Diageo India shifts focus to premium liquor to meet changing consumption pattern post pandemic | INTERVIEW

Consumers are now better aware and concerned about the quality of everything they consume, and are increasingly willing to pay extra for high-quality alcoholic beverages. This has created opportunities for liquor companies to offer premium price points.

alcoholic beverage, liquor, premium liquor, pandemic, drinking pattern
Rise in demand for quality drinks has created opportunities for liquor companies to offer premium price points.

The Indian liquor industry has been undergoing a transformation of sorts with rise in demand for quality drinks, especially around the urban areas. The ongoing pandemic has only accelerated this process. Premiumization is one trend that has accelerated during the lockdown. Consumers are now better aware and concerned about the quality of everything they consume, and are increasingly willing to pay extra for high-quality alcoholic beverages. This has created opportunities for liquor companies to offer premium price points.

Diageo India, for one, is launching & relaunching a slew of options in its range of international as well as Indian liquor. The company has taken this time to rethink a lot of its strategies in India, Vikram Damodaran, Chief Innovation Officer, Diageo India, told Financial Express Online. During the year 2021 and the last, Diageo India raised its total stake in liquor firm United Spirits Limited (USL) to 55.9 per cent, entered into craft spirits segment, outpaced Pernod Ricard in the premium segment for the first time ever in India, premiumised its entire portfolio, and onboarded Hina Nagarajan as the MD & CEO of the India business.

The Indian alcoholic beverage market represents one of the most compelling spirits opportunities in the world. The ever increasing alcoholic beverage market in India is estimated to grow at a CAGR of 7.4 per cent during the forecast period of 2017-2030, according to a Goldstein Market Intelligence report. The alcoholic drinks market revenue is anticipated to reach US $39.7 billion by the end of 2030.

The premiumisation overhaul

“We have been committed to premiumization, responsible drinking and inclusion and diversity. And, the results have started to show. We are the owners of the world’s largest selling whisky brand, McDowell’s and we have a strong portfolio across all segments from Prestige through Luxury,” Vikram Damodaran said. Diageo-owned USL expanded 13.7 per cent during the last fiscal ended June, with prestige-and-above (P&A) business now exceeding two-thirds of its overall sales, the company said.

Following the launch of the new No1 McDowell’s and Royal Challenge in 2020, this year saw the launch of a brand new Signature, Smirnoff and Black Dog product lines. “Black Dog has undergone a complete transformation, armed with a winning new liquid in Triple Gold Reserve and the introduction of a first-ever 14-yr old, aged variant, supported by a new brand identity, reflective in the brand’s packaging and retail assets.

International spirit

Diageo is also increasing its focus on its international spirits portfolio, and the launch of the new hipster pocket format and the new Black Dog bundle are examples of its investment in premiumising the Scotch and other international offerings. “We have now collaborated with Keira Knightley OBE, to lend international stature to the brand, and strengthen our credentials in International Whisky. We have also launched a New to World product, Royal Challenge American Pride, in the Upper Prestige segment,” Damodaran said.

Pandemic-induced premium liquor demand

The firm’s focus on premiumisation of its offerings sharpened after the new MD & CEO Hina Nagarajan took charge this July. She was tasked to get the company back on the growth path, driving revenues and profits in the premium and prestige segment of the Indian alcohol market, the company said in a statement at her appointment.

The Indian alcoholic beverage market witnessed a steep fall in the first half of 2020, but rebounded quickly as the lockdown eased. The rise in needs of in-house entertainment and time out from everyday chores prompted people to buy liquor in bulk. Moreover, the festive season in India and holidays further provided impetus to the sales. “With the rise in needs of in-house entertainment, people started seeking better drink experiences and even better quality. This, combined with lesser avenues of discretionary spends, fuelled the growth of Scotches and international whiskies,” said Damodaran.

Diageo expects to grow organic net sales in the double digits in the coming year, based on increased brand investment and a rapid consumer shift towards high-end brands. Diageo’s portfolio includes premium brands such as Johnnie Walker, Black Dog, Black & White, Vat 69, Antiquity, Signature, Singleton, Royal Challenge, McDowell’s No 1, Smirnoff, Ketel One, Tanqueray and Captain Morgan. Incorporated in India as United Spirits Limited (USL), Diageo India is listed on both the National Stock Exchange (NSE) and Bombay Stock Exchange (BSE).

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