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Informist, Friday, Jan. 24, 2025

By Avishek Rakshit & Noopur Bhandiwad

KOLKATA – Alcoholic beverages maker United Spirits Ltd. Friday said that although it is targeting double-digit growth in annual sales in its premium and luxury products portfolio for the ongoing financial year, muted sales of mass products may drag growth of the overall portfolio down.

Talking to analysts after declaring the Oct-Dec earnings, Praveen Someshwar, the company's chief executive officer designate, said, "Our aspirations for the full year are double-digit P&A (prestige and above) growth, and I think we are well on track for that. In fact, after the (performance during the December) quarter that we have delivered, we only feel more confident that we should be able to get to be in a double digit for the full fiscal year."

Prestige and above segment in the alcoholic beverages industry refers to premium and luxury products. For United Spirits, sales from the premium portfolio have been increasing over the past several quarters. Such products accounted for around 89% of the company's sales during Oct-Dec.

The company cautioned that at the top-end of the liquor market, the company has been seeing some demand moderation but it is likely to bounce back going ahead. The company is in talks with state governments to lower taxes which is expected to boost consumption, especially in the premium segment.

"With the current taxation structure and we continue to have ongoing dialogue with the (Karnataka) government to optimize and rationalise the tax structure to drive more premiumisation," the company's outgoing Managing Director and Chief Executive Officer Hina Nagarajan said.

Nagarajan will continue in her role till Mar. 31, after which she will assume a new role within the Diageo group. The chief executive officer designate, Someshwar, will thereafter take her position at United Spirits.

During Oct-Dec, the company's sales volume shot up by 10.2% on year to 18.2 million cases, from 16.5 million cases in the year-ago quarter. Of this, sales volume of the premium portfolio surged by 11.2% on year to 14.9 million cases. The mass product portfolio, on the other hand, saw a volume uptick of 5.9% on year to 3.2 million cases.

As a result, the company's net sales value from premium products rose by 16.1% on year to INR 30.6 billion, and the same for mass products rose by 9.6% on year to INR 3.3 billion. Compared to revenue, which includes taxes, net sales value is a true reflection of a liquor company's actual revenue as it discounts steep excise duty and other charges from the reported revenue.

While the premium portfolio has been on a steady rise, the mass segment was a laggard. However, the sales boost in the mass products' segment in Oct-Dec came from a price revision a few quarters ago along with duty reduction in one of the most salient liquor consuming state, provided the necessary growth tailwinds.

However, United Spirits is cautious on the mass product segment as the category has been under stress for a few previous quarters.

"While we obviously aspire to try and reach double digit (growth), but we may fall a little short on that front," Someshwar said. He was responding to an analyst's query on the projected growth taking into consideration the muted sales in mass products. Later, in response to another query, Nagarajan said, "(For) the last couple of quarters we were shrinking (in mass product category) at flattish to a low single digit. My sense is that the trajectory won't dramatically change. It will remain flattish to probably a low single digit decline."

Thus, although the premium segment is expected to drive double-digit sales growth, the stress on the mass portfolio, accounting for around 11% of the company's sales, may drag down the overall growth in 2024-25 (Apr-Mar) to less than a double-digit growth.

Nagarajan said that after the Andhra Pradesh government came up with the new liquor policy, the company has seen strong traction and demand in that state will stabilize in the next two to three quarters. On Friday, shares of United Spirits closed 2.1% lower at INR 1,469.8 on the National Stock Exchange.  End

Edited by Ashish Shirke

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