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2026.09.23 | TB | Consumer | United Spirits FSSAI & CETA

原标题：United Spirits – FSSAI Reformulation Mandate & India-UK CETA Impact Outlook

#consumer

Third Bridge · 2026-09-23

Analyst-led • 7 Sep 2026

Companies: DGE GB, RI FR, UNITDSPR IN, RADICO IN

Ashish Bansal (AB) Indpendent Consultant

Amir Khan (AK) — Third Bridge Sector Analyst

Agenda

Key Insights

Introduction

AK [00:00:02]: Welcome to Third Bridge's Interview entitled United Spirits – FSSAI Reformulation Mandate & India-UK CETA Impact Outlook. My name is Amir Khan, and I will be facilitating today's Interview with Mr Ashish Bansal, former Senior International Brands and Business Development Manager at Pernod Ricard India Pvt Ltd.

Ashish, before we start today's Interview, can you please state I agree or I disagree to the following statement: You understand the definition of material non-public information and agree not to disclose any such information, or any other information which is confidential, during this Interview.

AB [00:00:49]: I absolutely agree.

AK [00:00:52]: Could you start off with a brief introduction to your professional journey this far?

AB [00:00:59]: I'd like to start off with my alcobev experience, which is pretty much relevant to this call today. I started my journey with Pernod Ricard in 2011. Prior to that, I've been a banker and a hotelier. My journey started in the east of India, looking after the international brand business, business development and the expansion of business for the east based out of Calcutta, primarily looking at the primary shipment business that was bond to bond into our various partners there, as well as looking at the key accounts that were based out of the east at that point of time. Directly handled that business for about 4-4.5 years. After that, I moved to Tamil Nadu, looking after the state of Tamil Nadu, again, a very, very big assignment where primarily the business revolved around the key accounts, revolved around just the international brands at that point of time. During the good 4-5 years that I was there in Tamil Nadu, we saw a major policy shift where a lot more TASMAC retail shops opened up. Those shops gave us a massive boost in the business. We also saw the introduction, reintroduction of our Indian brands after almost a 10-year halt, and that meant 100 Pipers, 100 Pipers 12 came into the market, also paving way for Blenders and Blenders Reserve, which came in a couple of years later.

From there on, I moved to Bangalore, looking after the CSD business. Looking after the south and west of India, looking after almost 45-50% of the business of CSD, right from Gujarat down to Orissa. A massive geography that I was covering then. All these assignments gave me such a experience into the various states that we manage, the various route to markets and the complexities of business that we have when it comes to the alcobev sector. Came to Delhi looking after the key account business for a part of the north, Rajasthan, UP, Delhi. I have been a consultant now for about a year looking after distribution and consulting for distribution and helping brands establish themselves in the on-trade business.

Questions

[00:04:09] Could you elaborate on the operational route for the FSSAI [Food Safety and Standards Authority of India] mandate for United Spirits? What events led to its implementation?

AB [00:04:31]: I'll read out from an FSSAI notice that was sent to one of the various parties, not the parties that we talk about, but one of the many few to whom the notice was sent out. If I read the notice, it will give you a clear idea about what really are they looking for, so the issue stems from the enforcement action against manufacturers of alcoholic beverage for non-compliance with food safety and standards. That's the Alcoholic Beverage Regulation of 2018 and the Food Safety and Standards Labelling and Display Regulation of 2020. These two are the main compliance documents that the FSSAI team was looking at. The regulator clarified the direction was not limited to the products labelling, but extended to the composition and how it is described to the consumers. That's exactly where the issue stemmed from in terms of how is it that the brands are being communicated to the consumers, and whatever we mentioned in the label, is it true in terms of process, in terms of the way the brand is supposed to be made or the particular product is supposed to be made. That's exactly how it is.

