The country’s largest liquor maker United Spirits has in a presentation to its investors in London, said that the Supreme Court ban on alcohol sales near highways will have a short-term impact on its sales.
Anand Kripalu, Chief Executive Officer of the Diageo plc-owned USL, said the company “expects the impact to be mitigated eventually and where it doesn’t get mitigated the consumption will shift to other outlets”.
Following the ban, USL shares took a 15 per cent slide but after assurance from its CEO, the shares recovered to a healthy ₹1,961, up nearly 3.5 per cent.
Kripalu who is the first Diageo-appointed CEO of the company after the London-based liquor maker bought a majority stake in USL, said several States have or are in the process of declassifying highways, while the others are fast-tracking alcohol licence approvals.
He also pointed out that while the GST may not include alcohol, there is a lot of support to make sure alcohol is not unduly hurt as a result of input costs going up.
“We are in on-going discussions with the government around tax slabs for our inputs,” he said.
Topline to growThe company said it will grow topline by double digit and improve operating margin to mid-high teens.
This will be achieved through five strategic priorities. These include strengthen and accelerate core brands, evolve route to consumer, drive out cost to invest in growth, corporate citizenship and create a future-ready organisation.
Kripalu said the company has created what it termed as a fit-for-purpose model for its popular brands with three approaches to managing the brands.
He said in States like Maharashtra and Karnataka where it expects to have a profitable growth in the long term, it will retain the business and operate it themselves. In certain States where local parties have an advantage to increase the value of the popular brands, it has already started appointing franchisees for the brands through a fixed fee model. It will exit those States, where it doesn’t see a profitable business model.
United Spirits has over 100 brands of which 15 brands sell over 1 million cases. Its Prestige and above brands represent about 60 per cent of net sales.
The company also said it has delivered 700 bps of organic margin improvement through the end of F16 and it now stands at about 10 per cent.