Diageo may be taking over India's United Spirits

[Harry in WashDC]

According to the Times of India (http://timesofindia.indiatimes.com/business/india-business/Diageo-s-USL-open-offer-successful/articleshow/36858231.cms) and the Financial Times (http://www.ft.com/cms/s/0/9077457c-f844-11e3-a333-00144feabdc0.html?hpt=ibu_bn4#axzz35K6pxGyl), Diageo may be on the brink of raising its stake in United Spirits from 28% to 55%. This would, supposedly, give it better access to the 3rd largest consumer market in Asia (i.e., India) as well as to USofI's distribution system throughout the rest of Asia. It's been trying to gain control of USofI for several years if I recall correctly.

Anybody have any idea how this will affect the bourbon market domestically? Scotch whisky, vodka, etc., where Diageo is already a big player internationally obviously should benefit. BUT, some commenters seem to think "we" may be adversely affected. I'll have to think about "how" since I rarely drink Dickel.:shocked: OTOH, my vodka is Smirnoff (neutral is neutral, and it's cheap so go ahead and laugh). Price increase due to stretched supplies? Neutral is neutral. Hello, Stohli.

[squire]

The Empire is extending it's reach, submit or your planet will be destroyed.

[HD 335]

Resistance is futile...

[wadewood]

This has been a done deal in the works for a while. United Spirits owned Jura, Dalmore and Whyte & Mackay. They sold these very recently to a Filipino brandy company for regulatory approval needed to complete this deal.

[PaulO]

My impression is that South Asians whiskey consumers drink Scotch. No alcohol advertising is allowed in India. Large segments of the society are also t-totalers.

[Boulevardier]

It's all part of the collapse of Mallya's wretched Kingfisher empire. United Spirits was the only thing he had of value so he had to sell some of it, after the usual denials and obfuscations. I'm not sure how this would adversely effect bourbon drinkers other than by the possibility of bourbon being promoted more heavily in India, where it's virtually unknown except to people who've traveled overseas.

Now for some hopefully not-too-debatable generalizations. Whiskey is popular, sometimes it's local, sometimes it's actual Scotch like Black Dog (made for the Indian market), sometimes it's a weird concoction like Royal Challenge. They also have rum (Old Monk, for example) and the scary "country spirits" which are sold in ramshackle stores in some local markets. Taxes are generally quite high, and there are often limits as to how much can be produced, so it's a rather odd market by our standards. Regular advertising is banned, but there's surrogate advertising, e.g., Kingfisher Airlines, the Royal Challengers IPL team, and so forth. Yep, there are teatotalers, but the market is huge regardless. Finally, most Indian liquor stores are appalling and seem designed to give drinking a bad name. The worst part is that there's often a drinking area attached to the store where customers get blitzed as quickly as possible after making their purchase. In recent years the government has allowed private liquor stores to open (some aren't too bad), but that part of the market is still in its infancy and its really for the high-end customers anyway.

So there you go. A little random perspective from a guy who's lived in India relatively recently.

[squire]

Sounds bleak yet there's certainly a huge market there and throughout Indonesia as well. If I were an NDP I would be looking at office space in Singapore.

[tanstaafl2]

It's all part of the collapse of Mallya's wretched Kingfisher empire. United Spirits was the only thing he had of value so he had to sell some of it, after the usual denials and obfuscations. I'm not sure how this would adversely effect bourbon drinkers other than by the possibility of bourbon being promoted more heavily in India, where it's virtually unknown except to people who've traveled overseas.

Now for some hopefully not-too-debatable generalizations. Whiskey is popular, sometimes it's local, sometimes it's actual Scotch like Black Dog (made for the Indian market), sometimes it's a weird concoction like Royal Challenge. They also have rum (Old Monk, for example) and the scary "country spirits" which are sold in ramshackle stores in some local markets. Taxes are generally quite high, and there are often limits as to how much can be produced, so it's a rather odd market by our standards. Regular advertising is banned, but there's surrogate advertising, e.g., Kingfisher Airlines, the Royal Challengers IPL team, and so forth. Yep, there are teatotalers, but the market is huge regardless. Finally, most Indian liquor stores are appalling and seem designed to give drinking a bad name. The worst part is that there's often a drinking area attached to the store where customers get blitzed as quickly as possible after making their purchase. In recent years the government has allowed private liquor stores to open (some aren't too bad), but that part of the market is still in its infancy and its really for the high-end customers anyway.

