Diageo India’s new CEO and MD Hina Nagarajan took over her new role in July this year. She is also the first woman to lead a liquor company of such large scale in the country, In her interaction with BusinessLine , she shares the company’s new strategy to drive growth during the post-pandemic era:

At the investor call, you talked about the Strategy Refresh of Diageo India. Can you share more details about the new initiative?

Our mission is to be a top-performing consumer product company in India giving double-digit profitable topline growth and long-term value to all our stakeholders. We will deliver the mission through three pillars that form the essence of our strategy. The first pillar is about a portfolio reshape while delivering our guidance mid to high teens margin, second, creating an organisation of the future and third, defining and executing an ambitious role for Diageo India.

Within our portfolio reshape, we will accelerate growth in our luxury and premium category especially in Scotch where we are market leaders and activate our global luxury and reserve portfolio. We will strengthen play in our appropriate fields with highly differentiated offerings. We will reshape the value proposition in the lower end and mid prestige. We will create a future-ready company through digital acceleration. Our third pillar is Diageo in society. We do want to challenge ourselves with a more ambitious target.

Is the ‘Strategy Refresh’ based on the fact that the post-pandemic world needs a completely different way of doing business compared with what was relevant earlier?

I would say it is a combination of what has been happening in the past and what is happening now. The trend of premiumisation has been there for the last 10 years. We have publicly declared our focus on premiumisation in the past and what we are trying to do is to broad base it now. Changes in the post-Covid world have also been factored in. It is not just premiumisation but it is also driven by the fact a consumer wants to drink better and not more.

We have seen a massive uptick in digital engagement, especially with consumers spending more time at home and the need to experiment more and want to try out new things. A very large positive consumer sentiment and the vaccination drive.

With this strategy in place, what kind of targets are you looking at in a five-year time frame?

We want to be a top-performing consumer goods company. With this strategy, in a context consumers are demanding a more healthy and sustainable world. we are saying that really create value for all these stakeholders. We definitely have action plans under each of the pillars. We have recently launched a new renovated Signature and Royal Challenge American Pride. Both of these are very differentiated products.

We have eliminated 100 tonnes of plastic. We are creating a more future-back approach to our innovation. We are setting an extremely ambitious goal with our 2025 on water, plastic waste and low carbon world. We will be a zero-carbon corporation by 2025. On the water, we have so far reduced 65 per cent of water usage in our organisation. On plastic, we will be plastic positive by the end of the year.

You are perhaps the first CEO of Indian operations who comes with experience of having spearheaded operations in the countries as well. How much of that experience has gone into structuring the new strategy?

In Africa where I worked earlier, the demographics have been similar to that of India. The regulatory and sustainability challenges are similar. It is just that the market there is more of a beer market than India which is more of a spirits market and the affordability and premiumisation adoption are much faster here. China, for example where I have worked, is more digital-driven with 60 per cent of the sales coming from e-commerce. I would say a combination of all this experience has gone into forming the India strategy.

As per the latest quarterly results, there has been a double-digit growth of the Scotch category for USL. So what does this trend indicate for the company given that the domestic brands are also competing for the same space?

Different sets of people buying into different brands and each brand has its own importance. We have seen a premiumisation happening at a faster clip here. We have seen some positive policies development which has accelerated consumption of Scotch. Some of the states have reduced duties on the bottled in origin and seeing compression in the price gap between Scotch and other drinks. Our portfolio caters to the need across the spectrum. There is a unique set of consumers who are buying into each of these categories.

We understand that there are plans to either sell certain popular segment brands or change the strategy the way you want to market them.

Yes, we have hired a consultant for that business. We are looking at a strategic review of several options. We announced it in the January-march quarter and this is well on track. It could be an extension of the franchise arrangement that we moved into or an acceleration of selective brands. It could be a divestment or a change of the operating model. We are looking at the implications of each of these options and we will close this by the end of the year.

The government is likely to increase the regulated price of ethanol and because of the increase in energy costs, glass bottles could also cost more. How will it impact your operations going forward?

There is no question that inflation headwinds are increasing. ENA has been stable so far. The energy and inputs costs are continuing to increase. In the quarter gone by, we saw about 1.5-2 per cent inflation and we mitigated that through productivity. Going forward, recognising that there are inflation headwinds ahead, we are continuing what is within our control. We are driving productivity initiatives down the value chain and also looking at revenue management.

Will there be any changes to your plan regarding your IPL team, RCB?

It is a core part of our business and we remain highly committed to the RCB. We are delighted with the kind of valuations that are happening to the new teams. It is a powerful asset for us.

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