We see good potential for our premium IMFL brands in emerging markets: P A Murali

Source : BUSINESS_STANDARD
By : Raghuvir Badrinath
Last Updated: Mon, May 21, 2012 20:10 hrs

United Spirits, India's largest spirits major, is going through a consolidation phase after a series of steps to deleverage and to further cement its emerging stature in the global spirits market. The UB Group's flagship is a global spirits major selling as much as 123 million cases and is growing from strength to strength. In an interview with Raghuvir Badrinath, USL Joint President P A Murali speaks on how USL is gearing up.

Recently some independent industry reports said that your whiskey brand Bagpiper has been pipped by ABD's Officer's Choice whiskey brand as the largest whiskey brand. How does that change the scenario for you?


What is being made available is just one side of what is happening in the whiskey market. While Bagpiper whiskey sells 15.6 million cases and competition's brand is at 15.8 million cases, it is in just one segment of the market of a particular price segment in which we are also present. Please note that our product McDowell whiskey which is in a segment higher than that of the competitor's brand, alone sells 16.95 million cases. To clarify further, our McDowell No1 sells at a price point which is higher by Rs 100 per bottle compared to that of the competition's brand. The total McDowell franchise over three Flavours sells 45 million cases - whiskey, brandy and rum flavours. This is perfectly in line with our stated strategy of moving up the value chain through premiumisation of our portfolio and growing the prestige and above brands which are growing at 16 per cent to 17 per cent. Therefore our focus is on premiumisation and McDowell, has a pan-India footprint and is evenly spread across markets, thereby derisking any impact of regulatory swings in terms of steep hike in duties and taxes.

USL is starting to bet on emerging markets as well as starting to test the waters in the US... How is that playing out?
The emerging markets such as in the African continent and South East Asia is of high focus for us. We see a good potential for our Premium IMFL brands to ride along with our premium scotch portfolio in these markets. We are actively looking for alignments in the certain geographies of Africa and we will explore a joint venture there. In the US, which is a highly competitive and mature market, we recently launched our premium whiskey and we are following it up with gin and vodka. It's very early days to talk of volumes.

On a debt of Rs 8,000 crore and a gearing of close to two times, the issue of debt burden is still weighing heavily on United Spirits... How is the company approaching it?
While debt is an issue, it is not having an adverse impact on our operations. We, in the UB Group, have never feared leveraging ourselves to the hilt if a situation offers an opportunity to consolidate and create value for our stakeholders. At the same time, over the past decade, on multiple occasions, we have also demonstrated our ability to quickly de-leverage after concluding fully-leveraged buyouts. Our bold acquisitions and ability to quickly derive value out of such acquisitions have catapulted us to being a global leader in volume terms in the spirits arena. Even as of today, I have always stated that we have Rs 1,500 crore to Rs 2,000 crore worth of non-core monetisable assets on our balance sheet like treasury stock, investment in United Breweries Ltd, the cricket franchise among others which shall be used at an appropriate time to de-leverage and bring the gearing to a comfortable level. In the meanwhile, we are also taking steps to term out our amortisation pressures through possible bond issuances in due course.

Whyte and Mackay seems to be the main reason for the leverage as USL took on as much as $600 million to acquire that company... Isn't that proving unwieldy?
Fundamentally, our overseas acquisitions have been India-centric. From that perspective, W&M is a very valuable strategic asset for United Spirits. This investment not only gives us access to valuable scotch liquid which ensures very critical supply side security, but also has brands of great provenance which completes our product portfolio in all respects. We straddle all flavours, segments and price points with brands which are leaders in their own right in the Indian market which is expected to be the largest Scotch market on the globe in the near future. We are present in 98 per cent of points of sale in this country which will stand us in good stead in an emerging Scotch scenario. Yes, we had to leverage but that's a strategic call that we consciously took to create value over a period when inflexion seems imminent given the demographic dividend we are staring at. We have moved away from being a predominantly bulk scotch player and have embarked upon a long term strategy of building value by building brands at W&M which will yield results in the medium to long term. We have an option of reducing our stake in W&M while retaining control and we will take that decision as and when a situation warrants. However we don't have to rush into that step in the near future.



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