Demand resilient at stores, bars still a challenge: USL

United Spirits (USL), the country’s largest liquor company, said demand at retail stores remained resilient within the constraints of the lockdown but consumption of liquor at bars and restaurants (on-trade) still remains a challenge. “As we exited June, we had full operations as far as off-trade was concerned,” Hina Nagarajan, managing director at USL said in an earnings call.

“On-trade continues to be adversely impacted, both store openings and footfalls. It remained restricted and there are restrictions on capacity, on timings and the size of social gatherings around the country. So on-trade still remains subdued,” she added in her first interaction with investors after she joined the company in April.

On-trade channels typically account for a quarter of all liquor sold in the country but the contribution more than halved to 11% last year after bars and restaurants were shut for many months due to Covid and subsequently only allowed to operate at lower capacity.

The company that sells brands including Johnnie Walker and McDowell's said the pandemic does not impact consumers' appetite and spending power for premium tipple. “We are seeing positive development on the regulatory front. Also, we are seeing increased premiumisation and experimentation,” Nagarajan said.

USL said it is looking for more partnership, especially in manufacturing as it shifts focus on marketing brands. Earlier this year, USL said it was reviewing select mass-priced products in its portfolio as part of a strategy to drive higher profit by focusing on premium brands.

“We would want to unlock new entrants of growth, and enter more alliances and partnerships. And growth is linked to market share. Investments will definitely be there but we believe we have opportunity on margins as well,” added Nagarajan.

USL on Friday announced it has sold its stake in technology start-up Hip Bar for about ₹52 lakh, nearly three years after investing ₹27 crore in the alcohol delivery platform.

Over the past four years, USL has moved towards the franchisee model in the popular segment with fixed-fee arrangements in more than a dozen states and this has helped expand margins.

The popular segment accounts for almost half of its annual volumes and about a third of net sales, although it has been shrinking after it shifted focus to pricier products.