United Spirits, the largest liquor company in India, has announced its ongoing discussions with the Haryana government regarding the inclusion of spirits in workplace settings. This development follows the state’s recent decision to permit the presence of low-alcohol content beverages such as beer, wine, and ready-to-drink beverages within major corporate offices starting next month.
Read More: Haryana to permit large offices to serve beer and wine on their premises, marking a first for India
“Haryana has been relatively a more progressive state. They have started with beer and wine, and we are in discussions with them to see whether we can get spirits included,” Hina Nagarajan, CEO of United Spirits, told analysts at an earnings call.
In its recently implemented 2023-24 excise policy, the state government has granted permission for the possession and consumption of low-alcohol content beverages by employees working in offices with a minimum of 5,000 employees and a covered area of at least 100,000 square feet within a single premises. This policy was enacted last week.
According to the Confederation of Indian Alcoholic Beverage Companies (CIABC), the importance of this decision lies not in the potential sales volume it may generate, but rather in the shift in the government’s stance towards alcohol. However, the CIABC has clarified that it is not currently making a request for the inclusion of liquor at this stage.
“This decision is an acknowledgement of the role alcohol plays in de-stressing people after a tough day at work. It’s a big decision by the government and we would rather have them progress at their own pace and build confidence,” said Vinod Giri, Director General at CIABC.
“Once the model is established, addition of other categories will be an easier next step. Haryana towns like Gurugram are corporate trendsetters and we hope other such cities like Delhi, Noida, Bengaluru, Hyderabad and Mumbai follow suit,” he added.
The country’s spirits market witnessed a significant milestone, according to industry executives who cited the latest data from the excise department. During the fiscal year ending in March, the market experienced a remarkable surge in sales volume. It recorded a 12% increase compared to the previous fiscal year (FY21-22), reaching an impressive sales volume of 395 million cases. This surge in sales added nearly 40 million cases to the market since its previous peak approximately four years ago.
Due to being controlled by state governments, liquor companies face the challenge of lobbying for price increases and navigating other regulatory matters. In many markets, these state governments are involved in both the retail and wholesale aspects of the liquor business. As a result, liquor companies often need to exert significant efforts in their lobbying endeavors to address these complex regulatory landscapes.
The company behind renowned brands like Johnnie Walker and Smirnoff has acknowledged the current volatile period in the Indian market. They have attributed this volatility to the ongoing and frequent changes in the route to market, as well as the presence of inflationary pressures. These factors collectively contribute to the challenging environment in which the company operates within the Indian market.
“The year gone by was volatile and route to market changes will happen but we have the muscle, when one state goes down to look at other avenues of growth and expand our shares across states,” added Nagarajan.
During the fourth quarter, ending in March, the Diageo-controlled firm reported a significant growth of 15.6% in net sales when adjusting for the slump sale and franchising of mass brands that occurred a year ago. The prestige and above segment experienced substantial growth of 23.2%, indicating a strong performance. However, the net sales for the popular segment, when adjusted for inflation, declined by 6.3%. This decline can be attributed to the impact of inflation on this price-sensitive consumer segment.
Read More: United Spirits Ltd (USL) records impressive 7.3% growth in Q4 net profit despite revenue slump