No manufacturing in India, says Diageo

Purvita Chatterjee | | Updated on: Apr 16, 2014

BL16_02_DEEPAKROY

Will continue bottling some brands here

Diageo India, a major company in the liquor industry, says it will not set up a manufacturing base in the country even if its parent company increases its stake in United Spirits by an additional 26 per cent.

“We may look at scaling up some of our 25 odd brands in India, but none of them is going to get manufactured here,” said a Diageo official.

The company will continue to bottle some brands at the origin and import them even though duties are unlikely to be scaled down — they are as high as 150 per cent — in the immediate future

At the same time, it will also continue to bottle and distribute brands such as Smirnoff and Vat 69 in India.

The cost of liquor bottled in India is lower and the retail price is thus relatively lower.

“Today, brands like Johnnie Walker are being bottled from origin, while others like Smirnoff and Vat 69 are being bottled in India,’’ confirmed the Diageo India official.

Diageo’s brands currently have negligible volumes in the Indian market.

However, the company will continue with its premium positioning while focusing on more profitable and premium brands from the United Spirits stable.

Premium brands Says Deepak Roy, ex-CEO of Diageo and an industry veteran: “It has been difficult for Diageo to make its brands accessible in India since duties are so high. The company will never consider manufacturing here but might bring in more premium brands from its large portfolio.’’

The erstwhile Diageo CEO made history when he engaged in a management buyout of Diageo’s Indian whisky business (Gilbey’s Green Label franchise) in 2002 and subsequently sold the brand to (Vijay Mallya’s) United Spirits in 2005 for ₹100 crore.

“Gilbey’s Green Label was a profitable brand, and when I sold it to United Spirits it was at 3.5 million cases. It is unlikely that Diageo will focus on this regular whisky as it has already taken a strategic call to focus on the more profitable United Spirits brands,” he added.

Diageo is paying United Spirits a fee to use its distribution network.

Published on April 15, 2014
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