Last week United Spirits kinda lost a lot of love and just sold 32 of its brands and sorta made a longish sale agreement for another 11 of its brands.

So much for being called “United” Spirits 😉

Well actually that is the crux of this blog post. This is a snapshot of a part of the official letterhead of the company.The typeface of United Spirits has been reduced to that of the address, the address ! This is a clear cut change of identity, and a clear cut change in the way this company will operate in the future.

We have been hearing about the strategic review of the companies brands for a bit now and it has finally happened. Why did the Diageo actually do this ? If you look at Diageo’s international website, they too have a pantheon of brands and they’ve been doing pretty darn well.

On one side they’ve sold all most all localish brands and on the other side the’ve lapped up 2 new Craft Gin labels. (Craft can easily be construed as local too).

This move frees up a lot of inventory, gives the company cash which is almost as much as a full years profit and promised a little or lot more in the future. But this is not the main reason for the shedding of the skin.

Hina Nagarajan keeps talking about this move opening up more management bandwidth. It is easy to assuming that this simply means that they can do more of the same stuff, but I think it is the complete opposite. This bandwidth, will free up more time to be used in play and rest and not so much in work.

To innovate, to experiment, to improve, you need more play and rest. To achieve repetitive perfection, it is probably more work.

The Brands that Diageo got rid off, was stuff that just needed more and more work. The stuff that they are getting into is more play. Look at their new growth engines.

The brands that Vijay Mallya had acquired with so much enthusiasm over the years were both profitable as well as fairly well received, but their relevance is done. Diageo on the other hand is pretty clear that it want to hit the middle class and above, the moderately literate and above, the blue collar and above and love the people who are from families who are 2nd and 3rd generation of alcohol consumers. Not only would they not want to play the cheapo game, they can’t !

Management bandwidth, like determination is limited. Yucky things that you don’t want to do take 2x as much determination for hardly any progress and yummy things have automatic leverage built into them a.k.a tailwind.

That’s why the partial acquisition of Nao spirits makes huge sense to me. The Gin Soaked Boys get access to Diageo’s distribution and Gora clout. While craft has definitely made waves, sustaining the waves will require the effect of the Moon ! (bad reference to Diageo’s distribution strength)

Diageo has clearly understood the new DESH PREM that is trending in India and just as the Brits had once employed Indian soldiers to control Indians, they are using a similar strategy – Since the Indians have absolutely no affinity towards brands like Tanquray or Gordons, they will acquire stuff that the new Indian is excited about. I’m also pretty sure that Diageo will not buy out the company totally, because that would again kill the spirit of the spirit 😉

This partial buyout strategy works superbly well when you do not want to scale beyond that region. I would not be surprised if Diageo goes after brands like Stranger & Sons Gin and Samsara Gin next ! Who knows, they might even get into beer with Kati Patang and Simba too – after all their plan to launch Guiness will require a new beer distribution network !

To cut a mid sized post short –

Diageo is not going to do what it doesnot want to, and is going to do what it wants to henceforth.

The runway is now clear – I’m excited , really excited to see what they do with it.

My previous posts on United Spirits Limited –

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