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United Spirits net sales slip 8% in Q3
Diageo-controlled Indian drinks group United Spirits saw its 2017 third quarter net sales decline by 8%, impacted by the route-to-market changes in certain states.
United Spirits saw its net sales decline by 8% in the third quarter of 2017
In the nine months to 31 December 2017, United Spirits’s net sales fell to Rs. 5,996 crores (about US$940.8 million), with gross profit up 2% to Rs. 2,821 crores (US$442.6m).
The group’s underlying net sales fell by 2%, with the impact of demonetisation and pricing benefits offsetting the adverse impact of expected route-to-market changes in certain states and the highway ban.
Sales of the ‘Premium & Above’ segment fell by 3%, with the growth from “successful” relaunches of McDowell’s No. 1 Whiskey and Signature offset by a decline in the firm’s Scotch portfolio.
The new Captain Morgan Original Rum variant also witnessed “strong momentum” post-national roll out.
The group’s ‘Popular’ segment reported a 16% decline, impacted by “one-off” operating model changes.
Anand Kripalu, CEO, said: “Our net sales performance was adversely impacted in this quarter by the expected route-to-market changes in certain states, and to a lesser extent, by the residual effects of the highway ban. Given this context, I am particularly pleased with our gross margin improvement, which has allowed us to significantly increase marketing investment by 27% and, thereby, invest in the future.
“Looking ahead, while the adverse impact of the highway ban is behind us, we do expect to see continued impact of route-to-market changes in certain states in this financial year. Importantly, we now expect that the adverse impact of GST will be more than offset by productivity savings and pricing.
“We remain committed to capture the long-term opportunity in the spirits market, to achieve double digit top line growth and improve margins to mid-high teens in the medium term.”
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.
The years-long saga has resulted in Diageo suing Mallya through the High Court in London for at least US$180 million.