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United Spirits To Sell 32 Brands To Inbrew Breweries For Rs 820 Crore

The brands sold will include Haywards, Old Tavern, White-Mischief, Honey Bee, Green Label and Romanov, among others

<div class="paragraphs"><p>Alcohol bottles. (Source: Unsplash)</p></div>
Alcohol bottles. (Source: Unsplash)

United Spirits Ltd., a subsidiary of British beverage and alcohol firm Diageo Plc, said it will sell 32 of its mass-priced brands to Inbrew Breweries Private Ltd for Rs 820 crore.

The brands sold include Haywards, Old Tavern, White-Mischief, Honey Bee, Green Label and Romanov, said India’s largest liquor company in a regulatory filing.

The sale portfolio covers the entire business undertaking associated with the 32 brands, including the related contracts, permits, intellectual property rights, associated employees, and a manufacturing facility.
USL Press Release.

United Spirits, however, said it will retain two of its iconic whiskey brands - McDowell’s and Director’s Special.

Additionally, USL and Singapore-headquartered Inbrew have entered into a five-year franchise arrangement for 11 other brands, including Bagpiper, Old Cask and Blue Riband. USL has also granted Inbrew a right to convert the fixed term franchise arrangement into one with perpetual rights to use with a call option to acquire the brands at a pre-agreed consideration.

“The transaction reflects the continued evolution of the management of the popular portfolio since 2016, when the company moved to a franchise model in many states, to enable a sharpened focus on ‘Prestige & Above’,” said Hina Nagarajan, managing director and chief executive officer, United Spirits Ltd.

The decision follows USL reviewing its entire brand portfolio in order to increase its focus on premium and international brands. The one-year review was completed in March this year. The latest transaction, according to Nagarajan, is a significant move to reshape the company’s portfolio to deliver sustained “double-digit” profitable top-line growth.

Inbrew, led by Indian entrepreneur Ravi Deol, also acquired the India business of U.S. brewer Molson Coors for about Rs 1,000 crore last year to sell and produce beer brands such as Miller, Carling, Blue Moon and Cobra in India. “After the acquisition of Molson Coors’ beer business last year, we will now participate in the mainstream spirits category, making Inbrew India’s diverse alcobev player,” said Deol, also the chairman of Inbrew.

The acquisition of these iconic 32 brands provides Inbrew with a unique platform to extend its ambition of becoming India’s trusted household beverage company. These brands have delighted consumers over generations, and we are excited at the prospect of strengthening this legacy. Inbrew will revitalise these brands through expanded distribution, innovation and investment.
Ravi Deol, Chairman, Inbrew

The company expects to complete the transaction by the end of the Sept quarter.

USL, which produces and sells around 80 million cases in India, has reported 11.9% increase in volumes in FY22 over the previous year.

The company has reported a 12.14% decline in net profit for the fourth quarter of 2021-22 to Rs 178.6 crore because of exceptional items. These include impairment of an inter-company loan provided to Pioneer Distilleries Ltd, together with interest, impairment of fixed assets in certain operationally closed manufacturing units, and accelerated charge pertaining to unamortised brand/license fee, according to the company.

Net sales increased 9.5% in Q4, lapping a strong year driven by resilient consumer demand in off-trade and gradual on trade recovery, the company said in a statement.

Within the segments, the Prestige & Above now accounts for nearly three-fourths of the company’s overall sales. Its net sales grew 15.3% benefitting from premiumisation, ongoing portfolio renovation and accelerated momentum in states with the route to market unlock, while net sales of Popular segment, which accounted for 26.2% of net sales, rose 1.1%.

Prestige & Above volumes, too, grew 8.8% outpacing the Popular volume expansion of 1% during the quarter ended March.

Margins took a hit in Q4. The gross margin was at 41.7%, down 220 basis points, impacted by rising inflation partly offset by favourable product mix and productivity savings, the company said.

Shares of United Spirits closed 2.4% higher on Friday before the announcements were made as compared with 1.13% gain in the benchmark Nifty 50 index.