India at inflexion point, company to continue double-digit growth: Diageo

Indian market is at a "great inflexion point", Diageo India MD & CEO Hina Nagarajan on Wednesday said, adding the company would continue its double-digit profitable growth journey, with a special focus on premiumisation and innovations.

The company is looking the growing economy, the addition of the youth population, growing aspirations and occasions and increasing consumption of premium liquors among women as drivers for the growth in the country.

The company has reshaped its portfolio with renovation and innovations on its mid and upper Prestige portfolio and sales of its Scotch brands are "accelerating", she said.

Diageo India's Prestige level starts from McDowell and goes to Johny Walker and single malt whisky.

"Our focus would be on these categories and there is room for innovation and renovation in all these segments. There is room for premiumisation in each of the segments," said Nagarajan in a press meet here.

When asked about its innovation-to-sales ratio, she said, "our target is 30 per cent of our growth coming from innovation. We are about 11-12 per cent now. A year half ago, we were at 5 per cent only."

It has also reduced the period of launching new innovations and renovations of brands from five years to three years.

Diageo India has also reduced it debt significantly in the last few years and is now looking for new opportunities such as acquisitions etc.

"Our debt has come down from Rs 5,320 crore to less than Rs 500 crore in the mid of FY22, which was significant. We have strengthened our balancesheet."

Diageo India will also keep exploring opportunities through acquisition as it has done for a team in Women's Premier Leagues and others.

"Those we will keep exploring as and when they come, we will obviously leverage our cash flow," said a company official.

According to Nagarajan, the Indian market is witnessing "massive premiumisation" with growth in the luxury and the premium segments, while the popular segment has declined.

"This is the reason we reshaped our portfolio and divested our franchise recognising that neither this is a future profit pool nor a core strength," she said, adding, "now we have meaningful and purposeful brands in the country."

Diageo had in 2022 sold and franchised of over 30 popular brands to Singapore-based Inbrew Beverages for an estimated consideration of Rs 820 crore. The popular portfolio comprised entry-level lower-priced liquor brands, with an average price of less than Rs 400 for a 750 millilitre bottle.

"18 months into our new strategy, I feel very confident that we are on the right track. If you look at our results, the main theme was driving a double digit growth. Our growth overall for the last two years was 20 to 22 per cent in the Prestige and above," she said.

According to Nagarajan, the Indian market is at an inflexion point as far as economic and societal development is concerned.

"India presently has a very young population and in the next five years over 100 million people would come to our category," she said, adding, "Many cohorts such as women as a societal change driver."

Regarding the current trend in the Indian market, she said spirits are growing faster than wine and beer.

"This trend has been noticed post Covid," she said, adding, "We think it is linked to inherent dialling of wellness desire and white spirits as Vodka has a second lease of life and demand had exploded."

Over the change in liquor policy and another issue by the Delhi government and some other states, Nagarajan said: "It is kind of a matter of routine for us to cope with due to market changes in three states."

However, over Delhi issue, she said it "has changed our business shape... for various reasons, the business has gone down, then tried to pick up business from all the other states in the country."

The company manufactures, sells and distributes an outstanding portfolio of premium brands such as Johnnie Walker, Black Dog, Black & White, VAT 69, Antiquity, Signature, Royal Challenge, McDowell's No1, Smirnoff and Captain Morgan.