United Spirits’ profits rise thanks to demand for premium drinks in the third quarter

Revenue rose about 5% to 69.49 billion rupees. Sales had declined in each of the previous four quarters

India’s United Spirits, which makes Smirnoff vodka, reported a rise in third-quarter profit on Tuesday, boosted by strong demand for its premium alcohol brands.

A greater number of affluent Indians are choosing more expensive cars and consuming more expensive food and drink, unaffected by inflation.

This boosted the Diageo PLC-owned company’s profit before exceptional items and taxes by 51% to 4.59 billion rupees ($55.22 million) in the quarter ended December 31 compared to a year earlier.

Last year, the company had made a provision of Rs 1.48 billion as an exceptional item for costs related to a supply chain overhaul.

Sales in United Spirits’ premium segment, which includes brands such as Johnnie Walker, Signature and Antiquity and accounts for approximately 80% of net sales, rose 4.6% in the quarter.

Meanwhile, inflation and increased competition slowed sales of the cheaper ‘popular’ segment, which includes McDowell’s No. 1, Vat 69 and Royal Challenger. Sales in this segment fell by almost 23% in the quarter.

Revenue rose about 5% to 69.49 billion rupees. Sales had declined in each of the previous four quarters.

The company benefited from lower input costs for glass, packaging materials and barley, reducing raw material costs by 7%.

However, spending on extra neutral alcohol, a key ingredient, remains a millstone around the necks of drinks makers, analysts say.

Rival Radico Khaitan, which makes Magic Moments vodka, will report its third-quarter results next month.

First print: January 23, 2024 | 6:19 PM IST