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Wednesday, Oct 04, 2006

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Corporate - Restructuring
United Spirits begins restructuring exercise

K. Giriprakash

Increased focus on topline, profits

Bangalore , Oct. 3

United Spirits, the third largest distiller in the world and part of the UB Group, has began restructuring its entire operations based on a report from its consultants, Accenture.

The UB Group President and Chief Financial Officer, Mr Ravi Nedungadi, told Business Line that as part of the medium-term growth plan, Accenture has drawn up several growth initiatives for United Spirits.

Mr Nedungadi said there would be increased focus on topline and profits. "Growth will be driven by increased premium-ness of the portfolio," he said.

He said the company had introduced balanced score card to assess performance of the employees. The company was also in the process of revising incentive system to include a long-term component in addition to short-term incentive scheme. In addition to annual performance, accountability for three-year strategic plan has also been included.

Accenture had also said that total savings from synergies in operations would be around Rs 100 crore on a sustainable basis at 50 paise per bottle. The company, in its presentation to analysts last month, had said the performance metrics would be aligned with that of the strategic plan. For example, value growth would lead to volume growth while EBITDA (earnings before interest, tax, depreciation and amortisation) percentage should be increased by a minimum of 100 basis points on a year on year basis.

There should be increased market share in premium segments and on managing market share for profitability in other segments.

This can be achieved through increase in market share in scotch and premium whisky segments.

It has also set a target for the market share in scotch segment by 2008-09 to be around 25 per cent.

Product innovation

The report also says that as part of the product innovation strategy, cardboard packs and pouch packs will replace mono cartons.

It has also suggested that advertising and promotion spends should be moved increasingly towards above the line activities while below the line activities should be controlled.

The report also says that the company should leverage scale with the trade.

As part of its overseas foray is concerned, United Spirits expects to create credible alternatives in the premium and high end segments, facilitate entry into new segments like wines and provide access to non-traditional global markets, particularly Russia and China.

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Mallya to list United Spirits on overseas bourses

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