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Mallya said that with the acquisition of W&M, United
Spirits had gained access to global distribution and looked forward to
exporting liquor brands from India. Global consumption and prices of
Scotch whisky were increasing, and the sales of Scotch whisky rose by
10% worldwide in 2006-2007. The growth was much higher, at over 20%, in
emerging markets like China, India and Russia, during the same period.9
United Spirits was mainly targeting the Chinese and Russian markets for
export.
In India, United Spirits competed with Diageo and Pernod-Ricard, which
had market shares of around 60% and 30% respectively, in the Scotch
whisky segment. As of mid 2007, United Spirits' Scotch brand Black Dog
had a market share of 7-10%.10 Analysts felt that United Spirits could
compete with Diageo and Penod-Ricard on a stronger footing, using the
Scotch brands it had acquired by buying W&M.
Another significant point was that, as a result of the acquisition,
United Spirits had gained an edge over foreign brands like Diageo and
Pernod-Ricard in terms of the import duty payable. The Indian government
imposed a duty of 550% on bottled imported spirits, which made them very
expensive. But the duty on bulk liquor import was only 200%. Mallya had
indicated that United Spirits would import Scotch whisky in bulk from
W&M's Scotch inventory and bottle it in India. By doing so, United
Spirits would be able to sell Scotch whisky at lower prices than its
competitors.
However, at the end of May 2007, the Indian government said that it was
in the process of realigning its duty structure, in response to the
European Union and the US asking the World Trade Organization to examine
India's discriminatory tariff regime against foreign wines and spirits.
The Government of India was planning to amend the existing duty
structure and lower the countervailing duty in 2007.11 This was likely to
result in the Indian government levying duties on imported spirits and
wines on par with the excise duty imposed on domestically produced
liquor. As a result Diageo and Pernod-Ricard would be able to lower
their prices and increase their sales in India, negating some of the
cost advantages that United Spirits expected to enjoy.
Additional Readings and References
1. "Mallya's United Spirits Lifts Whyte & Mackay for £595 Million,"
www.domain-b.Com, May 16, 2007
2. "United Spirits Acquires Premium Scotch Distillers Whyte & Mackay for
£595m," www.andhranews.net, May 16, 2007
3. "Mallya Swigs Whyte & Mackay for ₤595 Million," www.in.msn.com, May
16, 2007
4. "UB Buys Whyte & Mackay for $1.18 Billion," www.yahoo.com, May 17,
2007
5. "Mallya's Whyte & Mackay Swig Makes Scotch Industry Uneasy,"
www.freshnews.in, May 17, 2007
6. "How The Scotch Stock was Key to UB Deal," The Hindu Business Line,
May 22, 2007
7. Arvind Kala, "Mallya's Giant Leap," Business Standard, May 24,
2007
8. Niren Shah, "A Strong Blend," Business Standard, May 28, 2007
9. "Mallya Effect: Govt to Cut Import Duty on Liquor," Financial
Express, May 29, 2007
10. Surojit Chatterjee, "UB Group Buys Whyte & Mackay for £595 Million,"
International Business Times, May 30, 2007
11. Viveat Susan Pinto, "Mallya's Spirits Run High," Financial Express,
May 2007
12. "Massive Countervailing Duty on Liquor to Dry Up Imports," Economic
Times, April 10, 2001
13. www.scotch-whisky.org.uk
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9] Niren Shah "A Strong Blend," Business Standard, May
28, 2007
10] Viveat Susan Pinto, "Mallya's Spirits Run High", Financial
Express, May 29, 2007
11] "Mallya Effect: Govt To Cut Import Duty On Liquor",
Financial Express, May 29, 2007
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