United Spirits Ltd, India’s largest spirits company, is requesting that state governments allow it to hike product pricing to offset rising raw material costs, particularly glass and additional neutral alcohol (ENA).
Because liquor pricing in India is a state affair, and alcohol producers establish rates in collaboration with excise agencies, the makers of Johnnie Walker whisky and Smirnoff vodka have begun negotiations with the states. “We expect volatility to be short-lived in the future.”
“We expect certain temporary short-term import limitations and inflationary headwinds to put pressure on our growth and margins,” USL President and CEO Hina Nagarajan said on the company after-profit call on Monday.
The company announced on Friday that net sales for the March quarter increased by 9.5 percent year over year to SEK 2,435 million.
However, in the three months ended in March, net profit decreased by further 19 percent to 136 crore. In the face of “unmatched inflation,” the corporation is concentrating on boosting efficiency indicators.
“Our organisation has been mobilised, with the goal of doubling overall output. “Whether it’s buying efficiency, making better investment decisions, or sweating our assets more for operational leverage,” Nagarajan said. At the same time, ENA, which is used in the production of alcoholic beverages, and glass, which account for two-thirds of the company’s raw material basket, remain high.
Inflationary forces are currently present in both commodities. “We would like to assume that ENA is more short-term driven by geopolitical issues,” said Pradeep Jain, USL’s CFO. Inflation has increased by double digits throughout USL’s whole portfolio compared to a year ago, according to Jain, who also mentioned “short-term margin pressure” on the company.
Advocacy activities in areas like Assam, Rajasthan, and Madhya Pradesh have generated results, allowing the corporation to hike product pricing in the last three to four months. “We’re in the middle of the cycle right now. “In the next two to three months, we hope to make headway on that front,” Jain added.
Meanwhile, as part of a strategic evaluation of its mass-priced liquor brands, USL announced the sale and franchise of more than 30 popular brands to Inbrew Beverages for an estimated Rs 820 crore on Friday. Haywards, Old Tavern, White-Mischief, Honey Bee, and Green Label are among the brands included.
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