If you have another minute on this, I'll just read out a couple of more lines that I have penned down. It basically clarified that the affected brands include Old Monk, McDowell's No.1, Bagpiper Deluxe Whisky, Old Cask Rum, Antiquity Blue and RC. The prohibition of sale was issued to Mohan Rocky Springwater in Khopoli, which is basically for Old Monk, United Spirits Baramati, Inbrew in Madhya Pradesh and another USL unit based out of Madhya Pradesh that was the Associated Alcohol & Breweries in Madhya Pradesh. These are the affected brands and the respective units that were pulled up for their actions. The actions were initiated following lab findings that revealed the addition of artificial flavour or nature identical flavours to products such as rum and whisky. That is where the whole issue has stemmed from. Misleading age-related claims such as declaring the blend as eight-year-old despite the matured spirit being added is probably less than 0.5% of the total beverage or the liquid strength. This is where the issue is stemmed from.

The notice clearly, which is sent to the other parties talks about the fact that this is a step which has been taken after the action against USL and Mohan Meakin, post which they have sent out notices, which are called improvement notices to a lot of parties across Punjab and Himachal because that's where a large part of our manufacturing base is. They've given these notices, these parts of the notice and given them only an improvement notice, asking them to actually report within 15 days about the practices that they follow against what is being mentioned on the label for them.

AK [00:08:35]: Should we consider this an ongoing exercise across facilities?

AB [00:08:43]: It is across a lot of facilities, obviously, stemming from the harshest action that was taken against USL and against Old Monk. These two were the hardest hit, while the others were then sent out improvement notices or warnings stating that please confirm that you are in accordance to these two laws are practicing. The team that I spoke to from this particular company, they had their notice that was received. It was received on, I'll just give you an idea, about a month ago, the 7 August is when they received the notice. When I spoke with them, within 15 days, they had their answer ready. They also were non-compliant as per their own reading. They also, within 15 days, managed to get their formulation corrected. They managed to get their labels out all a matter of within 15-20 days, so they had the labels, which are already ready, ready for reregistration because the labels were changed, so they were ready for reregistration in all the states and the formulation was ready awaiting and their revert to the FSSAI was also ready within 15 days.

[00:10:14] Given that reformulations are being done within 15 days, should we expect any differences in the flavour profile, or do you think it can be avoided?

AB [00:10:32]: The heart of the brand lies in the liquid. If the product and the liquid is not up to the standard, you would not have a following where you're going to have lakhs and lakhs of cases sold in the year. The brands that we're talking about, even if you talk about USL, RC and Antiquity Blue, RC has been a legacy brand for them. There is no way that they're going to be able to, they should not and they will not have the flavour profile change at all. The master blender's job is to ensure that you have the flavour profile absolutely consistent over the years, unless there's a recognisable policy shift or rather a strategy shift in the organisation to change the flavour or change any formulation, they will ensure that the flavour profile remains absolutely intact.

An interesting fact here is that let's take the Scotland, which is the base of a lot of our malts and the history of whisky to a large extent, dates back to Scotland in terms of its production. While here on ground, a person from Pernod might be fighting against a person from Diageo, Bacardi or any of the other large companies, you go back to Scotland, the distillers all sit together. They all get their neutral spirit from each other. They source neutral spirit from each other's factories. When you're talking about a single bottle of Scotch whisky, it is not necessary that you're going to be getting your grain-neutral spirit from your own production facility. It's an amalgamation of at least 20-30 different grain whiskies, which keep changing in terms of flavour, which keep changing in terms of their output. Getting those 20-30 whiskies together is what the master distiller's job is, and to ensure that even though the components or rather the factories might change, the sources might change, the flavour profile remains the same, and that's exactly what they pride themselves on. They all sit together, help each other source their liquid and end of the day, it's the product that makes a difference. They ensure that the Ballantine's you're tasting today is the same that you had probably 15, 20, 30 years ago as well.

AK [00:13:22]: Is that different vs the case in India?

AB [00:13:30]: In India as well, they don't sit together. They don't have the same history of sourcing and production. Even though none of the companies have their own manufacturing capabilities to cater to their own requirement, they do get GNS, that's a grain-neutral spirit from external factories for sure. Master blenders do help ensuring that the product remains consistent. That part remains the same. The master distiller is one of the most sought after and highly paid jobs in the industry. It's like a tea taster, so they go through 50-70 different tastings every day to ensure that the product is absolutely the same, but yes, they don't sit together the same way as this Scotland business does.

