'Whisky is our big business, and will continue to see growth': Diageo India's Hina Nagarajan on the company's brand new strategy

What was your mandate when you took charge?

Though Diageo acquired United Spirits in 2014, we spent a large part of our time till 2021 resolving legacy issues. Simultaneously, we brought in the Diageo culture and its way of doing business. There were a few serious challenges to deal with. The India business was at a single-digit Ebitda margin, and it was all about improving profitability to bring it to the early double digits.

Looking back, what struck you as the big growth opportunity in India at that point?

As a company, Diageo was also leading the change in reputation in the overall alcobev business. In terms of business, the overall growth of the market was 3-4% each year. The interesting piece was [that] the premium end was growing at 7-8%. In that sense, 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.

How did you go about that in a very competitive Indian market?

Among the first things we did was to formulate a new strategy, with three pillars. The first was to reshape our portfolio to deliver that double-digit growth and leverage the clear opportunity in premiumisation. The second part was to build an organisation of the future. The world around us is changing quite dramatically and it was obvious that we must have the capabilities with respect to digital acceleration. We also wanted to be the most inclusive company. The last component came down to defining and delivering a far more ambitious role for Diageo in society.

Now, when I look back at it, the strategy has been validated. We have delivered on a sharp surge in our top lines and the premium end has doubled its historical growth. In 2022, we turned debt-free and wiped out our losses. Last year, we wiped out our cumulative losses and declared a dividend for the first time.

One of the more important decisions since you took over was to divest the mass brands portfolio. There were opinions on the perceived low valuation and that it would reduce clout with the trade. How do you view the transaction from a strategic point of view?

I want to make it clear that the part on reducing clout with the trade is not true at all and the noise that came with it was quite overestimated.

On the specific issue of valuation, we ran a very robust diligence process with a view coming through many sources. It was a very fair value for the portfolio and at par. Here is proof of that—just look at our turnover for last year and we are back to where we were [earlier] and with higher margins. The decision to divest that part of the portfolio allows us to have better allocation of resources. Today, we are playing to our strengths and that includes brand-building, innovation and renovation, a global portfolio, [and] very strong local brands with the right marketing and sales capabilities. 

When you look back at the last three years, are there any missed opportunities that come to mind?

I would say white spirits is one, and that’s probably [because] we were so busy with whisky, but there are really no excuses. Today, we are investing significantly in Smirnoff (vodka) and tequila, with a clear potential existing in both. While vodka is only 5% of the market, there is visible growth. Ideally, we should have taken an early position here but there is tremendous scope for innovation, and we believe we can get the best out of this opportunity. Whisky is our big business and will continue to see growth. From a headquarters point of view, they are super-excited about the India story. McDowell’s No. 1 whisky goes out to more than 20 countries. Globally, some of the trends are most interesting like the large number of people drinking tequila. We could never imagine that in a post-Covid world, tequila would become as big as scotch in North America.        @krishnagopalan