The USL premium volume reaches the 50% mark

The sale of more expensive drinks contributed more than 50% to United Spirits USL ) total volumes in the last fiscal year. This is the first time this has happened, which shows that the effort towards premiumization by the largest liquor manufacturer in the country is succeeding.

USL classifies its brands under two categories: Prestige&abovesegment,whichincludesthelikesofjohnniewalker,vat69andmcdowell’sno1whiskey,andthepopularsegment,whichincludeswhitemischiefvodkaandbagpiperwhiskey.theformercontributed51%,orabout41millioncases(of9literseach)totheoverallvolumesales,upfrom30%in2014-15,asperthelatestannualreport.incomparison,thepopularsegment’scontributionhasdippedto49%from70%duringthesameperiod.uslsold81.5millioncaseslastyear.

The company has focused on premium drinks , which reach higher margins, since the British giant Diageo took control of the company a few years ago. “Since 2014, as part of our transformation journey, we have established a clear strategy to grow our brands with a strong focus on premiumization. Reinforcing this trend of premiumization, last year, the luxury segment grew faster than the Premium segment, which in turn grew faster than Prestige, ”executive director Anand Kripalu told TOI. The trend is expected to continue as more young Indians, with higher disposable income, enter the legal drinking age.

A large thrust to the volume growth has come from McDowell’s No 1 whiskey, which sold about 27 million cases, or 66% of the total premium volume sales, as per data from drinks research firm IWSR. While McDowell’s also straddles across the rum and brandy segments, the presence there is in the value category, where prices are less and thus yield thinner margins. USL has been working to repackage, rebrand or redesign several of its power brands since 2015, and McDowell’s was one of the first to undergo the process.

The move is part of USL’s effort to compete better with French rival Pernod Ricard, which operates exclusively in the premium category through its brands like Blenders Pride, Imperial Blue and Chivas Regal whiskey. Abneesh Roy, executive VP of Edelweiss Securities, said though advertisement spends and packaging for the premium brands have increased, Pernod is more aggressive, and its growth rate is stronger in the category helped by Seagram brands. “Pernod’s prestige and above segment is bigger and stronger,” I added.

While volumes have improved, the premium segment already contributes two-thirds to the topline by value and USL has long term plans to increase this to 75-80%. “The future profit pool of this industry will be in prestige and above and a lion’s share of our business will be in (that segment),” Kripalu said last year.

In an effort to go premium, USL also started franchising some of its popular brands a few years ago, and till date has done it in 13 states such as Rajasthan , Himachal Pradesh and Delhi. The company says the measure helps it move towards a lightweight asset model, in addition to ensuring the stability of the margins in the segment, reducing working capital requirements and allowing management to focus on products with greater margins, according to The annual report.