United Spirits Vs United Breweries: Terry Pratchett said, “There are better things in the world than alcohol. But sir, alcohol sort of compensates for not getting them.” Humans’ love for alcohol is visible everywhere. Whether it be long lines outside a liquor store or packed resto-bars on weekends.  

And that’s not just people. Governments love alcohol too. It gets them heavy taxes. Investors love liquor stocks because spirits never run out of demand. 

In this article, we will cover two such liquor companies: United Breweries and United Spirits. We will take a look at their past performance, understand their products and try to project which can perform better in the future. Furthermore, we will also have a quick look at the liquor industry in India.

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So without further ado, let us jump in.

Industry Overview

India is one of the fastest-growing liquor markets in the world. Since 2001, the alcohol` industry has grown at a CAGR of 12% barring 2019 (economic slowdown) and 2020 & 2021 (Covid-19 virus outbreak) years. 

Increasing urban population, rising disposable income, growing preference towards premium brands, and spreading awareness are major drivers of growth for the industry.

The market is divided into 5 categories mainly: IMFL, IMIL, wine, beer, and imported alcohol. IMFL and IMIL stand for Indian Made Foreign Liquor and Indian Made Indian Liquor respectively. The difference between IMFL and IMIL is simple. Foreign-made liquors are imported in bulk and bottled in India. 

Among all liquor categories, whiskey leads the market by a broad margin. Furthermore, the IMFL category makes up 72% of the overall Indian market.

The organized industry will benefit from the growing consumption of foreign liquor against country liquor. This is primarily due to increasing health concerns and bans by state governments on country liquor because of increased death tolls.

The regulatory scenario is quite tight in India with respect to alcohol. Players need to pay high inter-state duties to set up owned or contract manufacturing sites. In addition to this, licenses are required to bottle, store, distribute, or retail all alcoholic beverages.

The distribution is controlled as well. The state governments can control pricing and sales quotas. All this poses persistent operational challenges to incumbents. These restrictions act as a barrier to entry for prospective players too.

The pricing remains a challenge for all the players because of the high taxes on the alcohol industry in India. Furthermore, direct marketing of alcohol products is banned in India.

Industry Analysis

Having understood the industry, we are in a good position to perform a quick analysis. This shall help us to review the companies in a better way. 


  1. High regulatory oversight acts as a barrier to entry albeit hurting incumbents.
  2. Brand equity drives a large part of purchase decisions and helps with newer product launches.


  1. Per capita consumption of liquor is low in India. For women, it is even lower with the median age being 27.9. This marks steady industry growth going forward.
  2. Increasing urban population, rising disposable income, growing preference towards premium brands and spreading awareness are major drivers of growth for the industry.


  1. The sector is exposed to prohibitively high taxes and licensing restrictions impacting pricing and the consequent demand.
  2. Margins for beer production get hampered during periods of commodity inflation.


  1. State governments have the freedom to decide the route to market alcoholic beverages. Therefore a sudden default by distributors can happen in case the government concludes a change of operations and ceases their business.
  2. State bans lead to the proliferation of unorganised country liquor and inter-state illegal selling impacting pricing and demand.
  3. Indian government doesn’t allow liquor companies to market their products directly.

United Spirits Ltd

Abbreviated as USL, United Spirits is India’s leading alcohol beverage company. It is a subsidiary of Diageo PLC, a global leader in alcohol production. As of June 2022, it owned a 55.94% stake in USL. It started by initially acquiring a minority stake back in 2013.

It has an overall portfolio of 80 brands including premium ones such as Johnnie Walker, Black Dog, Black & White, VAT 69, Antiquity, Signature, Royal Challenge, McDowell’s No.1, Smirnoff and Captain Morgan. In the 2022 fiscal year, it sold 79 million cases.

It is the largest spirits company in India and the second largest in the world. The company has a market share of 32% in India. It has more than 47 facilities and a robust distribution network of 70,000 outlets.

It receives operational and management support from the parent company. The company segments its products into two categories:

  1. Prestige and above (costlier drinks)
  2. Popular (relatively cheap)

USL’s P&A segment accounted for 72% of the total revenues of the company making it a premium player. The company has been focusing on premium drinks since Diageo gained control. Premium drinks give better margins to the company. McDowell’s No 1 whiskey leads the pack.

In terms of volume, the P&A segment represented 53.9% of total cases sold for the recent financial year.

United Breweries Ltd

United Breweries or UBL is India’s second largest alcohol beverage company in India. It is owned by Dutch multinational Heineken International. It has 61.68% ownership in the Indian company. Furthermore,11.04% is owned by liquor baron and fugitive Vijay Mallaya. Therefore, the combined promoter ownership of the company stands at 72.71%.

