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Boby Kurian

Mr Mallya said he was being forced to step into the spirits retailing. For instance, McDowell & Co's turnover is pegged at Rs 1,300 crore, while at the prevailing consumer price, the business is worth roughly Rs 3,000 crore annually.

Bangalore , Sept. 26

THE UB Group has set sights on tapping the retail business.

The move to tap the retail end of the industry is aimed at bolstering the profitability of UB Spirits Division, comprising McDowell & Co and Herbertsons, which as a manufacturer has seen its meagre margins come under severe strain.

Mr Mallya, the UB group Chairman, told Business Line, that there was a serious intent on his part to tap the retail trade of the liquor industry as it would bring "significant upsides for his business". Blaming the Government and the trade for squeezing out bulk of the profits from the industry, Mr Mallya said he was being forced to step into the spirits retailing. For instance, McDowell & Co's turnover is pegged at Rs 1,300 crore, while at the prevailing consumer price, the business is worth roughly Rs 3,000 crore annually.

Replying to a query on the sidelines of McDowell & Co's AGM, Mr Mallya indicated that he would enter the retailing business in the north Indian States initially where both wholesale and retail trade are in the hands of cartels that monopolise regions divided among them. Down south, the wholesale trade across Andhra Pradesh, Tamil Nadu, Karnataka and Kerala is State-managed. "The powerful cartels in the north consistently ask for lower prices or heavy discounting, while the Government agencies in the southern markets are averse to price increases even in the face of acknowledged inflation," he said.

"We feel there is disproportionate profit at the retail end of the industry chain," Mr Mallya said, while explaining the importance of tapping retail market to shore up the bottomline of spirits business. "There is assured 30 per cent margin for retailer in this industry," he said. The industry observers dubbed Mr Mallya's retailing plans as a broad statement and groped for the finer details and nuances of doing it in an extremely sensitive industry. "This is a strategic move to corner the significant value generation that happens between the despatch point of factory and the consumer," they said but wondered whether it would set UB on collision course with existing retailers, since it had a dominant share not just in spirits but in beer as well.

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