‘A brand wouldn’t be a luxury one if you could buy it cheap’

BY admin

Abanti Sankaranarayanan, who recently assumed the role of Business Head for Luxury and Corporate Relations at United Spirits Limited, talks about her new responsibilities and issues that plague the Indian liquor industry

BY SALONI DUTTA

For Abanti Sankaranarayanan, former managing director of Diageo, the work schedule has just become heavier, involving high-profile meetings, talks with government departments for a host of concerns including tax and industry-related policy matters to promoting responsible drinking.

This is all part of Sankaranarayanan’s new role as Business Head for Luxury and Corporate Relations, India at United Spirits Limited (USL), a subsidiary of Diageo plc. With this move, Sankaranarayanan joins the Executive Committee of USL, which is setting up a new luxury unit for the premium brands of the portfolio to bring focus on the fastest growing segment of the Indian alcobev market. The Luxury business will encompass Diageo’s iconic brands such as Johnnie Walker, Ciroc and the Single Malts.

In addition, Sankaranarayanan will lead the new Corporate Relations function that has been set up to drive USL towards strong leadership and execution on Public Policy, Regulatory, Tax & Trade Affairs, Alcohol Policy, Corporate Reputation and Brand, Sustainability and Responsibility. In this role, Sankaranarayanan will build key stakeholder relationships with regulators, government, industry bodies, NGO partners and relevant members of civil society. Here are excerpts from an interview with Sankaranarayanan:

Q] What does your new role as Business Head for Luxury and Corporate Relations, India entail?

It is an exciting new role as I am stepping into United Spirits Limited at a time when this company is going through a huge and exhilarating transformation. It is an opportunity to be a part of this whole new journey. There are two aspects of my role – one is the Luxury portfolio and the other is Corporate Relations. Both are geared towards helping United Spirits achieve its ambition of being the best-performing, mosttrusted and respected consumer products company in India.

Luxury is the premium end of the Diageo portfolio in India and setting up the luxury vertical is the recognition of how quickly this segment of the market has grown. It is going to be one of the fastest growing segments in the alcobev space and hence we were keen to have a centre of excellence within  he larger business (which presently is very much around the belly of the market with mass and affordable brands) to allow the luxury brands to flourish and be well-poised for impending growth.

The second part of my new role is to focus on Corporate Relations which I am equally, if not more, excited about, because it is something absolutely new for United Spirits. Corporate Relations is all about  setting up United Spirits to move towards the ideals of corporate citizenship and to transform the reputation of this company as well as the industry at large and to become the most trusted and respected consumer products company in the world. It will entail Public Policy, Trade and Regulatory Affairs, Market Access, etc., and also building reputation through the work that we do around Community and Sustainable Development. Our efforts are also directed towards propagating responsible drinking, as well as building a very strong corporate brand Diageo, USL.

All of this put together will really help us transform our reputation and be industry leaders in terms of what we do within Public Policy and Regulatory Affairs. Public policy is very important as the industry is highly regulated and alcohol is seen as a demerit word in India. Selling alcohol in India is akin to selling in 32 different countries. Each State and Union Territory has its own policy towards alcohol. Therefore, regulatory and public policies can make or break a business in the alcobev space. We want to start engaging with stake-holders, including policymakers both at the Centre and as well as at the State level, to move towards shaping public policy outcomes which are a win-win for the industry, the Government and society at large. Within its ambit comes a whole bunch of things that we want to do with State governments around excise policy, responsible consumption and market access. At the Central level,  there are certain key regulatory hurdles that the industry faces such as GST, FSSAI, service tax and so on.

Q] What is the need for a Center of (Luxury) Excellence within USL?

USL is a large and successful business with an expansive portfolio of brands, but it does not have brands at the higher or luxury end. This is something that Diageo has within its portfolio and we wanted to therefore create a separate structure for luxury within the larger business so that the unique luxury capabilities that Diageo India had as well as the differentiated ways of marketing, selling, supply and logistics are all protected.

