Economic Times: August, 2016
Bengaluru: Diageo, the world's largest spirits company, said India will be one of the major growth drivers of the company this fiscal as it looks to sell more of its premium products in a market where consumer dynamics are changing rapidly due to a rising middle class and higher disposable income.
The maker of Johnnie Walker scotch and Smirnoff vodka said that India, which contributes about 10 per cent of its sales, will be its third area of focus, the other two being global growth of scotch and improving performance in the US.
"Our third area of focus for fiscal '17 is India where consumer dynamics are fuelling premiumization. In fact we view the market as three Indias, with consumers across all income levels on a journey through our brands," according to a presentation in the company's website after its full year results. The three Indias are the affluent, middle and aspiring households.
Diageo's net sales from India rose 5 per cent for the year ended March 2016, compared to the year before. That's almost double that of its global net sales, which grew 2.8 per cent for the year ended 30 June.
India sales were helped by higher revenue from its premium whiskey and vodka products. The Prestige & Above segment of United Spirits (USL), controlled by Diageo, reported net sales growth of 21 per cent with the relaunch of McDowell's No.1 whisky and Royal Challenge brands. The sales of the two brands grew by 20 per cent and 46 per cent respectively.
"Our business in India is stronger this year and it will be an important driver of growth for Diageo," chief executive Ivan Menezes said in a post-earnings conference call with analysts.
USL's premium segment in the first quarter represented 42 per cent of total volumes and 57 per cent of total net sales, up 4 per cent and 5 per cent respectively compared to last year, according to its quarterly results last week.
"India, obviously, is a big market for us, and we'd expect the India growth to move up next year, relative to the 5 per cent it had this year, Menezes said, adding that USL is now a business in good shape to grow market share.
Diageo's sales have also been helped by Uttar Pradesh, which has rebounded after the excise duty reduction in the state. "The nature of India is you've got ups and downs all the time across the states. And, yes, we do get some gains and benefits," he said.