United Spirits reports double-digit sales drop in Q4

Diageo-controlled United Spirits saw its net sales decline 11.4% during the first three months of 2020 as a result of Covid-19 disruption in India and “ongoing consumption slowdown”.

United Spirits owns McDowell’s No.1, the second biggest Indian whisky brand in the world

Bangalore-based United Spirits released its fourth quarter and full-year results for the period ending 31 March 2020.

For the fourth quarter, net sales were affected by the coronavirus crisis, which “exacerbated the impact of the ongoing consumption slowdown”. For the full year, net sales grew 1.2% to 9.09 million Indian rupees (US$120m). Excluding the one-off benefit from the sale of bulk Scotch, underlying net sales declined 1.5% for the year ending 31 March.

Anand Kripalu, CEO of United Spirits, said: “The business was severely impacted in the fourth quarter due to disruption caused by the outbreak of coronavirus in India.

“Net sales declined 11%, led by a larger decline in the prestige-and-above segment, further impacting full-year growth, which was already subdued due to the ongoing consumption slowdown during the fiscal.”

Net sales of ‘prestige-and-above’ products during the fourth quarter fell by 15.6%, “disproportionately impacted by [the] drying up of social occasions” and the closure of the on-trade channel in a number of states even before the nationwide lockdown came into effect on 24 March to stop the imminent spread of Covid-19. United Spirits also said the pandemic “impacted the premiumisation trend within the segment as well as across segments”.

Earlier this month, United Spirits resumed operations at the majority of its manufacturing facilities in India after the group’s sites were temporarily closed due to the country’s coronavirus lockdown. The plants are now operating at reduced capacity.

Kripalu added: “We saw a sharp deceleration in our prestige-and-above portfolio from the previous quarter. Within the segment, our bottled in origin (BIO) Scotch portfolio was the hardest hit.”

The ‘popular’ segment saw its net sales drop by 11.4% during the fourth quarter.

United Spirits also said the roll out of its revamped McDowell’s No.1 Whisky brand was interrupted, however the group was “encouraged” by initial consumer response in areas where it had launched.

Uncertain outlook

Kripalu continued: “Overall, despite an unfavourable environment, impacting both the demand and the cost of raw materials, PAT [profit after tax] for the year was up 7%.

“Overall, in this fiscal, we faced several external challenges, including the general election, broad-based economic slowdown and the outbreak of coronavirus.

“While the outlook for next year remains uncertain, I am confident in the resilience of our category and our agility and ability to adapt in this difficult environment. We will continue to execute with discipline and invest prudently to meet evolving consumer needs.”

Last week, an Indian news site reported that Diageo was exploring the option of buying out minority stakeholders and delisting United Spirits. When asked about the claim, the Johnnie Walker owner said: “As a policy we do not comment on market rumour and speculation.”

Diageo currently owns a 55.9% stake in United Spirits.