay Mallya, the Indian liquor tycoon, and Heineken, the Dutch brewery, highlights the challenges that international companies face in tapping what they believe to be India's huge potential market for alcoholic beverages. Diageo, the UK-based spirits group, recently bought a 25 per cent stake in United Spirits, the whisky and spirits arm of Mr Mallya's beer-and-spirits empire. United Spirits is due to report its results later today. India's youthful population is expected to increase its consumption of alcohol significantly over the next decade, a prospect that has drawn many international players into the market. However, the manufacture, sale and pricing of beer and spirits in India is heavily regulated by each individual state, leaving companies vulnerable to sudden state-level shifts in policies, taxes and preferences - especially in states with historically higher liquor consumption. "The opportunity is there but it's not going to come at the pace at which people expect it to come," said Nitin Mathur, an analyst at Espirito Santo Securities. These are initial warning signs. If the macro-environment doesn't improve, you can see further quarters of decline. In spite of the increased competition, UB said it still accounted for more than 50 per cent of India's total beer sales. The swing into the red for his flagship beer company marks another setback to Mr Mallya, whose Kingfisher airline ceased operation last year, after a financial crisis that left it unable to pay staff salaries.