[00:14:38] The FSSAI ban on United Spirits was from 29 June 2026, and then an agreement was reached for reformulation and the prohibition was revoked on 17 August. Was the company not manufacturing during this period, and were retailers relying only on dealer inventories? Could you give us a picture of what was going on at the time?

AB [00:15:19]: It was basically just a pipeline that was getting depleted. There was no manufacturing happening on these brands. The warehouse held enough stocks. The dealers, the wholesalers, retailers at any point of time would have at least a month's inventory with them basis the RTM. The RTM changes, the holding pattern changes. Otherwise, you pretty much saw the inventory that was within the business only getting depleted. If you would talk about if there was any impact on the business, let me tell you that the all India market share of RC has grown 1% since June. An extremely interesting fact that in the last three months there, I think June, July, August, now 3-3.5 months, you've seen the market share grow by 1%. Against an industry size of about 4.5 crore cases, 1% is a significant leap in three months. That's exactly how the business is.

[00:16:36] Considering United Spirits has a 90-day transition window to work on labels and reformulation – a process that another brand completed in 15 days – it does not seem to be a monumental exercise. As we step into the festive season, where the volumes are high, and no brand would want to compromise on sales, should we expect any supply chain challenges for the affected brands?

AB [00:17:26]: Not really because as I mentioned earlier as well, while reformulation typically takes time, the organisation that I was talking about initially was a smaller player, a more regional player than a national presence. As a result of which decisions were a lot faster. If you would like to typically call an Indian company, a more Lala-driven company, it was easier for them to work on this on a war footing and get the work done within 15-20 days. While it comes to USL, they have the experience that is required. They know exactly how the formulation can and should change. I don't anticipate it taking three months for them to do this, but yes, because they have a pan-India presence, they've got presence across all the channels that you can think of today. The process would take slightly longer for them to act on. One of the most significant changes that they would probably need to do is to increase the quantity of the spirit that they import in from Scotland.

There is a certain component of liquid in every bottle of BII Scotches or whisky that are imported from Scotland. Changing that or rather adding a slightly larger component of that formulation is certainly required to be done, and that's exactly how the other organisation also that I spoke of has rectified the product. That's exactly what USL is also going to be doing in terms of reformulating their product. That's how they expect the reformulation to take place. The process of label registration is a tricky one because it depends on each excise department. The only advantage being that this is coming at a time when the main label registration rush, which is typically seen over February, March during the excise year or in terms of June, July when it comes to Karnataka, probably among the only few states that has a June calendar for its excise year. The rush of labelisation is over.

When you're talking about just a few brands that need to run through the excise tables, it would happen a lot faster. Plus at this point of time, it's not only about the formulation, it's not only about the master blender doing a job, but there's a large part of the responsibility, which falls on our external affairs teams. The external affair teams are the ones that are the conduit between the organisation and the government authorities, whether it is the state government, central government, FSSAI, excise are all the stakeholders, external stakeholders of this department. They are extremely active, clued in to figure out and to ensure that the timelines of the reformulated product coming into the market do not affect the business at any point of time. That's how I would anticipate a larger organisation with its much more influential teams to ensure that the route to market is not disrupted when it comes to the festive season that we just about to kick in, in the next couple of weeks.

[00:21:16] You mentioned that for BII [bottled-in-India] spirits, the percentage of component imported from Scotland that is added to justify the claims regarding the age of the bottle would have to be increased. Previously, it was less than 5%. How much do you think it would have to be increased to ensure compliance?

AB [00:21:52]: The seven years that we're talking about, it was primarily for Old Monk because Old Monk has a statement claim of seven years matured spirit. That was primarily towards Old Monk. If you pick up any bottle of BII that's your Indian whiskies, none of them have an age claim. They cannot put an age claim there. I'm talking about below Scotches. Anything below Scotches do not have an age claim. The seven-year issue was primarily for Old Monk because if you actually go through some of those statements, the formulation had less than 0.5% of seven-year-old rum. They actually mature it on their own. They have their own capability of… They don't require importing, first of all, it's rum, it's not a whisky. Old Monk being old Monk, the historical presence of the organisation itself is enough to have the kind of liquid that they require. They would have either removed the age claim or they would… I'm not too sure how they would be able to proceed without removing an age claim now because adding a significant component of the Scotch malt is not going to help any whisky company in terms of the profits that they talk about because at the end of the day, the formulations are all secret. Nobody tells you how much of Scotch malt are they adding into their products when it comes to all these Indian whiskies.

