United Spirits sales hit by highway ban

Diageo’s Indian subsidiary United Spirits has reported a net sales decrease of 8% in the second quarter of its financial year, impacted by the country’s alcohol highway ban.

United Spirits reported a net sales decline of 8% in the six months to 30 December 2017

In the six months to 30 December 2017, net sales hit Rs. 3,733 crore (about US$573m), while profit after tax grew 71% to Rs. 216 crore (US$33m).

USL’s net sales were impacted by the highway ban and the “one-off impact” of operating model changes.

Net sales of the company’s ‘Prestige & Above’ segment were up 1%. Excluding the one off impact of operating model changes, net sales grew 12% in the second quarter and grew 2% in the first half.

While the ‘Popular’ segment reported a net sales decline of 21%.

McDowell’s No. 1 whisky grew volume by 5% and net sales up 14% in the second quarter, while in the first half volume was flat and net sales grew 6%.

Royal Challenge grew volume 6% and net sales 12% in the second quarter and volume declined 5% and net sales declined 1% in the first half.

Signature continued to show “positive momentum” supported by its “successful” revamp and grew volume 10% and net sales 13% in the second quarter and volume grew 9% and net sales grew 14% in the first half.

The company’s Scotch portfolio in the premium and luxury segment grew volume 5% and net sales 8% in the second quarter driven mainly by Johnnie Walker and Black Dog. Volume declined 8% and net sales declined 7% in the first half.

The company also said it expects its Indian whisky brand Antiquity to “deliver momentum in the subsequent quarters” post the national roll out and its re-launch.

“With the recent Supreme Court clarification on the highway ban, we have seen outlets start to re-open in September and we expect the impact of the highway ban to continue to decrease and the business to normalise by end of the third quarter,” said Anand Kripalu, CEO of United Spirits.

“Based on our current expectations, through our continued focus on productivity initiatives coupled with price increases in select states, we expect the net adverse impact of GST on our margins to be moderate in this financial year. We continue to focus on our strategic priorities to capture the long term opportunity in the spirits market and achieve our medium term ambition to grow top line by double digit and improve margins to mid-high teens.”

In April, United Spirits’s former chairman Vijay Mallya was arrested and then bailed after appearing in a London court.

Mallya resigned as chairman and non-executive director of Diageo-owned Indian drinks group United Spirits in February 2016, following a vote of no confidence from his own board.

Earlier this year, Diageo declined to comment on reports that it is considering increasing its majority stake in Indian drinks group United Spirits.