The Indian Competition Commission (CCI) has approved Diageo’s purchase of a 53.4% stake in United Spirits (USL), saying that the £1.28bn ($2.04bn) purchase may boost the nation’s premium spirits market and improve consumer choice without jeopardizing competition.
In a newly issued order, which is dated February 26, the CCI wrote: “From an analysis based on market shares, it can be seen that post combination, the market share of the combined entity will not change much except in the vodka market.”
Whisky alone accounts for 60% of Indian branded spirits sales volume, but looking at vodka more closely, CCI said that this segment (despite a high CAGR of 22% from 2007-2011) only constituted around 4% of sales.
CCI noted that nearly 88% of Indian vodka sales were priced at INR 500 or below. “It is observed that Diageo, with its brand Smirnoff and its variants, is present in the INR 500+ segment and that USL, with its flagship brand Romanov and its variants, is present in the below INR 500 segment”.
But the Competition Commission added that Radico Khaitan (with its ‘Magic Moments’ brand and variants) had products pitched at similar price points to both Diageo and USL.
“It is also observed that the vodka brands of both USL and Diageo would also face stiff competition at different price segments from many other brands and their variants, such as Pernod Ricard’s Absolut and its variants, Brown Forman’s Finlandia and its variants, etc.,” the CCL said.
Furthermore, in the past two years 27 new brands had entered the local and flavored vodka segments, the CCI said, “indicating that this market is rapidly growing and evolving in India”.
More to follow…