[00:23:50] What might be the revenue impact for United Spirits? How much of the company's revenue base do the impacted brands – Antiquity Blue, RC [Royal Challenge], etc – represent today?

AB [00:24:08]: RC and Antiquity together would be probably a volume share of 50% of the total business of USL Diageo, keeping in mind that they have a larger brand called McDowell's, which is on the volume front. Above Antiquity, they have got their three Scotches, which is Black & White, they've got Black Dog, they've got Vat. These are the primary players that they have in the business. It would talk about a value share of about 55% because these are money spinners for them. 50% volume share and 55% value share on pan-India volumes.

[00:24:59] You mentioned how the aforementioned brands from United Spirits were not making any age-related claims. Are there any other reasons that could potentially impact gross margins once the reformulated bottles are out?

AB [00:25:25]: For sure. As I mentioned, the reformulation would involve adding more Scotch malt into the product. Scotch malt is expensive and that process itself would take up the cost of goods. The cost of goods sold, that's the COGS, would go up significantly for RC and for Antiquity Blue. This is something which directly hits the bottom line. Till the time that they actually learn to absorb it or they find other ways to ensure that the COGS or rather the end product is now feasible in terms of the rates because they have no option but to absorb the cost on their own. There is no MRP change. That's another reason if you talk about the label registration process, the fact that there's no MRP change, the process of label registration becomes a lot faster. It's only a label that's going to go in for change because of a regulatory issue, the process becomes a lot faster for them. Just going back to the previous question, the previous discussion that we are having. The COGS and the distribution cost because the distribution cost includes cost of label registration. In a lot of markets, it is quite significant, even though the base of the brand is quite huge, but nonetheless, every rupee spent, a couple of lakhs that are spent on label registrations do add to the bottom lines of the product.

[00:27:12] When we're talking about a significant impact for RC and Antiquity Blue in terms of COGS, what range are we talking about?

AB [00:27:29]: Just to give you an idea that RC, the COGS is about 60%, so 60% of the cost of the product goes towards COGS in RC, while Antiquity Blue, it's about 40%. The impact that we're talking about could range between 1-1.5% in terms of the end product cost increase in the gross margin or decline in the gross revenue.

AK [00:27:57]: You noted that this is something that the brands will have to absorbe on their end.

AB [00:28:09]: They have no choice. It's a very price sensitive. Any of these brands are extremely price sensitive. Even if you increase INR 10 in their price of nips, which might seem very insignificant. In an RC kind of a category, you have to price align to exactly what the competition is doing. If you're going to even take out INR 10 increase in your nip price, you are going to end up losing market share. It's not only about regulatory issues, but the complete pricing game is so critical that a INR 5, INR 10, INR 15 increase could end up consumer shifting from your brand to the next available brand in that segment.

[00:29:03] You noted how even other brands that are not seeing action have received improvement notices. Is this a wider industry trend, even though only a few companies are in the spotlight, when it comes to reformulation across mass portfolios?

AB [00:29:27]: If you actually look at it, with Pernod, Diageo being probably 70% of the industry when we talk about this segment, the rest being smaller regional players, they've all been given improvement notices, and they're all in the process of reformulation or changing labels as we speak. As a result of which with the larger players having their act together, 70% of the industry getting sorted, this is certainly they have tided over this particular episode. I don't think they're going to be facing any more fire on this particular issue. It's just unfortunate that USL and Mohan Meakin pulled up for this. While I'm sure it is a larger practice wherein every player would be using something or the other, which is not regulatory.

[00:30:30] FSSAI has been fairly active in the past couple of months. Are there any other potential risks or actions that we could expect in the alcoholic beverage space?

