Bangalore, July 17:

As part of its derisking strategy, United Spirits plans to move away from its dependence on molasses by converting existing distilleries of its associates into multi-feed distilleries.

This is apart from increasing the number of company-owned primary distillation plants at a total investment of around Rs 1,250 crore.

A top official with the UB Group told Business Line that the time-line for carrying out these plans is between four years and five years.

He said United Spirits was willing to pick up around 26 per cent stake in the associated distilleries.

The total investment in converting multi-feed distilleries was about Rs 750 crore.

These distilleries will be able to either use molasses or grain for making liquor.

The price of molasses has increased 75 per cent over the last one year to Rs 6,500-Rs 7,000 a quintal and 90 per cent of the total liquor produced in the country is from molasses. Some of the larger liquor manufacturers are already planning to increase the prices of their brands because of the increase in raw material cost. “While we may be able to increase the prices and still sustain our market share, the smaller companies will have a tough time holding on to their margins as well as their share,” the official said.

The official said nearly 85 per cent of the primary distillation companies which supply extra neutral alcohol (ENA) to United Spirits are not owned by the company. One of the reasons for not owning these distillation plants earlier was because of pollution issues with these plants.

But because of better technology available now, United Spirits has now decided to own about 50 per cent of these plants and also upgrade the technology wherever necessary.

This will cost the company about Rs 500 crore. As far as bottling plants are concerned, nearly two-thirds are owned by United Spirits.

Taken from Business Line

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