The Hindu Business Line : Time for tie-up running out for Diageo, says United Spirits

Bangalore, Dec. 19 Time could be running out for Diageo plc as it negotiates a possible joint venture with United Spirits as the Indian liquor major may start talks with other foreign companies soon.

“Diageo has a few more days left for exclusivity,” the UB Group president and Chief Financial Officer, Mr A.K. Ravi Nedungadi, told Business Line. He said United Spirits could open up windows for talks with other leading foreign liquor majors if the current discussions take a longer time to evolve into a deal.

He did not name the other players keen on negotiations with United Spirits. He, however, said there is more than one player interested in talks. Industry sources say that Pernod Ricard, which owns brands such as Chivas Regal and Absolut Vodka, might be a serious contender with which United Spirits may start negotiations.

But Mr Nedungadi said that talks with Diageo had ‘gone the farthest.’ He said a tie-up with a foreign liquor major would be a ‘win-win’ situation for both the companies as there were enough synergies for both to succeed. “While we will get an entry into their markets, the joint venture partner will get access to one of the fastest growing markets in the world,” Mr Nedungadi said.

Brands need growing market

He said countries in Europe were witnessing flat growth and hence it was important for a foreign liquor company to look towards Asia which was witnessing high growth. He said countries in Asia can either take on foreign liquor majors or partner them.

“But what Asia cannot do is to create brands like those in Europe which are leaders in the industry,” he said.

He pointed out that while Europe has the brands, Asia has a growing market.

Mr Nedungadi said United Spirits was keen on doing the deal right rather than get into an unhappy relationship with a foreign company.

“We don’t want any situation that could lead to differences at a later stage,” he said.

Diageo is the largest multinational beer, wine and spirits company in the world and owns brands such as Smirnoff, Johnnie Walker, J&B and the Guinness beer.

The company, which employs over 22,000 people, is listed on both the London Stock Exchange as well as the New York Stock Exchange.

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