AB [00:30:58]: Not really because what really happens is that there are not too many people who keep check on what's really happening in the industry in terms of the formulation, in terms of the components, in terms of the processes. There's one team that is extremely active in this front is the CSD team. Having worked with them, I know internally that the samples of products are sent regularly, maybe every year to government-designated labs that they have. There's one lab, which is based out of Delhi itself, and I remember having sent bottles there myself for one of the brands that we were looking at. At that point, those formulation, those labs go through extensive checks in terms of alcohol content, in terms of flavourings that are used and various other parameters. If there are any discrepancies there, they are flagged off by the CSD team and that can have an impact on the brand and the product as well. That's something which they do look out for to ensure that those issues are controlled immediately.

Also in this whole scenario, the stock that was being held by the CSD depots across the country, there are about 24-odd depots, all the depots, whatever stock of RC and Antiquity Blue that they had, they raised a debit note on USL Diageo because they immediately banned the sale of these from their depot, and whatever stock they have, they have debited USL Diageo. It's quite a significant amount because it's not only the EDP, but also the duties that are paid that are debited and the stock was not allowed to be sold. Till the time, I think till about a week ago, USL Diageo's team, the CSD team was interacting with the Adelphi, that's the CSD headquarters, people giving them explanations and giving them the reasons for this. The debit notes probably would get revoked for sure, basis clarification and assurances that are given by the USL Diageo team, but just to tell you that's how active the CSD team is to immediately pull off the sale of these two brands. At the same time, the CSD counter, the canteens can sell the product that they have, but certainly not the depot.

[00:33:51] Historically, how frequently do bottles fail CSD [Canteen Stores Department] lab tests? For example, out of 20 bottles, how many typically get held up? Is it a very rare occurrence?

AB [00:34:14]: It is a rare occurrence because the biggest factor that they look at is alcoholic strength. I think that is something which even the factories are extremely cognitive [sic] of that the alcoholic strength that has been declared is the variance is allowed, very minimal variances are allowed. They make sure that the strength of alcohol, which is the biggest factor that the labs would keep looking at are maintained. The other factors also… What also happens is that one, at the time of introducing a new label, or at the time of changing a factory, that means changing a source of the particular product is when, for sure, you send almost 6-12 bottles to the government lab here, which is, I think, run by the Army as well. The labs receives the samples here in Delhi and then runs through those samples to give the report. The biggest factor is alcoholic strength, and that's something which they ensure is controlled at the factory point itself.

I just had one more point on this FSSAI mandate and this whole turbulence that it's caused. If you actually look at it historically and as a consumer, why don't you try to rack your brains and tell me, not related to alcobev, but anybody who's been pulled up in the last maybe 4-5 years, and what is the impact that you think the two brands have on their sales today. I'm talking about maybe 5-6 years ago. Can you think of anything? Maggi? You recollect the whole pushback that Maggi got from the authorities. Cadbury chocolates. Do you recollect that? Because also stemmed from the fact that there were some worms that were found and then a whole thing on Cadbury's? These are brands that you and I relate to, whether you're one generation behind me or one generation ahead of me. I'm talking about anyone between a 10-year-old to a 70-year-old relates to these two brands for sure. Do you think the sales are impacted? Do you think they're back to shape now? You don't even recollect that there was something that happened to big brands like this, big brands like this. These are brands that are available across 8-10 lakh stores across the country, if not more. That's what I'm trying to talk about the fact that this is, yes, it's a shakeup. Yes, it's a part of an ongoing initiative from the authorities to improve and get our country back into make people responsible for what they're selling, and when you talk about RC and you talk about Antiquity Blue, RC more particularly, the consumers are probably lower-middle class, just about middle class. Whether they're really into this research, into this information finding about their own brands, I doubt it. The fact that you think that this will have a negative impact on the consumer, I doubt.

AK [00:38:42]: I think the news might not have any impact, and as long as the flavour profile does not give anything away, it probably would not be an issue.

AB [00:38:54]: Absolutely.

[00:38:58] While the India-UK CETA [Comprehensive Economic and Trade Agreement] has some benefits for BII, it has more benefits for BIO [bottled-in-origin]. How strong is the consumer perception difference between these two segments?

