The world’s second largest spirits firm is confident of beating Diageo within a year. Can Vijay Mallya pull it off?
The party over United Spirits (USL) becoming the world’s second largest spirits firm by sales volume is long over. But the king of good times, as Vijay Mallya is known as, is still in a celebratory mood, as dislodging French firm Pernod Ricard from the second spot is only the beginning of a broader game plan.
Mallya, who announced USL’s promotion at a media jamboree last month, has already set his sights on occupying the top spot within a year. That may not be just a fond hope as Diageo (the largest firm with annual volume sales of 111 million) has been growing at 2 per cent and USL at 10-15 per cent. In the same period, the top 100 spirits brands in the world have collectively grown by only 1 per cent. Moreover, 18 of the top 25 global premium brands including Smirnoff, Bacardi, Johnnie Walker and Absolut have lost ground.
The story, though, is completely different in terms of profits. USL’s profit for the year ended March 2009 was not even a tenth of Diageo’s net profit of over $1.5 billion just in the first half of its fiscal. And analysts say profitability remains a concern going forward. Besides, debt at over Rs 5,500 crore remains a huge problem.
But Mallya is unperturbed and says he would shortly unveil a new vision on how the company is planning to touch 200 million cases in the near future. While one has to wait for that, the Rs 6,500 crore spirits arm of the UB group certainly has the track record in volume sales. In 1983, the company sold three million cases of spirits a year (a case is nine litres). This has now risen to 100 million cases. USL has a 59 per cent market share in the segments it is present in India. The Indian spirits industry is pegged at 236 million cases.
Acquisitions have played a huge role in this growth story. The firm acquired its closest rival, Shaw Wallace in 2005, gaining brands such as Royal Challenge whisky and White Mischief vodka. In 2007, it bought Scotch whisky distiller Whyte and Mackay, which had brands such as W&M Scotch and Jura single-malt to add to USL’s offerings that include Bagpiper whisky and Celebration rum.
In the process, USL has 20 millionaire brands (selling more than a million cases a year) across segments like whisky, brandy, rum, vodka and gin.
“The concerted effort to sell premium is paying off. At the same time, the Prestige segment presents a huge opportunity with 100 million new consumers likely to enter the legal drinking age over the next five years,” says USL Managing Director Vijay K Rekhi.
Analysts say with its brands strategically positioned in most categories and price points in order to gain the maximum share in a market growing at around 16 per cent, USL indeed has a portfolio that is difficult to replicate in a country where advertising of beverage alcohol is banned. Other players in the Indian spirits market include Radico Khaitan, Mohan Meakin, Seagram, Diageo and a few more regional players such as Khoday’s and Amrut Distilleres.
Rekhi says USL has never shied away from investing in brands. Consider the Millionaire brands. At present, USL has a portfolio of over 145 brands and 80 distilleries — 30 of its own and 50 contract units. The growth has been driven by careful positioning, aggressive marketing strategies, brand refurbishment and innovation backed by a huge distribution network. “The idea is to associate each brand as an extension of consumer’s lives,” Rekhi says.
McDowell’s No.1 whisky has been positioned on friendship and bonding. The company’s McDowell’s No. 1 Rum is positioned on the ‘macho’ platform and sponsors hiking and motorcycling events. Royal Challenge whisky, from the Shaw Wallace stable (which it acquired in 2005) was into golf before it became a part of cricket through the IPL team from Bangalore.
Signature whisky is promoted on the fashion platform. White Mischief, its vodka brand, is promoted through Indian Premier League cheerleaders while Romanov Red is positioned on the music platform. To promote Black Dog, its premium scotch whisky, the company has used jazz events. The promotion has helped key brands like Black Dog whisky grow by 45 per cent this year followed by brands like Celebration Rum at 36 per cent and Director’s Special and Romanov Vodka at 25 per cent.
As part of its strategy to drive sales of its premium and prestige brands, USL is also partnering with a slew of retailers to modernise and enhance consumer experience through multi-brand ‘Spiritz & More’ experience stores.
The good times seems set to roll for a long time.
