United Spirits Limited — Q4 FY24 earnings call

Call held 27 May 2024

Management summary

United Spirits demonstrated successful execution of its premiumization strategy in FY2024, achieving 89% P&A share and launching significant brand innovations. The company maintained its commitment to double-digit growth while strengthening brand equity across its portfolio through strategic campaigns and celebrity endorsements.

Highlights

  • Maintained double-digit revenue growth guidance for overall portfolio

  • P&A (Prestige & Above) segment NSV share reached 89%, showing strong premiumization progress

  • Launched McDowell's X Series (rum, gin, vodka) and McDowell's Indian Single Malt Whiskey as key premiumization initiatives

  • Royal Challenge American Pride achieved 8% salience within Royal Challenge trademark

  • Black Dog Triple Gold Reserve now represents 40% of Black Dog trademark

  • McDowell's brand equity scores improved 5% with 8% increase in awareness

  • Royal Challenge grew ahead of market throughout the year

  • Royal Challenge Sports Private Limited paid INR 125 crore dividend after wiping out accumulated losses

  • Upper Prestige segment showing fastest growth with luxury/premium portfolio contributing over one-third of NSV

Key financials

  1. P&A NSV Share 89%
  2. Other Income Q4 ₹229 Cr
  3. RCSPL Dividend Received ₹125 Cr
  4. McDowell's Brand Awareness Increase 8%
  5. McDowell's Brand Equity Score Increase 5%
  6. Antiquity Brand Awareness Growth 41%

What they filed

Q1 FY27: revenue up 6.0%, net profit up 51.6% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue2,843 3,432 2,946 2,549 3,170 +12%3,683 +7%3,046 +3%2,703 +6%
EBITDA507 588 505 415 672 +33%618 +5%591 +17%432 +4%
Net profit335 473 451 258 472 +41%529 +12%571 +27%391 +52%
How to read this

₹ crore, as filed. The percentage beside a figure is the change against the same quarter a year earlier — never the quarter before, which would make every seasonal business look like it collapses and booms each year.

Guidance & targets

P&A Growth Pattern

  • Growth trajectory P&A Growth Pattern · FY2025 · High confidence Normalizing after significant prior year growth
    we are cycling over significant growth last year in P&A. And as those normalize, we will, on a year basis, continue to remain with our guidance of double digit

    — Hina Nagarajan

Gross Margin Strategy

  • Margin expansion intent Gross Margin Strategy · Ongoing · Medium confidence Expand through premiumization and productivity
    our intent will be to expand gross margin... through the combination of the three levers of headline pricing, revenue growth management and sustained productivity offsetting inflation and hopefully, the premiumization

    — Pradeep Jain

Market context

  • Overall portfolio growth Revenue Growth · FY2025 · High confidence Double-digit
    We are guiding for double-digit growth overall

    — Hina Nagarajan

Risks & concerns

  • ENA (Extra Neutral Alcohol) cost inflation in second half

    medium

    Input cost pressures on key raw material requiring mitigation through premiumization and pricing

    Managing through pricing and productivity levers

  • Lower segment upgrade momentum slowing

    medium

    Reduced upgrade from Popular to P&A segment due to consumer pressure at bottom end

    Focusing on competitive performance within segments

  • Base effect challenges in P&A growth

    low

    Cycling over significant prior year growth in P&A segment creating tougher comparatives

    Normalizing growth expectations

Q&A highlights

4 direct
Revenue growth guidance clarity Direct
We are guiding for double-digit growth overall. And we are saying that we are looking to -- we are cycling over significant growth last year in P&A

Confirms company's commitment to double-digit growth despite normalization in P&A segment

Asked by Jay Doshi - Kotak

Andhra Pradesh market opportunity Direct
right now in our numbers, we do not have any sales in Andhra Pradesh... when it opens up, we will obviously -- that hopefully, those numbers should come and sit on top of our guidance

Potential upside opportunity if state policy changes to allow alcohol sales

Asked by Jay Doshi - Kotak

Royal Challenge American Pride growth normalization Direct
after that, the growth is normalizing a bit on that large base already because the first year was huge... The brand is healthy and continues to grow

Explains growth trajectory of key innovation after initial pipeline filling

Asked by Jay Doshi - Kotak

Other income components and sustainability Direct
INR125 crores is the dividend that RC SPL has paid to USL... if RCSPL remains profitable, which we believe they will, right, hopefully, it should continue

Clarifies significant other income item and potential recurring nature

Asked by Percy - IIFL

1 min read 4 chapters

Detailed narrative

Premiumization Strategy Delivering Results

United Spirits successfully executed its four-lever premiumization strategy in FY2024, achieving 89% P&A NSV share. The company launched significant innovations including McDowell's X Series and Indian Single Malt, while brand extensions like Royal Challenge American Pride reached 8% trademark salience and Black Dog Triple Gold Reserve achieved 40% of trademark share. This demonstrates effective portfolio reshaping toward higher-value segments.

Strong Brand Building and Marketing Investments

The company made substantial brand investments with new celebrity endorsements (Kartik Aaryan for McDowell's) and purposeful campaigns focusing on inclusivity and sustainability. McDowell's brand equity scores improved 5% with 8% awareness increase, while Antiquity saw 41% brand awareness growth. Royal Challenge leveraged IPL partnerships effectively, achieving 1.8x equity versus market presence.

Financial Performance and Dividend Upside

The company received INR 125 crore dividend from Royal Challenge Sports Private Limited after it wiped out accumulated losses, contributing to elevated Q4 other income of INR 229 crore. Management indicated this dividend stream could continue if RCSPL remains profitable, providing potential recurring income upside beyond the core business performance.

Managing Growth Normalization and Cost Pressures

While maintaining double-digit growth guidance, management acknowledged normalization in P&A growth after significant prior year increases and slower upgrade momentum from Popular segment. The company is managing ENA cost inflation through pricing actions, productivity initiatives, and premiumization benefits, with intent to expand gross margins despite input cost pressures.

This is an AI-generated summary of a publicly available earnings call transcript.
View original transcript

More Fast Moving Consumer Goods earnings calls