INDIA BUSINESS WORLD - OCTOBER 2005
THE MONTH THAT WAS

UB EXITS RTD BIZ; PULLS BACK SHOTZ & CRUISER

Almost two years after the much hyped launch, UB Spirits Division (UBSPD) has exited the ready-to-drink (RTD) business. The reason: the poor commercial outlook for the category and the need to keep out bleeding businesses in the wake of Shaw Wallace & Co (SWC) acquisition.

UBSPD comprising McDowell & Co, Herbertsons and Triumph Distillers & Vintners (TDV) has pulled back RTD brands Shotz, Cruiser and Tequila Slamma from the market. The move is aimed to bolster the division's mainstay Indian Made Foreign Liquor (IMFL) brands as it is in the midst of integrating SWC, the country's second largest spirits company, into the fold following a Rs 1,300 crore acquisition earlier this year.

"We decided to move out of RTD as part of a portfolio restructuring in the wake of SWC deal. The task at hand is to strengthen our main business," a top company official told ET. UBSPD - to be remained as United Spirits Ltd soon - also cited "poor commercial outlook for the RTD business in the country" as another reason for the exit. UB's move leaves Bacardi Breezer as the only surviving brand in the nascent domestic RTD category. The other spirits companies like Radico Khaitan and UDV India have already dropped their plans to tap the RTD business citing uninspiring market conditions.

UB group companies McDowell & Co and Triumph entered RTD segment with fanfare predicting that the category would attract young and women consumers in large numbers like in other parts of the world through the 90s. But a combination of factors including taxation on par with hard spirits and consumer mindset stalled the development of RTD market, which is pegged at a minuscule three to four lakh annually.

"We believe RTD segment has not yet reached the tipping point in the country. We could re-look at it in future," said the UB official. Tight taxation and regulatory environment along with a slow retail take off ensured prolonged bleeding for most companies intended on building brands in the category that is driven mainly by imagery. Bacardi Breezer, one of the two cult RTD brands globally along with Smirnoff Ice, carries on in the Indian market banking mainly on its clout in the international markets. Incidentally, RTDs popularity in the global markets too is vaining after hitting a peak in the late 90s, and has been responsible for some of Bacardi's recent growth pangs.