United Spirits’ premium alcohol segment help push profits 29% higher

INDIA – United Spirits, a subsidiary of Diageo and India’s largest spirits manufacturer has reported 29% increase in profits to US$11.80 million helped by strong growth in premium alcohol segment in the first quarter, ET Retail reported.

For the three months ended 30 June, net sales rose by 13% attributed to strong performance in the company’s focus brands, Prestige and Above while net sales excluding the one-off impact of operating model changes increased 14%.

Sales of Prestige and Above segment which also includes brands such as McDowell’s No 1 whiskey, Royal Challenge, and Signature was up 19% but the popular segment declined 3%.

The brewer was also able to counterbalance and surpass the impacts of the highway liquor ban that severely affected the spirits and beer industry during the period.

“Our performance has continued to improve in the first quarter as the operating environment has become more stable.

During the quarter, overall net sales growth excluding the impact of operating model changes was 14%, benefitting from lapping the impact of highway ban last year, while also driven by improved performance of the Prestige and Above segment,” said CEO Anand Kripalu.

“The Prestige and Above segment performance were supported by the robust performance of our Scotch portfolio with Johnnie Walker, Black & White and Black Dog showing strong momentum.

Additionally, our renovated brands such as Signature and Royal Challenge continued to deliver strong growth, further validating the success of our renovation strategy.”

As a result of productivity gains and flow through pricing, gross margins were reported to have grown 49.1%.

Adverse impacts of inflation and GST were offset by productivity savings, pricing effects, accelerated investments, and strong marketing of its brands.

“During the quarter, underlying gross margin improved 266bps, driven mainly by savings from our productivity programme and pricing which more than offset the inflation and the adverse impact of GST.

This quarter we significantly accelerated the investment behind our brands with marketing spend up 30% compared to last year,” he added.

2018 looking forward, the brewer will continue to focus on premiumisation, brand strengthening and driving productivity with a medium-term ambition to deliver double digit top line growth and improve margins to mid-high teens.

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