AB [00:39:48]: This is 250 years of legacy of making whiskies. They have perfected the art. They have pretty much made strict regulations around what and how can be called a Scotch, gin, rum from that particular region, from that particular part of the world. You might be existing, you might be from that part of the world, but if you do not conform to the standards and the laid down rules, you certainly cannot be so-called GI tagged or you cannot proclaim to be from that part of the world to sell it to the rest of the world. This is something which they have perfected over so many years. When we talk about Scotland, UK, USA., Japan, they've all built the industry over so many years. The US, everybody knows they're famous for the bourbons, but the fact that a bourbon has to be with a certain percentage of rye, certain percentage of corn has to be made in a certain way in a certain kind of a still has to be matured in barrels made of this kind of wood only. The barrels can be used only once. After they are used, they have to be discarded. They have to be charred. They cannot be charred. All these processes in terms of the terroir, in terms of where you're sourcing it from are parts of regulations that make the brand, make the industry what it is for those countries.

We can just go back to our conversation five minutes ago, the fact that India is only just about beginning to start regulating itself in all these matters. It might be a step in that direction, but the fact still remains that anything imported has certain provenance to it, and it is extremely important for them. It's a matter of pride for them. It's a selling point. Beyond what a bottle of Ballantine's might cost or bottle of Chivas might cost in the Indian market, it's the heritage that really makes a big difference to why a Chivas 12 Year Old is a Chivas 12 Year Old.

[00:42:44] While discerning consumers in the P&A [prestige and above] segment have a strong degree of cognizance for the value of BIO, do you think the general consumers – such as young consumers who have money to spend – would have the cognizance for BIO that it deserves?

AB [00:43:31]: No. Interestingly, the consumers. if they're walking into a shop in Gurgaon, they know what they're looking for. If they know that they're going to go in for a BIO product, they've heard the brands. In today's day of social media day and age, I don't think anybody is going to walk in blindly. Very, very few people might because there are a lot of brands that are being imported. If you talk about Gurgaon in particular, every big retail store or rather conglomerate in Gurgaon has their own brands as well. They import their own brands. They've seen over the last few years that distribution of brands with them being the retailers has not really got them the same benefit. They've got the market, they've got the space. They've got the glitz and the glamour to go with it. Why not import their own brands? A lot of them have started importing their own brands. Those are brands which people might not be aware of. They have to depend on the consumers walking in to buy Ballantine's, to buy a Chivas, to buy a Red Label, Black Label and then try to convert them into picking up a bottle of whisky, which they are importing on their own. A lot of consumers do walk in with fixed preferences.

A lot of them are looking for something new experimentative for sure. They would love to try various brands, especially the single malt consumers are extremely experimentative. When they start off, they recruited through the Glenlivet and Glenfiddich of the world, but they would look for new opportunities and new spirits to keep tasting.

[00:45:21] How much contribution might BIO have in United Spirits and Pernod Ricard's revenue base?

AB [00:45:38]: Just to give you an idea, Pernod Ricard's BIO business would be probably about 20-25% out of the total net sales of INR 12,000 crore, the Pernod Ricard BIO is about INR 2,500 crore in terms of the sale. That's the percentage that you can talk about INR 12,000 crore vs INR 2,500 crore.*

AK [00:46:13]: What about that in the case of United Spirits?

AB [00:46:16]: It would be slightly lower. The percentage will be slightly lower. Keeping in mind that Pernod Ricard has a slightly larger sale when it comes to BIO business, keeping in mind that they have recognised more categories that they talk about. They've got extremely popular Irish whisky. They've got Absolut Vodka. The single malts do much better. The Pernod Ricard net sales are higher when it comes to the BIO segment.

[The numbers quoted by the expert were different from the overall total revenues of the company. The top line of Pernod Ricard India at INR 12,000 crores is measured by the volume in cases per brand multiplied by the EDP [ex-distiller price] registered in each state. For BIO, the approximate EDP is taken at 10,000 per case and a volume of 25 Lakh cases per year, resulting in a value of about 2,500 crores.]

[00:46:54] India-UK CETA has already been implemented, and the FTA [free trade agreement] between India and the European Union is expected to be signed in December 2026. Given Pernod Ricard is French and Diageo is British, would Diageo have more of an advantage currently due to the FTA with the UK?

