United Spirits Company Case Study

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United Spirits (MCDOWE)

UB Group is an Indian conglomerate company headquartered in UB City, Bangalore in the state of Karnataka, India. Its core business includes beverages, aviation and investments in various sectors. The company markets beer under the Kingfisher brand, and owns various other brands of alcoholic beverages. It is India's largest producer of beer with a market share of around 52.5% by volume.
United Breweries now has greater than a 40% share of the Indian brewing market with 79 distilleries and bottling units across the world. Recently, UB financed a takeover of the spirits business of the rival Shaw-Wallace company, giving it a majority share of India's spirits business. The group also owns the Mendocino Brewing Company in …show more content…

estimated 6238 crore.
• Net Revenues grew 3% (YoY) & 22% QoQ to 2494 crore vs. estimated 2254 crore. The lower growth was witnessed as a result of higher Excise Duties.
• Volumes for the quarter fell 5% (YoY) to 24.5 million cases vs. the estimate of 23.1 million cases.
• Volumes for Prestige & Above (P&A) segment grew 5% (YoY) to 10.1 million cases.
• Volumes for the regular/popular segment fell 11% (YoY) to 14.4 million cases and now contribute 59% (vs. 63% in Q3FY16) to overall volumes.
• Renovation of Signature, McDowell’s No.1 whisky and Royal Challenge continue to provide momentum to overall volumes for P&A segment.
• Popular volumes in priority states grew 3% thanks to McDowell’s No 1. Rum, Bagpiper, Director’s Special and Hayward’s.
• Gross margins for Q3FY17 rose 300 bps driven by positive price/mix fuelled by price rise in select states (Maharashtra & Karnataka), strong performance of P&A segment and productivity initiatives.
• An improvement in the operational performance was noticed with the EBITDA Margins expanding 70 bps YoY (160 bps QoQ) to 11.8% vs. the estimate of …show more content…

Diageo has now decided to focus on 14 power brands, which include 3 main brands of Diageo – Johnnie Walker, VAT 69 & Smirnoff. Over the next 3 years, Diageo plans to focus on these 14 power brands in order to improve realisations from them.

Cost Reduction & Profit Expansion
EBITDA margins in FY 2011 – 15 declined by approximately 728 bps. This was because of an increase in the cost of ENA (mentioned earlier). However, following this, a rise in the margins was also witnessed by 200 bps, owing to price hikes. These margins were invested in the rebranding and positioning of the brands.
Accordingly, it is expected that a rise in the EBITDA will be seen. This is also felt as USL has gone in for backward integration with glass plants in Andhra Pradesh. This coupled with other operational efficiencies will lead to a cost reduction of up to 33%.
In addition, USL is working towards shutting down the low margin units in Malkajgiri, Andhra Pradesh and Palakkad, Kerala, contemplating entering into a franchise based model (like the one in Tamil Nadu). Similar model is followed by competitor Pernord Ricard, whose EBITDA grew @ 47% from 2007 – 13
(against 17% for USL) & average EBITDA margin was 25% (against 16.50% for

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