United Spirits (USL) may phase out some of its brands suffering from negative Ebitda margin as the company shifts focus from market share to profitability under Diageo. USL’s existing portfolio comrpises nearly 150 brands.
Diageo has made its intentions clear by moving Abanti Sankaranarayanan, former MD of Diageo India, to USL as business head for luxury and corporate relations. USL has also launched new marketing campaigns for Black Dog, Royal Challenge, McDowell’s No. 1 Whiskey and Director’s Special following positive results from the relaunch of Royal Challenge Whisky.
Analysts have, in the past, reported that the company was underperforming under the previous management with focus on volumes rather than profitability.
The company is looking to set up a luxury unit within USL for the premium brands with the objective of maintaining Diageo’s premium brand leadership. “Creating a centre of luxury excellence will provide focus behind the fastest growing segment of the Indian alcobev market. The luxury business will encompass Diageo’s iconic brands, such as Johnnie Walker, Ciroc and the Single Malts,” USL sources added.
Motilal Oswal has reported that the new management under Anand Kripalu has identified a set of power brands and already begun innovating around it with focused brand investments. “A new advertisement of Black Dog is on air and this is the first in 15 years. Similarly, a new advertisement for Director’s Special has also been put on air. Royal Challenge has undergone massive brand restage. In a nutshell, USL is putting money today in these brands to make money tomorrow and will continue to unleash the power of brands,” says the report.
The USL board had informed shareholders some time back that by entering into the agreements, the company will be in a position to gain a diverse, global product portfolio, additional sales revenue and improve the company’s standing in the domestic market by virtue of leveraging the Diageo brand.
Industry watchers say that premium brands were under-invested for the last few years under the erstwhile management of USL. Hence, the brands appear fatigued and USL’s key competitor in the premium space, Pernod Ricard India (PRI), has outspent it by a wide margin in the marketplace. According to the analyst at Edelweiss, the primary reason behind the large gap between value market shares of PRI and USL is the former’s premiumisation focus. USL, which has shifted focus on premiumising its portfolio quite recently, has a long way to go to match PRI, which operates only in the prestige and above categories in India. By virtue of its strong presence in the mass segment, USL captures 40% volume market share in India, followed by PRI with 10% share.
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