So there you go. A little random perspective from a guy who's lived in India relatively recently.

My understanding from some Indian friends in the liquor biz who go back periodically (one has just returned permanently to India in an effort to start his own business, oddly not the liquor business) is that much of the local "whisky" is actually flavored cane based spirit. True whisk(e)y is pretty uncommon even for the middle class. More of an upper class thing apparently which is consistent with those who also travel internationally with some regularity. Was that your experience?

[Boulevardier]

They're correct about the cane spirit (Royal Challenge being a notable example). The Thai whiskeys are also cane spirit, by the way, so we should really call them rum if we're being sticklers for accuracy. It's cheap (the cane spirit, that is) and it's what they've got.

Real whiskey is definitely a higher-class thing. I'd guess that most single malts or fancier blends (Johnny Walker products, for example) are brought in via duty-free by Indians flying internationally so they are in fairly short supply, although you can find some in the high-end privately owned liquor stores, but even at upper-class events and homes you'll find Indian brands being served. For example, when my wife and I were drinking with the father of the Maharajah of Jaipur and a couple other guys at his polo club in Jaipur the whiskey we drank was Indian (I hope that doesn't sound too hoity-toity, he was the friend of a friend and it was just one of those things).

Moving away from whiskey for a moment, and since I'm feeling a bit long-winded, I'll note that the "middle-class" in India can be defined in a lot of inconsistent, subjective, and often unintentionally amusing ways. A few years back I was talking about this with my pal who had been our (U.S) Commercial Minister in Delhi and he noted that they had tried to figure out the requirements for qualifying as middle-class; among them were owning more than one household appliance, and having eaten cheese (not paneer). Now I bring this up to be amusing (as was he), but it just goes to point out that middle-class in India is something very different than in Europe or North America. Very, very few actual middle-class people would be able to afford foreign whiskey.

Your friend is wise not to have gone into the liquor business (F&B being something else entirely) back home. Let's just say that it takes more than a nice smile and a firm handshake to succeed in that sector.

@squire

I've lived in Jakarta, too, and still have friends there. Indonesia would be a great market, but as a majority Muslim country, and despite their tradition of tolerance, it would be hard going and involve cracking a few skulls, both figuratively and literally.

Edited June 28, 2014 by Boulevardier

[cowdery]

Although Diageo has hit some bumps in the road, they will have control of United Spirits eventually. Yes, most Indian-made 'whiskey' is flavored cane spirit but there a few legitimate malt distilleries, most notably Amrut, which is available in the U.S. Indian producers have tried to export their fake whiskey as whiskey, without success. That quid pro quo likely will slow down imports of U.S. and European whiskey products into India. They have proposed that it be called 'Indian -Style Whiskey' but it seems doubtful that the U.S. or E.U. will yield on the 'whiskey must be from grain' rule. Obviously, one reason Diageo is trying to become the largest spirits producer in India is so they are better able to import Johnnie Walker and other Diageo products. Doing business in India is tough. Most of the economy is 'informal,' meaning cash- or barter-based, undocumented, and un-taxed. In spite of India being a democracy and more attractive to westerners on that basis, the business environment is worse than China's in terms of transparency, stability, corruption, and other things western businesses care about. But predictions about growth in India and China are driving the whiskey boom, so it matters to us for that reason.

[tanstaafl2]

Although Diageo has hit some bumps in the road, they will have control of United Spirits eventually. Yes, most Indian-made 'whiskey' is flavored cane spirit but there a few legitimate malt distilleries, most notably Amrut, which is available in the U.S. Indian producers have tried to export their fake whiskey as whiskey, without success.

Amrut is getting increasingly available here in Atlanta and some of the whisky is quite good. But from my Indian friends I am led to understand that Amrut is nearly impossible to find in India itself. Just too expensive for their market and those that can afford it want the cache of imported whisky it would seem.