Trying to position beer as a home consumption drink: United Breweries MD

In a Q&A, Rishi Pardal says he is happy some states hace rolled back liquor tax, and thar hus firm is positioning beer as a home drink even as it waits for bars to reopen

Rishi Pardal took over as managing director of United Breweries right in the middle of the Covid-19 pandemic. Sales for the beer maker slumped 74 per cent owing to the various lockdowns. In an interview with Bibhu Ranjan Mishra, the former Hindustan Unilever and Marico executive said that even though things for the beer industry have improved, returning to normalcy will take longer than anticipated. Edited excerpts:
 

You had a challenging first quarter with the company posting losses and sales plunging 74 per cent. Where does the company see itself hereon?
 

During the first quarter, we were impacted by physical closure of stores because of the lockdown. In addition, higher taxation also impacted us in certain markets. Bars continue to remain closed.
 

Nevertheless, it (UB) is a fundamentally sound business with a good track record. It has been hit by a once-in-a-century kind of event. We have to keep our eyes on the long term given India has got the right demographic and unpenetrated market. There is a lot of potential to grow market share. We have a very optimistic view in the long term.
 

What about the short and medium term? Do you see signs of improvement?
 

We believe one has to really move the needle despite the pandemic and become responsive to the situation, instead of being predictive. The focus is on staying agile and working on the right things in the short term.
 

On the whole, markets are on the road to recovery and demand for the category is there. It is a question of having the physical ability to service that demand as bars are yet to open and consumers do not have access to outlets.
 

When do you expect a return to pre-Covid levels in terms of sales volume?
 

The second quarter has given us more positivity because markets have gradually opened up.
 

Nearly 60 per cent of (liquor) outlets are now open despite bars being shut. People are no more confined to their homes.

While there has been progress certainly, it will still take some time to return to normalcy. But how long it will take is difficult to predict at this point. Until then, our focus will be on creating a compelling brand proposition, ensuring that we manage the cost in a prudent manner and drive productivity.
 

Are you getting any indication as to when bars may reopen?
 

For a category like beer, bar is a significant channel and they will eventually open up. Therefore, one of the things we are looking at, as the market leader, is on working with bars to instill confidence among customers and drive trust.

Further, to drive the consumption, we are working with online channels and aggregators; we are trying to work with state governments on this. We also seek to ensure that we position beer as a ‘home consumption’ drink.
 

What kind of cost-cutting measures have you undertaken?
 

In situations such as this, preserving cash is absolutely critical and that’s what we are doing. The other focus areas are managing plants efficiently and reducing discretionary spends substantially.
 

There are opportunities on the procurement side, where you can take a strategic position because current prices may be very low. It’s a combination of everything we are focused on, and this is what will help us deleverage the profit and loss statement, given that volumes have fallen sharply.
 

Do you see the rush by states, to tax liquor during the pandemic, easing?
 

Recently, I came across a report regarding the correlation between taxation and demand in the spirits industry. It is already a highly taxed category, and taxing it further has only proven to be a counterproductive measure.
 

The good news is that some states have already realised the same, and have started rolling the additional taxes back. As more states follow suit, it will lead to improvement in our position. We are working with states and trying for some degree of moderation.
 

India is perhaps the only country in the world where tax on a milliliter of beer is higher than that of spirits. That needs to be corrected and we are working with various governments to ensure the same.