The luxury segment of the alcobev industry has been growing at a very strong double digit rate over the last four years. Also, the fact that we have been working with United Spirits as the selling agent for Diageo brands in India has given us the confidence and comfort that this is a win-win structure. Last year, we clocked 42% top line growth.

Q] How is marketing for the luxury segment different from other premium segments?

Luxury marketing is all about creating desire, and a level of aspiration for luxury brands which come from providing compelling brand stories and emotional benefit to consumers. It is not about rational benefits or properties of the product. What we want to do within luxury marketing is to create that desire with consumer knowledge about our brands. We do a lot of on-trade stuff, for example. At high-end bars or events, we bring the luxury experience alive, sometimes by something as simple as making consumers enjoy a great ritual such as how do you drink a blue label. So, we create romance around the brand. These things set luxury apart.

Q] Which are your target or strong-play markets? Where do you see scope for growth?

For our luxury alcobev brands, the key stronghold markets are North, particularly for scotches – so Delhi, Punjab, Haryana are our strong markets. We are also looking at other markets on the basis of  macroeconomic indicators as well as current trends and are identifying these as markets of the future, where we would like to go and invest - Karnataka, Andhra Pradesh, Maharashtra, West Bengal and Goa.

Q] Does price play a big role in indicating the quality of the product for consumers?

For luxury brands, price is very much a part of the proposition. A brand wouldn’t be luxury if you could buy it cheap. It is different if you got it at a discount or a special offer, but if the general pricing is not very high, then you would actually question whether it is a luxury brand. Pricing is a cue to aspiration and premiumness and general exclusivity of the brand. Secondly, it also is a cue on product quality and things such as the extent to which it is crafted, the blend, how old it is, what is the lineage, rarity and exclusivity. Consumers then take the price and use the price as cues for all of this. So pricing is both a cue for aspiration which is an emotional benefit or a pay-off and the other is the product quality and heritage.

Q] Given the focus on digital marketing, how do you plan to engage the luxury market consumers via this medium?

Even the luxury consumer is a digital hound particularly if you look at the new age, younger luxury consumer. We have exciting plans for digital, and are clear that we need to market our brands and the stories around our brands on digital. Therefore we are looking to provide product knowledge and use influencers to market our brands strongly in the digital medium. Digital marketing would serve the need that we have of educating the consumer and exciting the consumer with our proposition.

Q] How will the Centre of Excellence unlock the commercial and business value for the company and what are some of the challenges faced by this segment?

The Luxury unit will play a very big role in the company as this is the segment of the future. It is already the fastest growing and most profitable segment within alcobev industry. In India, though there is affluence and pockets of wealth, we are still at an early stage of luxury development; we are roughly about 10 years behind China in terms of our phase of evolution of luxury. There are some structural as well as consumer-related factors for that. The structural inhibitors are that we don’t have a strong and wellembedded luxury retail environment. The other factor is that taxes are very high on luxury brands, particularly if they are imported. In our industry, basic customs duty is 160%. Even for a high net worth individual, the per capita penetration of luxury is lower than a high networth individual in China or Latin America. For Indian consumers, the core reason for buying luxury is badge value or conspicuous consumption, whereas in the West, luxury is much more internal. It is very much a personal choice and is about reflecting the personality of the consumer. That is why for us in USL, the idea behind luxury is that we want to really ‘make the market’ as we call it. So, to lead category development for luxury, make the market, create the market, so that by 2020, we are among the top 20 luxury businesses in this country.

Size matters

Luxury, i.e., BIO spirits as of FY2014 stood at 1530K cases, with domestic contribution estimated to be around 38% and Duty Free at 62%. Blended Scotches constitute a bulk of the Luxury spirits market in India with 65% share of volume. Other key categories such as malts, vodka and rum contribute 8%, 12% and 5% respectively. USL’s share in Luxury spirits is 51.7% (domestic & Duty Free combined).

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