United Spirits decides to focus mainly on premium brands. Sells, franchises the popular brand portfolio.

United Spirits Limited (USL), a subsidiary of British alcohol major Diageo, has been strategically reviewing it’s Popular brand portfolio since February 2021.

The review is a part of it’s strategy to increase profit by focusing on the premium brands.

It has now announced the following deal with Inbrew Beverages Private Limited (“Inbrew”)-

  • Sale of 32 ‘Popular’ segment brands for a consideration of Rs 820 crore
    • Sale includes the related contracts, permits, intellectual property rights, associated employees and a manufacturing facility
  • Franchise of 11 other ‘Popular’ segment brands for a period of five years, with an option for Inbrew
    • to convert the franchise arrangement into perpetuity; and / or
    • to acquire such brands

(Inbrew, led by Indian entrepreneur Ravi Deol was before this transaction mainly into beer. It had bought the Indian unit of US brewer Molson Coors for about Rs 1,000 crore last year. As part of the deal, Inbrew acquired Molson Coors’ Indian beer brand Thunderbolt along with selling and distribution rights of its global brands such as Miller, Blue Moon, Carling and Cobra in India.)

32 brands being sold 

1. Amber
2. Black Stallion
3. Bombay Deluxe
4. Derby
5. Diplomat
6. Doctor’s Brandy
7. Doctor’s Special
8. Doctor’s Day and Night
9. Golconda
10. Gold Medal
11. Golden Grape
12. Green Label
13. Haywards
14. Honey Bee
15. John ExShaw/ ExShaw
16. Joie De Franc
17. Kerala Malted
18. Kissan
19. Louis Vernant
20. Louis XI
21. Majestic
22. Men’s Choice
23. Men’s Club
24. Old Tavern
25. Old Adventurer
26. Regal Crest
27. Romanov
28. VIN
29. White Mischief
30. French VSOP
31. Bonaparte VSOP
32. Tiger

11 brands being franchised

1. Bagpiper
2. Black Riband
3. Blue Riband
4. Carew’s
5. Duet
6. Gold Riband
7. Old Cask
8. Red Riband
9. Silk Riband
10. Silver Riband
11. White Riband

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

Key other points to note related to the transaction

  • The transaction is a continued evolution of the ‘Popular’ portfolio since 2016, when USL moved to a franchise model in many states to enable a sharpened focus on Prestige & Above (P&A) segment.
  • Inbrew is entitled to convert franchise agreement into perpetuity during anytime within the franchise period of 5 years subject to payment of pre-agreed consideration. Assuming conversion happens at the end of 5 years, the pre-agreed consideration is approx Rs 1,293 crore – payable partly upfront and partly in 20 qtrly instalments. A further balance consideration of Rs 37.8 crore is payable as final purchase consideration (at the end after qtrly payments).
  • The transaction is expected to be completed by September 30, 2022.

Transaction impact on USL’s business

  • Case volume decline by 29%
  • Sales value decline by 14%
  • P&A segment contribution to sales increase from 74% to 85%

Profitability is expected to be better with higher premium portfolio contribution.

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