United Spirits Ltd (USL), India’s largest liquor company, reported a 7.3% rise in net profit for the fourth quarter ending in March, with revenue declining by 25% to INR 5,783 crore. The company’s profit after tax stood at INR 204 crore.
After adjusting for the Pioneer Distilleries merger, slump sale, and franchising of the reviewed popular portfolio, the company stated that the performance remained strong for a like-for-like comparison.
Excluding the impact of slump sale and franchising of mass brands from a year ago, net sales in the fourth quarter grew by 15.6%. The prestige and above segment saw a remarkable growth of 23.2%, whereas the rebased net sales for the popular segment declined by 6.3% due to ongoing inflation affecting the price-sensitive consumer segment.
Hina Nagarajan, Managing Director at Diageo owned USL said, “We have delivered a strong year once again with robust top-line growth and resilient operating margins in an extremely volatile and inflationary environment. As an organization, we have exhibited tenacity and focus amidst macro-economic headwinds and regulatory challenges.”
After accounting for a one-off credit resulting from the reversal of indirect tax provisions, the underlying gross margin stood at 42.6%. This represents a decrease of 225 basis points compared to the previous year but shows sequential improvement.
According to industry executives citing the latest excise department data, the spirits market in the country witnessed a sales volume of 395 million cases during the year ending in March. This reflects a significant 12% increase compared to the previous fiscal year (FY21-22) and an addition of nearly 40 million cases since its previous peak approximately four years ago.
USL’s net sales for the fiscal year ending in March grew by 19.5%, with underlying net sales volume increasing by 20.1%. This growth was driven by a strong premiumization trend, continued momentum in off-trade sales, recovery in on-premise sales, and sustained home consumption trends.
“The stepped up contribution in growth from the upper and mid prestige segments lend credence to our portfolio reshape strategy,” added Nagarajan.
Last year, USL sold 32 brands, including Haywards, Old Tavern, and White-Mischief, to Inbrew for INR 828 crore. They also established a five-year franchise arrangement for 11 other brands, such as Bagpiper and Blue Riband. Inbrew, headquartered in Singapore, has the right to convert the fixed-term franchise agreement into a perpetual rights agreement and has the option to acquire the brands through a call option.
Over the past six years, USL has adopted a franchisee model in the popular segment, implementing fixed-fee arrangements in multiple states. This strategic shift has led to an expansion of margins. Currently, the company’s P&A (Premium and Above) business constitutes 87% of its overall sales, a substantial increase from less than 50% six years ago. This shift underscores USL’s strong focus on the premium segments.
