When Hina Nagarajan took charge of Diageo India (incorporated as United Spirits Ltd) in 2021, her task was cut out. After the $27-billion UK-based alcobev giant Diageo plc acquired United Spirits from controversial liquor baron Vijay Mallya in 2014, the business was on a weak footing owing to continuing legal tangles, mounting debt, and increasing competition from the likes of Pernod Ricard. Diageo India MD & CEO Nagarajan, 59, the only woman CEO of a liquor firm in India, began putting in place a turnaround plan. Key to this was a move towards premiumisation and the decision to get away from the ‘popular’ category. The mission was to be among the country’s top-performing packaged consumer goods brands and take advantage of the growing number of aspirational customers. Consequently, in September 2022, Diageo India, the country’s largest alcobev firm by revenue, sold 32 brands in the popular segment and franchised out 11 for five years. While taking the road to premiumisation, Diageo retained McDowell’s brandy, rum and DSP Black. The strategy seems to be working; net profit margins have shot up 50% between FY22 and FY24 from the company incurring losses earlier. The markets have given Nagarajan a thumbs-up. When she took over, the company’s market capitalisation was around Rs 46,000 crore, which today is over Rs 1 lakh crore.
In our cover story, Krishna Gopalan takes a close look at the reinvention of Diageo India and how Nagarajan is putting her strategy in place. Alongside the move towards premiumisation is also a focus on innovation. For example, the launch of Royal Challenge American Pride, a bourbon variant of the popular Royal Challenge whisky. Or the Black Dog Triple Reserve variant and Johnnie Walker Blonde, a light Scotch variant for the next-generation non-Scotch consumer. “The mandate was very clearly laid out—bring in top line growth and leverage the premiumisation in the market to dial up that growth for more profitability,” Nagarajan tells us. However, it won’t be easy as the Indian spirits market is witnessing heated competition, and everyone wants a piece of the growing pie. Besides Pernod Ricard, other key competitors are home-grown major Radico Khaitan and the recently-listed Allied Blenders and Distillers Ltd. Nagarajan’s strategic thinking and resolve will be tested.
Elsewhere in this issue, Surabhi decodes how climate change is affecting food prices, with extreme weather events like floods and heatwaves impacting food production. Persistent food inflation has also been worrying the Reserve Bank of India, which has yet to begin reducing interest rates. The government is introducing new technologies and climate-resistant varieties of crops, and has also placed export curbs to stop price fluctuation. It has also brought in policies to boost vegetable cultivation and expand production bases to more states. However, longer-term solutions are the need of the hour, but remain elusive.