The company is involved in the manufacturing of beer and non-alcoholic beverages. Alcoholic beverages account for 70% of the net sale value of the total beverages sold by the company.

It operates in the popular or affordable category with its mass-market products. The company has 33 manufacturing sites across the country.

Its portfolio includes brands such as Kingfisher Premium, Kingfisher Ultra, Kingfisher Strong, Kingfisher Ultra Max, UB Export Lager, London Pilsner and many more. 

The company earns 1% of its total revenue from its international operations. UBL entered African countries in the fiscal year 2020-21. As of now, it has a presence in Kenya, South Sudan, Ethiopia, Tanzania, Uganda, the Democratic Republic of Congo and Seychelles.

United Spirits Vs United Breweries – Revenue Growth

We have covered the hard part of understanding the industry and two companies. From this point, we shall be looking at the numbers. 

For the purpose of studying financial statements, net revenue is calculated in a different way in the liquor industry. Excise duty makes up a significant portion of gross sales and is mandatory. Thus, we use a different figure for the revenue comparison, called net sale value. It is the difference between gross revenue less excise duty.

Net Sale Value = Gross Sales – Excise Duty 

YearUSL Net Sales (Rs. Crores)UBL Net Sales (Rs. Crores)
5-Yr CAGR1.93%2.74%

We see that the net sales revenues of both companies have grown at a very slow rate. USL’s NSV grew at a CAGR of 1.93% over the last seven years. That of UBL’s inched up at an average rate of 2.74% every year, slightly better than its premium counterpart.

United Spirits Vs United Breweries – Net Profit Growth

It is no doubt that lukewarm revenue growth makes both companies look unattractive. However, something else has been happening at USL for the last 7 years behind the curtain.

While UBL’s net profit growth (7-year CAGR) of 2.94% imitated its revenue growth; USL’s profit has grown at a whopping rate of 29.19% every year.

Since Diageo acquired the giant, it has been very keen on premium alcoholic beverages. Its strategy is clearly visible in the bottom line of the company.

United Spirits Vs United Breweries - NP Growth

United Spirits Vs United Breweries – Profit Margins

With its premium product offerings, USL boasts of better operating and net profit margins than its counterpart UBL. For the fiscal year ending 2022, USL’s net profit margin stood at 8.5%. In contrast with this, UBL’s was only 6.3%.

As for the operating profit margin, the difference was 500 basis points. USL operating in the high-positioned market was able to fetch a 17% operating margin. Whereas, UBL lagged behind with the 12% figure.

United Spirits Vs United Breweries - Profit Margins

United Spirits Vs United Breweries – Return on Equity

It is no wonder that the performance of United Spirits has been very commendable for the last 7 years. The better earnings have kept it ahead of its peers across different fundamental metrics. Return on equity clearly demonstrates this.

Furthermore, another green signal is the laudable job done by the management of USL in lowering the debt levels. From the debt to equity figure of 2.32 in 2017, it has come down to 0.07 for the last fiscal year. 

For FY22, USL’s ROE was at 16.34%. UBL lagged behind with a return on equity of 9.28% for its investors. 

It shall be interesting to monitor the capital allocation by the management of USL in future. Whether the company shall focus on acquisitions, dividends, or higher capital expenditure; we shall know soon. 

UBL has a history of providing consistent dividends. Surprisingly, in FY22 United Breweries distributed 76% of its earnings as dividends. This signifies either the promoters are taking money out of the business or the management sees little growth prospects.

United Spirits Vs United Breweries - ROE

United Spirits Vs United Breweries – Key Metrics

What we can say for sure is that USL’s focused strategy on premiumization has benefited it clearly. As recent as last month, the company sold 32 mass-targeted brands to InBrew for ₹ 820 crores. 

Let us have a quick overview of both companies.

Face Value (₹)21
Net Profit Margin (%)8.56.3
Operating Profit Margin (%)1712
EPS (₹)11.413.82
ROE (%)19.89.72
Market Cap (₹ Cr)60,41343,434
Promoter’s Holdings (%)56.7372.71
Dividend Yield (%)0.000.63
Debt/Equity Ratio0.210.07
Current Ratio1.111.55
CMP (₹)8311,643
Stock P/E73119
Book Value70149
Price to Book Value1211
5 Year Stock Returns (CAGR %)8.7315.12

In Conclusion

We are now at the end of our presentation. UBL has historically performed better for its shareholders. It may be some time before investors start viewing USL as a better company. 

But UBL’s mass-market products give it an extra edge in volume growth. This makes a strong case for it building a robust brand with future benefits of cross-selling.

It is said that time has all the answers in the stock market. So, let us wait to see how these companies perform. Till then, save more and keep investing.

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