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United Spirits, India’s largest liquor maker, has taken a decisive step towards complete premiumisation of its portfolio, initiating a strategic review of half of its popular brands.
Profitability
The strategic review could either mean divestment or rationalisation of its portfolio to ensure long-term profitability of the company, said Anand Kripalu, the CEO and MD of Diageo India (United Spirits), during a business update call.
“A number of outcomes are possible, including but not limited to extension of the franchise structure, accelerating selected brands via additional investment, potential divestment, and organisational review,” said Kripalu. The decision will eventually help the liquor giant gain a higher margin from its portfolio of brands while moving away from being a volume player.
USL’s popular portfolio comprises around 30 brands, and the strategic review will focus on approximately half of this portfolio by volume. The review will not include McDowell’s or Director’s Special trademarks. The strategic review is expected to be completed by the end of 2021, a statement from the company said.
It said this is part of a strategy towards long-term profitable growth through premiumising the company’s portfolio.
The company has a separate SBU for its popular brands that focus on franchisees. “This step allows us to extract and release resources and management time, which can be redeployed to focus more on premiumisation,” said Kripalu during a call with analysts on Tuesday. In 2019-2020, United Spirits sold a total of 80 million cases (12 bottles of 750 ml each). Of these, in volume terms, it sold 38.8 million cases of spirits in the popular category. For the same period, its net sales were ₹9,091 crore, of which, ₹2,760 crore came in from popular brands.
Some of the popular brands consist of Bagpiper whiskey, Hayward’s whiskey and Blue Riband gin. The premium brands consist of McDowell’s whiskey, Signature and VAT 69.
Since its takeover of United Spirits in 2013, the London-based Diageo has been focussing on the premium segment, which fetches the company higher margins.
An analyst tracking the company said that in the non-prestige category the margins are low and have very little pricing pressure and branding capability.
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