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Anand Kripalu, appointed by London-based Diageo to take charge of Bengaluru-based United Spirits (USL) as managing director and chief executive officer a year before, talks to Raghuvir Badrinath on how it's been and the road map he's preparing for the next three years. Edited excerpts:
You seem to have stepped on to a landmine of a company, with so many disturbing aspects tumbling out, one after another. How have you been addressing it?
It is highly challenging and complex but also extremely exciting when you're in the thick of it all. I am able to draw from three decades of FMCG (fast moving consumer goods) experience with Lever's and Cadbury's, beside learning new aspects of this complex alcohol beverages sector. My core aim is a significant change in how this sector and company are perceived, and to leave a legacy of a business which will sustain on the core foundations of ethical standards.
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Corporate governance seems to be top on the agenda for Diageo as it implements a series of changes at USL.
An aspirational vision statement for us is to be a highly trusted and respected FMCG player. It (Diageo) is pushing us to put in place strategies to work towards that. I have least tolerance for non-compliance and we are putting in place a culture to achieve that. We have enabled 'Speak Up' for employees and stakeholders and that department is pretty busy. It is heartening to see the changes already tangible.
You recently suffered a setback when minority shareholders rejected a proposals to integrate Diageo India's operations with USL. How will you address this aspect of closer alignment between the two?
We are certainly disappointed but not giving up. The integration plan is in the best interest of the shareholders. We're again reaching out to them with more details on this. For one, it will be revenue and EPS (earnings per share)-accretive immediately. Instead of USL being only a sales agent for Diageo's brands in India, it will be earning revenue of as much as Rs 700 crore and operating profit of Rs 70 crore by getting into a licensing and distribution arrangement, as opposed to earning around Rs 16 crore through the sales agreement now in place.
The shareholders reached out to us for more detailed information and we are sharing more data points. We are hopeful that in our next meeting during early January, we will be able to convince them about our efforts.
Has there been any decision on how the integrated entity might want to address Diageo India MD Abanti Sankaranarayanan's role?
We are working on that as well but I am sure she will have a significant role as we chart the three-year road map for the integrated operations, in whatever structure the shareholders approve.
The USL board of directors has also authorised you to probe the various irregularities it had (under the earlier management) entered into with various UB Group companies. What has been the outcome?
The process is still on and I hope to bring a conclusion at the earliest. It is not an easy process and we want to address that issue once for all, without any residue.
Another aspect is of Vijay Mallya, the larger-than-life chief of USL. How long can he continue as chairman, given his status as a wilful defaulter and the ongoing crisis at Kingfisher Airlines?
Diageo has contractual obligations under the shareholders agreement to support Mallya as non-executive director and chairman, subject to certain conditions and the absence of certain defaults.
USL has charted a three-year strategy on how best Diageo's brands and those of USL's can ride on a robust distribution network.
We will be driving growth across segments and the parallel effort will be to grow the segment. USL has half the Indian spirits market share and with this presence across the categories, we will be able to deliver smartly as part of this three-year road map.
