INDIA – Diageo’s United Spirit ltd (USL), the world’s second-largest spirits company by volume, has announced the sale and franchise of selected brands to Inbrew Beverages, as part of a portfolio review aimed at delivering sustained double-digit profitable top-line growth.

The deal covers the entire business undertaking associated with the 32 brands, including the related contracts, permits, intellectual property rights, associated employees, and a manufacturing facility for a total cash consideration of Rs 8 20 crores (US$106 million).

However, the transaction does not include the McDowell’s or Director’s Special brands, which will be retained by USL.

In addition, USL and Inbrew have entered into a 5-year franchise arrangement for 11 other brands, including Bagpiper.

USL has also granted Inbrew a right, subject to certain conditions, to convert the fixed term franchise arrangement into one with perpetual rights to use and/or a call option to acquire the brands at a pre-agreed consideration.

In the period Diageo took control of USL in 2012/14, it has consistently said that it would overhaul its portfolio of locally-produced Indian brands as there were many areas of overlap generating extra costs and downward pressure on slim margins from “Popular” commodity lines.

This divestment by USL also comes after it suffered a 12.14% fall in consolidated net profit for the quarter to the end of March as margins were hit by rising inflation.

 However, its revenue from operations rose by 1.16% over the same period in 2021 while the gross margin fell by 220 basis points to 41.7% due to inflation but this was partly offset by favorable product mix and productivity savings, according to USL.

Inbrew views the acquisition as a better way to expand its portfolio beyond its current beer focus, enabling it to work towards its vision of becoming a wide-ranging alcohol and non-alcohol beverage platform through both acquisition and franchising models.

Inbrew further plans to revitalize these brands through expanded distribution, innovation, and investments making Inbrew India’s diverse AlcoBev player as it enters the spirit category.

Meanwhile, this acquisition by Inbrew follows the deal with Molson Coors Brewing Co.’s beer business in India last year, as the multinational drink and brewing company was in the process of exiting non-core geographies.

Inbrew Holdings acquired Thunderbolt and the rights to Molson Coors’ other brands such as Millers, Miller High Life, Miller Ace, Blue Moon, Carling, Cobra in India, and its facilities.

With the two acquisitions, Inbrew has become the only company in India to play in both the beer and spirit market with hopes of better sales.

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