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USL is ‘trying to fly the plane while fixing the engine’
The CEO of Diageo’s Indian drinks subsidiary United Spirits has likened the internal struggle at his company over recent years to “trying to fly the plane while fixing the engine”.
Anand Kripalu, CEO of United Spirits Limited
Anand Kripalu, CEO of McDowell’s No.1 maker united Spirits, told investors last week that the company has “come a long way” since it was acquired by Diageo in 2014.
“We’ve transformed nearly every aspect of the business, merging two very different companies; dealing with legacy issues, instituting global standards and controls while delivering on ambitious performance outcomes such as improving performance of our core brands and expanding operating margins,” he said.
“We are trying to fly the plane while fixing the engine.”
Shortly after Diageo acquired a £1.3 billion controlling stake in USL, the Indian company recorded a £445m net loss, prompting an internal investigation. The investigation discovered that a number of transactions had been “diverted” to other subsidiaries within previous parent company United Breweries.
As such, Indian tycoon Vijay Mallya resigned from his position as chairman and non-executive director of United Spirits after Diageo agreed a severance package of US$75m.
“At the start of our journey three years ago, we set out our vision to become the best-performing, most trusted and respected consumer goods company in India,” Kripalu told investors attending Diageo’s Capital Markets Day.
“To achieve that we set out a medium-term goal to grow top line double-digit and improve organic operating margin to mid-high teens.”
In order to achieve this, USL has undertaken a number of initiatives, including a “renovation” of its McDowell’s No.1, Signature and Royal Challenge brands.
“It’s clear that the renovation strategy is the right one, and that we have developed the capability to deliver this change,” added Kripalu.
To increase productivity, USL has reduced the number of its manufacturing sites from 93 to 73, and within that owned manufacturing sites have reduced from 30 to 25; moved to standardised and lighter weight bottles; eliminated “ineffective” marketing spend; implemented “zero-based budgeting”; and is “engaging with government” on price increases.
In the medium-term, Kripalu is “confident” USL can deliver double-digit organic net sales growth.