Bangalore: The largest liquor company in India by market share, United Spirits Ltd (USL), plans to reintroduce some of the lower-priced liquor brands it had stopped two years ago.
USL had stopped production of brands such as Kerala Malted Whisky, Vin, Majestic and the United series, because of rising prices of molasses and spirits, the key inputs for making beverage alcohol.
USL says it wants to start bottling these brands now to encash a sales boom in Karnataka of low-end brands after the state banned arrack or country liquor.
In Karnataka, prices of spirit has decreased from Rs36 per liter to Rs24 per liter, a drop of more than 30% in two years. Prices of molasses in the same period have come down from Rs4,000 a tonne to Rs1,700 a tonne owing to a surplus production in sugar cane crop.
The company, which claims a market share of 59% for its premium brands, had cut back sales of low-end brands by 2.95 million cases in 2006-07. USL expects total sales to be around 75 million cases this fiscal year compared with 66 million cases the previous year. This would also include sales of Scotch whisky produced by Whyte and Mackay Ltd, the Glasgow-based firm the UB Group has acquired in May 2007.
“We had pulled back some brands because spirit prices were high. This year, the prices of molasses have been more reasonable than before and we are thinking of restarting the second-line products. That is also because of the opportunity in Karnataka,” said Vijay K. Rekhi, president of the group’s spirits division and managing director of United Spirits.
As a result of Karnataka’s ban on arrack last July, sales of Indian-made foreign liquor (IMFL)—as drinks like whisky, rum and brandy are classified—have now shot up to more than three million cases (of nine bulk litres each) per month. Prior to the ban it averaged 1.4 million cases a month.
The increased consumption of IMFL has, for the first time, put Karnataka ahead of Andhra Pradesh.
While 3.2 million cases were sold in Karnataka in January, Andhra Pradesh consumed 3.16 million cases. However, a major portion of the demand in Karnataka is for the cheapest brands of IMFL, priced between Rs27 and Rs35 per 180ml.
“If we re-enter the price segment which we are planning to, it will mean a jump in revenue and volume. That’s why we are evaluating the options of getting back into that segment,” Rekhi said, adding that the brands in the portfolio would be revived.
The company’s net sales rose to Rs888.96 crore in the third quarter of this year from Rs773.42 during the same period last year.