UB Group scouting for foreign strategic partner

United Spirits, the proposed consolidated spirit business company of UB Group, will rope in an international spirits company as its strategic partner.

The UB Group, which is persuading the merger of two of its currently owned spirit companies -McDowell and Shaw Wallace, would initiate this international collaboration to enhance its global presence by outsourcing each other's capabilities and brand potentials in the domestic market as well as abroad.

"The company is keen to tie-up with an international company as part of a global business strategy, with which the Indian brands can be launched in other world markets and the foreign brands can be brought in to Indian market," said UB Group chairman Vijay Mallya.

He added that the objective of the strategic partnership is to leverage the capabilities such as brand equity, technology and distribution network of the global company and UB Group. "The ideal partner we are interested to tie-up with is a better synergic match" Mallya said.

According to an industry analyst, UB Group is already in talks with few major spirit companies abroad including the Black Label brand owner Diazo. However, Mallya said that the company will start scouting for the strategic partner only after the consolidation process is over.

At present, United Breweries has a similar tie-up with the UK-based Scottish & Newcastle Plc for its beer business. With this strategic tie-up, it would leverage on Scottish and Newcastle's distribution strength, with which the group had broadened its business understanding, in future to ensure the products reached global markets.

Mallya said that the strategic partnership would also help United Spirits to enhance its Indian market portfolio with global premium brands.

UB's McDowell & Company is now planning a major capacity expansion programme involving an investment of Rs 400 crore.

The capex project, which will streamline its own production base in strategic locations across the country, includes acquisition of Karnataka Breweries and Distilleries (KBDL) at Bangalore and two green field projects -one in Uttar Pradesh and another in Orissa.

Vijay Mallya said that the KBDL acquisition with a consideration of Rs 185 crore will be completed by the third quarter of the current financial year.

As part of the full acquisition deal, Rs 123 crore has been already placed in an ESCROW account and the acquisition will be completed by the third quarter of the current financial year.

"The capacity expansion within the control of the company is with an objective of maintaining high quality production standards and also to minimise the total delivered cost by setting up manufacturing units in strategic locations," Mallya said.