World's leading spirits maker Diageo incurred a loss of 2 million pounds on sale of its Indian wine business last year, the company's annual report has said.
Diageo-owned liquor firm United Spirits Ltd (USL) had sold its entire equity stake in Four Seasons Wines as well as associated brands to Grover Zampa Vineyards and Quintela Assets for Rs 31.86 crore.
"The disposal of the Indian wine business has resulted in an exceptional loss of 2 million pounds," Diageo said in its Annual Report 2020.
Talking about consumption preferences, Diageo said consumers who drink alcohol are increasingly choosing spirits over beer and wine. "This is a long-term trend. In markets where spirits is a less mature category, mainstream spirits brands can offer quality and affordability. In more mature markets, premium core and reserve brands offer choice and new experiences," the company said.
In January 2019, United Spirits had entered into an agreement for the sale of all the equity shares held by the company constituting 100 per cent of the paid up equity share capital of its wholly-owned subsidiary, Four Seasons Wines (FSWL), along with the brands. Total consideration received for this sale was Rs 31.86 crore.
USL had said this move towards disinvestment of Four Seasons Wines was in line with its strategy to successfully continue to monetise its non-core assets, including subsidiaries. At the time of the sale, USL said the Four Seasons Wines business was a niche but a small part of the overall Diageo India portfolio and the sale would enable the company to focus on its premiumisation strategy and grow core spirits business in India.
Earlier this month, Diageo disclosed it had taken a write down of 1.3 billion pounds, including an impairment of 772 million pounds for the Indian market, reflecting the impact of COVID-19 and challenging trading conditions.
The company said the impairment was based on the value "in use calculation and fair value less costs of disposal methodologies" to assess the recoverable amount of the India cash-generating unit.
Diageo's India subsidiary posted a consolidated net loss of Rs 246.6 crore for the April-June quarter and its revenue from operations was down 47.60 per cent to Rs 3,820.7 crore.