AB [00:47:31]: It depends on the product. It is not about Pernod being a French company or UK being a British company. The product is from Scotland. It is covered under the UK FTA. Automatically, they would get the benefit for all the products of Scotch that are imported get the benefit straight away. You are talking about big brands like Ballantine's, Chivas, Glenlivet, the complete series of Glenlivet, the Aberlour, which are covered under this FTA straightaway. While UK, while we talk about Diageo, you've got Red Label, Black Label, the complete label series going all the way up to Blue Label, which are all extremely popular products being covered under the FTA, giving equal benefit to everybody when it comes to the cut in the duties, custom duty.

[00:48:37] UK FTA-benefited inventory is expected to reach India during the festive season in October and November 2026. Do you think that can improve BIO's penetration by year-end 2026?

AB [00:48:59]: Honestly, as I told you, while BII, the inventory levels are anywhere up to 1-1.5 months, BIO inventory levels are slightly higher. We do expect that November, December things to start impacting. It also would depend on the local excise, how fast they allow the MRP changes to take place, how fast would they really impact the products? They are, from what I understand, being a little painful on ground right now in passing on the benefits to the consumers right away. It will take time, but it will happen for sure.

[00:49:56] In terms of baseline understanding, how much gross margin difference is there between BII and BIO brands in the P&A segment?

AB [00:50:08]: Yes, you're talking about… It significantly changes, but I think about 40%-odd gross margins are an average when it comes to BIO, which is extremely huge. The same thing could go up much higher when it comes to the age variance. If I talk about a simple 12-year-old or an unaged Ballantine's, you could be talking of certainly about 35-40%, but when you talk about a 15-year-old, 18-year-old and going above, the gross margins go up significantly.

AK [00:50:45]: Yes, I would imagine, given the quality of the product as well.

AB [00:50:51]: There was a simple statement that we used to make during our days in Pernod Ricard saying that the amount of money that you make selling one case of Royal Salute is equal to the amount of money that you make selling truckload of Royal Stag. That's the kind of difference you can talk about.

[00:51:25] With the UK FTA benefit coming in, how should we think about United Spirits taking the gross margin benefit vs passing on something to the consumers?

AB [00:51:56]: They have no choice but to pass on the benefit to the consumers. That is exactly why the FTA was put into place. The only difference being that as we were speaking earlier about Scotch concentrate that comes in from Scotland is also a part of the FTA, but the benefit of that that comes in with the custom duty waiver might not be passed on to the consumers because when you talk about Scotches, you talk about all of them, the COGS will reduce because of the waivers, but they might not be passing on that price advantage to the consumers. When you talk about BIO in particular, there is no option but to pass on every rupee that is saved because of this to the consumer. End of the day, your gross margins are not really going to be impacted because of price variations. They might get impacted because of better economies of scale, better distribution strength that you might be able to pull off because of lower costs and lower impact. That's probably the reason why GMs might improve, but certainly not because of the FTA benefit.

[00:53:28] We discussed concentrates in reformulations and how a 0.5-1% impact might come from the increase in the amount of concentrate going into BII brands such as RC and Antiquity Blue. Do you think the gross margin benefit could be absorbed by those brands?

AB [00:54:05]: The gross margin for RC and this thing has to be absorbed by them. They don't have a choice. They cannot take up MRPs as we discussed because of backlash that they're going to get from FSSAI, they're not going to be able to take up prices in any of the products. The price increases are a regular process, which they probably struggle with each state's excise department every year to take up maybe 3-5% price increases that they get. That's the only difference that they're going to be able to pull off, but nothing else in terms of price increases are going to come their way.

[00:54:55] If all the benefits that we discussed go through, BIO prices would come down in October 2026. Do you think there is a cannibalisation risk between entry-level imports and the more premium BII portfolio? Or is that not the case because we have buyer-level nuances here as well?

AB [00:55:23]: Just to give you an idea that the entry-level Scotch would probably be reduced by INR 150, while the 12-year-old Scotches would reduce by about INR 350. This is the end consumer price difference that we're going to be expecting to come in when the new impacted stocks hit the shelves. This is significant. The price difference between entry-level Scotch, let's say, 100 Pipers, Black & White, Black Dog, VAT 69 are all anyway in a lot of states sitting on the border when it comes to Ballantine's vs these. With INR 150 price reduction, we're certainly going to see a lot of benefit going up to the BIO segment, and you're expecting the BIO segment to boom because of this particular benefit that's being passed on to the consumers. When it comes to the higher age variant brands, I think a lot of them would be festive season-led or gifting led, so yes, during festive season that's coming in now or during any other time, there would be possibly people who will skip or rather shift to higher brand considering the benefit that they're getting on the rate.

AK [00:56:58]: Essentially, we should expect a move towards BIO in the upcoming festive season, provided the inventories reach the market as expected.

AB [00:57:12]: Absolutely. Plus you're always talking about India's premiumisation story, which is extremely robust and strong. This is only a step in the direction to speed up the process. While if you look at the last couple of years, USL, Diageo, Pernod, Bacardi are all looking at 5-6% growth in the overall bottom line. It's interesting to see that while you're talking about 5-6% growth, BIO has always been growing at at least double-digit growth, 15-17%. All that is premiumisation led. The consumers are not increasing. The consumer base remains the same. It's purely because the market is expanding. It's because premiumisation is taking place that the BIOs are seeing such healthy growth over the last few years. I'm talking about 12-15% is only in the last 2-3 years when you've seen maybe post-COVID that you see the bottom lines of Pernod, Diageo all growing by only 5%, 6%, 7%. Prior to that, BIOs were growing at 25-30%. Those are the days when BIO was still finding its feet into tier 2, tier 3 cities, and there were lots of markets still to explore for BIO. 25-30% growth were regular in BIO at that point of time. It's going to continue. The premiumisation drive plus the reduced MRPs are just going to give a double whammy to the BIO sectors in the next, maybe 2-3 years to come.

[00:58:52] How do you see the competitive landscape evolving among the top five players, including Pernod Ricard, Diageo and India-based players?

AB [00:59:23]: The top players, I'll leave aside and I think the top regional players today are all looking at BIO portfolios. The they've got the distribution strength in place. They might be regional players. They've got the distribution strength going across north or probably going across south, south that they operate in, but all of them are looking at BIO brands to come into their portfolio. It gives their brands, their home-grown brands a larger credibility. It's either rubbing off the distribution strength of the home-grown brands that they're going to push their BIO brand, but the fact that they come from the same stable of that company, it gives them overall credibility in the market. You name the regional player. Company like Modi Illva, you probably just read about them once in a while. They've got a BIO team in place. They're looking at buying brands and importing brands. Why even sometime back, I was talking about the distributors and the [contractors] of Haryana and Gurgaon having their own BIO brands today. If a [contractor] who's limited to 15-20 shops and has deep pockets in Gurgaon can start a BIO portfolio, what's really stopping companies who've got maybe 50-70 years of establishing brands in the country. As I told you, Radico Khaitan, Modi Illva.

Today, you talk about Piccadily known for Indri, an extremely successful Indian single malt. At the same time, you also have Camikara Rum, which is coming out of the stable. You've got Cashmir Vodka. These guys are moving up the premium ladder because they know premiumisation is the way to go, and that's exactly how the middle class is going to boom their sales in the next couple of years.

[01:01:44] How long do you think it would take before we start hearing about BIO acquisitions by India-based players?

AB [01:02:05]: It might be an acquisition. It might be just distribution agreements or white labelling that they're doing, but it's all in process right now as we talk. They're all in talks with various companies to start acquiring. The other day, I was talking to an older distributor of mine, and they were looking at first, just getting some labels into the country in the booming tequila, gin, vodka segments because all the segments are now doing well, white liquids are back in action. Then just two weeks later, when I spoke to them, they said their investors are telling them to push and not import, but take stake and buy some stake in some company and then become part owners and then take the distribution strength into India, and you wouldn't have heard of these players. They're extremely small, very, very professional players in the market. It's happening every day. It's happening just every day today.

AK [01:03:21]: It's essentially a matter of a few quarters.

AB [01:03:26]: Absolutely. A lot of these brands you might not even hear of because they would remain regional. They might remain in the stores of Gurgaon, but they're certainly there in the market.

AK [01:03:40]: I see we are at time. I'll make that my last question. Thank you so much.

AB [01:04:13]: Thank you.

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