United Breweries Ltd., that owns the popular Kingfisher brand of beer, reported a 77% year-on-year drop in primary volumes for the quarter ended 30 June, the company informed the exchanges last week. Even as the markets have opened up, it could be a long road to recovery, said Rishi Pardal, chief executive officer and managing director, at UB who took charge on 1st August. In an interview, Pardal and Debabrata Mukherjee, the company’s CMO, said that the company will continue back the Indian Premier League where Kingfisher is beverage partner for five team. Edited excerpts:
How have July and August been for business?
Rishi Pardal: The quarter that went by (April-June) was very unusual, impacted by the pandemic and lockdowns. For more than 50% of the quarter we were physically shut. At the beginning of the pandemic, large increases in taxation also impacted demand.
In quarter two, our story is mirroring the progression of the pandemic. As governments are easing restrictions we are starting to see the similar thing come into the business. However, I would say it’s a long road ahead. Bars continue to be shut.
There are a lot of starts and stops. A sudden spike in local cases can shut market for a few days, so it’s too early to talk of recovery right now.
Your other expenses this quarter were down significantly.
When you have a quarter such as the one that we did, I think the first focus is on keeping folks safe, but then immediately after that the focus is on managing costs in as conservative a way as we can. All discretionary expenses that can be avoided such marketing spends, which may be specifically driven towards either a particular innovations or events that are not happening, are avoided. However, at the end of the day, we are a consumer products company, and so we need to make sure that we cannot be silent or absent in the mind of the consumer.
Would you say that the demand for alcoholic beverages is intact?
Pardal: I think it’s going to be a long road to recovery. It’s not going to be a short one. But the good news as far as beer is concerned, and our own company is concerned, is that we see the latent demand. If there is a physical fulfilment opportunity where a consumer can access the outlets, or we encourage online order and home delivery, or look at reviving consumption in bars – the latent demand is there. It’s more of a supply side issue.
Are volumes in home-delivery of alcohol big enough to show up in your numbers this quarter?
Pardal: This is a highly restricted category, with lots of stringent rules. So the fact that a few state governments are now beginning to sort of consider this (online sales and home delivery), is really a positive development. And we are encouraging it. We are partnering with the online aggregators, with delivery services and people engaged in the space. It will take time. At the end of the day, this is a nascent opportunity. Hopefully, over a period of time more states will follow suit and the channel will build scale. My own assumption, and the company’s view is that it will take time.
From a distribution point of view have all channels opened up?
Pardal: We are able to reach anything that is open. Having said that, not everything is open. And what is open is probably 60% of what the normal is.
Then there are some rules as well. For example, in Kerala, there are queueing systems, so consumers can only access the outlet based on an app that allows them to queue and get an appointment.
As the market leader we have a responsibility that as bars start to open we partner with them, we try to create safe zones for consumers to come out, we also use our range of properties and partnerships with the bars to encourage traffic to come in.
With change in IPL venue will Kingfisher still back the teams it had partnered?
Debabrata Mukherjee: This being a black swan year, we do not believe the long-term relationships should be put to test. We are working with them to figure out how best we can leverage this opportunity. Yes, there are issues around it going out of the country, the fans will not be allowed in the stands. We are in talks with the teams, as more details emerge as to how they are really going to create the magic around IPL, we can figure out a way by which we can partner with them to tell our brand story. IPL will continue to be a part of our strategy.
But will you lower marketing spends on IPL?
Mukherjee:You use a sporting event of this nature to connect with your consumer. So the money outlay is based on that brand strategy requirement. At this point it will be a conjecture to say whether it will go up or down. At this point suffice to state that we are very keenly watching the progress on the IPL and we will be invested behind the IPL like previous years.
