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Diageo, the world’s largest distiller and with a controlling stake in United Spirits (USL), has appointed Ashoke Roy, a veteran of Vijay Mallya’s UB Group, to head the compliance division at the Indian spirits company.
This is the second key nomination Diageo has made in USL; the first was to appoint Chief Financial Officer P A Murali as its nominee on the board of directors. The latter was done right after the maker of Johnnie Walker Scotch whisky and Smirnoff vodka bought a 25.02 per cent stake for Rs 5,200 crore in the Indian firm from Vijay Mallya last year.
Diageo has also announced an external candidate, Anand Kripalu, an ex-Mondelez India chief, as their chief executive-designate at USL, to take over from May 2014.
Roy, now USL’s deputy president, ethics, compliance and audit, was CFO of Whyte & Mackay for about a year and a half until last November. Prior to that, he was deputy president, internal audit, at the UB Group, where he has worked for close to 25 years. Prior to joining United Breweries, he was with HPCL and Phillips.
Diageo did not respond to queries seeking comment on the appointment, while a spokesperson for USL said, “Ashoke Roy was always chief internal auditor. He was temporarily posted as CFO of Whyte and Mackay. He is now given additional charge of compliance in USL.”
The role is understood to be a new one at USL. Diageo had made compliance one of its top two priorities at USL and has been pulling out all stops, especially through personnel changes, to ensure the Indian company’s operations meets all the stringent regulations in the alcoholic beverages sector. London-based Diageo is subject to compliance norms in its home country and in the countries in which it has distilleries.
This focus on compliance, in addition to the spotlight on premiumisation of the USl portfolio, has led to a drop in volumes at USL but Diageo isn't complaining. In the last quarter, USL decided to shut its distillery in Tamil Nadu that had been running on reduced capacity due to regulatory restrictions placed on the company in the state.
Diageo has also offered to part with most of the assets of United Spirits' UK subsidiary, acquired almost completely through debt for $1.2 billion in 2007. The offer has been made to comply with competition concerns in the sector and comply with norms at the UK Office of Fair Trade. The offer made by Diageo secures the distilleries that supply brands of USL.
The growth in the consumption in spirits has generally been on a decline across India, as consumers cut back on discretionary spending and the growth from conversion to Indian-made foreign liquor from country liquor is almost complete. However, Diageo has said it has factored in the slowdown and the negative effect of the focus on premiumisation and compliance is having on volumes at United Spirits. The company had sold about 124 million cases (each nine litres) in 2012-13.
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