Diageo gets United Spirits

on 09 November, 2012

India has huge tax tariffs and a labyrinthine bureaucracy. At the moment most Indian whisky drinkers have to raise a second mortgage to get their hands on a decent bottle of scotch...

Diageo has finally struck a deal to take a 27.4% stake in United Spirits, the major Indian spirits producer whose brands include Bagpiper, McDowell’s, not forgetting Whyte & Mackay scotch whisky.

The deal has been widely trailed as United Spirits/United Breweries’ owner Vijay Mallya’s woes particularly regarding his Kingfisher airline, have been widely reported. The man needed a breathing space and the ensuing money will be much needed.

More importantly the deal gives the world’s largest premium drinks company access to the huge Indian drinks market, which is predicted to be worth US$45 billion by 2015. The Indians love their whisky even if a great deal of it would be classed as rum in Europe as it is made from molasses rather than grain.

India has huge tax tariffs and a labyrinthine bureaucracy. At the moment most Indian whisky drinkers have to raise a second mortgage to get their hands on a decent bottle of scotch.

As soon as this deal goes through, Diageo will have access to United Spirits’ distribution system thus hastening its penetration of this key burgeoning market.

Through Mallya, India’s most high profile entrepreneur, it and the tenacious Scotch Whisky Association, will be able to exert more pressure on theIndian government to get the import tariffs lowered.

The one question mark is over Whyte & Mackay. Will it have to be sold off or is Diageo’s stake sufficiently low for it not to attract the attention of the various regulatory bodies.

Either way, it’s a great deal for Diageo. Your move Pernod Ricard?

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