United Spirits is involved in the manufacturing, purchase and sale of alcoholic beverages (spirits and wines). UNSP is a subsidiary of Diageo and is the second largest spirits company in the world in terms of volume. Its portfolio includes premium brands such as Johnnie Walker, Black Dog, Black & White, VAT 69, Antiquity, Smirnoff and Captain Morgan among others.

Diageo’s global market leadership and its dominance in premium segment is benefitting UNSP. India is a critical market for Diageo, given the scale, leadership position and opportunity to premiumize. Thus, UNSP is focusing on cost savings (rationalized the number of factories from 93 to 49 since takeover, halved the number of white collar employees), premiumization (each premium layer is growing faster than the one below) and debt reduction to boost growth.

After single digit EBITDA growth in both FY17 and FY18, operating performance improved sharply with double digit sales growth and 25% EBITDA growth in FY19. UNSP cited that double-digit sales growth, moderate gross margin expansion and a greater share of margin improvement coming from operating leverage in FY19 will serve as a blueprint for earnings growth.

The growth targets will be achieved due to (a) major disruptions now appearing to be in the past, (b) continued mix improvement, (c) benefits of cost savings, (d) faster price increases obtained from state government and (e) better balance sheet management.

Disclaimer: The above report is compiled from information available on public platforms. inChat team advises users to check with certified experts before taking any investment decisions.

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