Consumer demand starting to pick up, says United Spirits’ Anand Kripalu3 min read . Updated: 24 Apr 2018, 08:09 AM IST
Consumer demand is starting to pick up even though it may not have met the industry's expectation
Bengaluru: India’s liquor industry barely grew in the last financial year, extending the period of sluggish sales it has reported since the past six years.
But consumer demand is starting to pick up even though it may not have met the industry’s expectation, said Anand Kripalu, managing director and chief executive at United Spirits Ltd, the country’s largest liquor company.
“I’m seeing a little bit of resurgence in consumer demand and I think it’s more to do with just stability of the environment rather than anything else," said Kripalu.
Volume growth in 2017-18 was clearly less than what USL and the industry anticipated, but it did grow despite the various regulatory changes, he added.
India’s alcoholic beverage industry has been hammered by policy changes over the past 18 months, starting with the government’s demonetization move in November 2016. The Supreme Court’s decision to ban alcohol sale near highways starting from 1 July 2017 dealt the biggest blow as it led to the closure of several bars, pubs, restaurants and retail outlets.
The government’s decision to keep alcohol out of the goods and services tax (GST), and route-to-market changes in some states were other challenges the industry had to deal with last year.
Most of the liquor outlets hit by the Supreme Court’s ban have now been reopened and that is helping boost demand, said Kripalu, reaffirming USL’s medium-term target of double-digit net value sales growth and margin growth in the mid-to-high teens.
Kripalu, 58, is a veteran of consumer goods companies. He joined USL as CEO-designate in October 2013 after spending more than two decades at consumer goods giant Unilever Plc and a spell as head of chocolate maker Mondelez India. In August 2014, USL appointed him as CEO and managing director for a period of five years.
Kripalu said he has much work left to do at USL, though he declined to share more details on his future at the company.
“I don’t think I will leave for another job or another company. That’s unlikely. I still have a lot to achieve here at Diageo India. One of my big goals was to change the way this industry is perceived. Over the last few years, the company has transformed significantly especially on governance controls, how we do business and increasing our gender diversity numbers. The fact is today we are able to attract people from blue-chip companies and mentor talent for global roles at Diageo. While we’ve made progress in our journey, there’s a lot more to do," Kripalu said.
For now, he is trying to make the best of what looks like a relatively stable period for liquor firms.
Kripalu said that whisky, which accounts for roughly 62% of the spirits market in India, according to data from the International Wine and Spirits Research, is growing faster than other categories of vodka, rum and gin.
For USL, growth in the whisky space will mainly come from its McDowell’s No. 1 portfolio. McDowell’s was one of the first so-called USL power brands that have been repackaged, rebranded or redesigned. McDowell’s is USL’s largest brand and one of the top-five largest selling liquor brands in the world.
Still, while USL is the market leader, it continues to lose market share to arch-rival Pernod Ricard Pvt Ltd, maker of Blenders Pride, Royal Stag and 100 Pipers whiskies.
Last week, Pernod’s parent company said sales at its Indian arm increased 14% from July 2017-March 2018 compared with the year-ago period. USL reported overall sales growth of 2% in July-December. In the prestige and above segment, the comparable segment at USL in relation to Pernod, USL reported sales growth of 6% in the July-December period. (The company is yet to file results for the March quarter.)
“We are almost neck-to-neck in those two quarters (July-December) if you look at Diageo’s results. But we know that in December we were cautious and went slow because of the expected route-to-market changes," Kripalu said.