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Diageo, maker of Johnnie Walker and Smirnoff, is aiming to derive about 10 per cent of its business from India after buying a controlling stake in United Spirits, the country’s largest liquor company.
Most countries yield 3 per cent or less to Diageo's worldwide sales, but India’s contribution could climb to 10 per cent, Chief Executive Ivan Menezes told investors.
“North America is the powerhouse. Business there delivers about a third of our net sales and about 40 per cent of our operating profit,” he added.
Sales in India grew 35 per cent in the first half of this financial year, the company said, against a 1.3 per cent growth in all emerging markets combined.
Diageo attributed the spectacular growth in India to gains after United Spirits, in which it has a a 26.37 per cent stake, began selling the London based-distiller’s brands through 65,000 outlets.
“The biggest transformation is in India and our investment in United Spirits,” Menezes said. “The strength of United Spirits’ route to market is offering a benchmark to many of our other markets.”
According to its India-born chief, Diageo is trying to replicate in other markets the combination of scale and agility in the operations of United Spirits, earlier controlled by Vijay Mallya.
“It is my ambition that in all our markets we have the capability which United Spirits has: to launch an innovation into 95 per cent of outlets in five days,” he explained.
Reaching across 90 per cent of the country, United Spirits’ distribution network was keenly sought by Diageo, which initially sought to buy 53.4 per cent of the company, but settled for 25.02 per cent last July after hitting legal hurdles.
Diageo started selling its liquor through United Spirits outlets since October 2013. “We have our sales promotion agreement in place and it contributed to the very strong growth we delivered in the first half in India,” Menezes added.
