Setback for Mallya in whisky battle

Last Updated: Tue, Jul 10, 2012 05:03 hrs

There is more worry for Vijay Mallya, battling many a fire. Even as his Kingfisher Airlines struggles to hold itself, another of his major companies, United Spirits, has had a setback in its legal battle against his arch rival, Kishore Chhabria.

A year before, Mallya had moved the Calcutta High Court to restrain Chhabria's Allied Blenders & Distillers (ABD) from raising fresh resources for expansion. The court has now said Chhabria can raise the resources and cannot lose control over the company, for now, leaving Mallya to ponder the next move to curtail ABD's growth. It is understood that United Spirits (USL) will continue its legal battle and appeal against this order in the near future.

ABD over the past year has been growing aggressively and its flagship product, 'Officer's Choice', recently overtook USL's 'Bagpiper' as India's largest selling whisky brand. Independent research reports said while ABD sold a total of 15.8 million cases of Officer's Choice, USL sold a total of 15.6 million cases of Bagpiper during 2011. Mallya has been trying to get the ownership of Officer's Choice, contending that when he took over Shaw Wallace, Chhabria took away this brand, which, according to Mallya, belongs to Shaw Wallace. Chhabria has been vehemently denying this and aggressively expanding the brand. The management of both companies did not respond to queries for this article.

Early last year, Mallya had also moved the Calcutta HC, requesting that USL substitute itself in place and stead of Shaw Wallace in a suit filed in 1992, when Shaw Wallace was under the stewardship of the late Manu Chhabria, brother of Kishore Chhabria. The HC, granting some relief, has accepted this appeal, an aspect opposed by Chhabria. The part stating Chhabria cannot lose control over the company gains significance as Mallya seeks to go the length to stake claim over ABD. The order said in the event of the plaintiff (Mallya) going ahead and winning that case, Chhabria has to give back what he had taken out from the original plaintiff or if that is no longer possible, its money equivalent.

Flowing battle
Mallya had moved this suit just as Officer's Choice was galloping ahead of Bagpiper and was about to wrest the pole position. Even as Bagpiper lost its leading position in the Indian whisky market, USL's management has been maintaining that it has been a while since they started to focus on the more premium McDowell franchise, which gives them better returns. "While Bagpiper whisky is a key element in our growth plans, as part of our premiumisation strategy we are starting to put resources on the McDowell franchise," a senior management official told Business Standard.

In an earlier statement, USL president Ashok Capoor had said in their pursuit to be the value leader, McDowell's No 1 led the charge and helped USL drive significant value growth. The segment driven by McDowell's No 1 Whisky sells at a price premium of 40 per cent over the regular whisky segment and at a per case level, the profitability surplus of McDowell's No 1 is in excess of 50 per cent as compared to the regular whisky segment, USL had said.

USL also said that McDowell's No 1 spirits franchise had emerged as the largest alcobev brand in the world, clocking a little over 44 million cases in FY12. "This is with a growth of nine per cent on a large volume base. With the emerging markets thrust to Southeast Asian markets and Africa, the franchise is only going to consolidate this position. Put together, the McDowell's No 1 franchise across the various flavours of whisky, brandy & rums (both Dark & White) have added four million cases of additional volume to USL's kitty. McDowell's No 1 continues to build the base of consumers for the USL franchise, helping us to sustain and migrate these consumers to premium variants and other flavours," added Capoor.

More from Sify: