Johnnie Walker seen gaining in India on Mallya's woes
Maker of famed Scotch could take stake in United Spirits, but it's still no done deal
For years, Diageo has sought to shore up its operations in India, where it accounts for a tiny fraction of whiskey sales. Now, a struggling airline may give the world's biggest distiller the chance it needs to gain a stronger foothold in the world's biggest whiskey market.
As Vijay Mallya's Kingfisher Airlines has been battered by high fuel costs and falling ticket prices, the Indian billionaire has expressed a willingness to sell part of his United Spirits to Diageo.
A deal would help Diageo, based in London, bolster its position in a US$21 billion whiskey market where a maze of regulations and taxes restrict foreign liquor producers.
Diageo, the maker of Johnnie Walker Scotch, trails global rival Pernod Ricard in the country and has failed in past efforts to close a deal with Mallya.
Diageo has "never been able to secure a market in India as Pernod Ricard and United Spirits have", said Sharan Lillaney, an analyst at Angel Broking in Mumbai. For the British distiller, "this is the best move. You get a company that is among the largest in the world, excellent distribution network, excellent contacts everywhere."
Kingfisher Airlines will need a capital injection of US$600 million in the next two months after defaulting on loan payments following five years of losses, industry consultant CAPA Centre for Aviation said in August. Mallya owns about 36 per cent of Kingfisher through his own holdings and affiliated companies.