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Informist, Wednesday, Jul 24, 2024

--United Spirits: Looking at national rollout of Godavan whisky
--CONTEXT: Comments of United Spirits mgmt in post-earnings call
--United Spirits: Expect Apr-Sep to be lucid, Oct-Mar to be better

By Avishek Rakshit and Sunil Raghu

KOLKATA/AHMEDABAD – Alcoholic beverages major United Spirits Ltd is set to launch its award-winning single malt Indian whisky Godawan nationally soon, Managing Director and Chief Executive Officer Hina Nagarajan said today. It is two years since the brand's inception in limited markets in the country.

In a call with investors after detailing the company's financial results for the June quarter, Nagarajan said the Godawan brand has been rolled out in west and south India with limited availability. The company has now decided to introduce the brand to north India and scale up distribution in the existing markets of Godawan.

Classified as one of its premium products, this whisky is priced at 5,400 rupees for a 700-ml bottle in online stores. Comparatively, a 750-ml of Johnnie Walker Red Label is priced at 2,250 rupees in online stores. Johnnie Walker, the market leader in whisky globally, is the mother brand under which United Spirits' parent Diageo Plc has several brands such as Red Label, Black Label, and Gold Label Reserve.

In April, Godawan 100, a collector's edition artisanal single malt, won the Single Malt Whisky of the Year award at the 2024 London Spirits Competition. Since then, United Spirits has been banking on this brand as a future growth driver.

Godawan Artisanal Single Malt Whisky is produced by The Good Craft Co – United Spirits' craft and innovation hub set up in 2022 to accelerate transformational innovation and strengthen the company's craft and premium drinks portfolio. The Good Craft Co also acts as an incubator to accelerate the alcoholic beverages start-up ecosystem.

Nagarajan said that as consumers prefer quality over quantity, United Spirits is focussing on premiumising its portfolio even further. Premium and luxury brands account for 88% of the company's annual revenue. Nagarajan said global brands that, which have been introduced in India and are priced at a premium, have been recording strong double-digit growth.

During the quarter ended June, revenue from premium products grew 10% on year, but net sales in the mass category products fell 2.4% year-on-year. The company reasoned that the fall in revenue from the mass category was on account of the raging inflation at the macroeconomic level, which hurts price-sensitive consumers in the budget products category. Nevertheless, total sales volume grew 3.5% on year to 13.7 mln cases, more or less in line with the projections from some sector analysts.

Nagarajan said the Apr-Sep period of the current financial year is expected to be lucid due to the ongoing inflation, and the General Election already impacting sales in the Apr-Jun period. Besides, state taxes on alcoholic beverages have also been impacting sales. However, she said Oct-Mar is expected to be better than Apr-Jun.

Although the company's earnings before interest, tax, depreciation, and amortisation margin expanded to 19.5% in Apr-Jun from 17.7% in the year-ago period, Executive Director and Chief Financial Officer Pradeep Jain cautioned investors that it was a "one-off thing" and investors should not treat it as a benchmark. He said the company's EBITDA margins would grow, but asked investors to compare it to the number from last financial year. For the year ended March, United Spirits' EBITDA margin was 16%, according to its latest annual report.

United Spirits reported over 25% year-on-year growth in its net profit for the Apr-Jun period at nearly 3 bln rupees, though it narrowly missed the Street's projection of 3.1 bln rupees. The company's revenue from operations rose 9.7% on year to 58.3 bln rupees. This figure, however, includes excise duty which goes into the government's coffers. Discounting the excise duty outgo, the revenue of United Spirits, or the net sales value as the company calls it, increased 8.3% on year to 23.5 bln rupees, 500 mln rupees lower than the average of the estimates of sector analysts.

Today, shares of United Spirits closed 3.8% higher at 1,382.9 rupees on the National Stock Exchange.  End

Edited by Avishek Dutta

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