United Spirits Take a Leap with RCB: Revenue Doubles to ₹650 Crore

Remember the electrifying atmosphere of the recent T20 World Cup win? India’s cricketing dominance extends beyond the international stage, with the Indian Premier League (IPL) captivating fans worldwide. But the IPL isn’t just about entertainment; it’s a multi-billion dollar business, and for United Spirits Limited (USL), the country’s largest liquor maker, one franchise has become a golden goose: Royal Challengers Bangalore (RCB). 

Let’s see how Royal Challengers have transformed from a crowd favorite to a significant contributor to United Spirit’s profitability. 

From Runners-Up to Revenue Raiser

Royal Challengers Bangalore has always been a fan favorite, known for its explosive batting and passionate supporters. However, their on-field success has not translated significantly to financial gains for their owner, United Spirits Limited (USL). Despite reaching the IPL finals three times, their contribution to USL’s bottom line remained minimal.

However, FY24 witnessed a remarkable turnaround. Royal Challengers Bangalore’s revenue skyrocketed by a staggering 163% to a whopping ₹650 crore, more than double the previous year’s figure. This dramatic improvement resulted in a net profit of  ₹222 crore, a complete reversal from a net loss of  ₹15 crore just a year prior. Even more impressive, this profit jump translates to a substantial 16% of USL’s total net profit for the year, compared to a mere 8% two years earlier.

So, what sparked this financial explosion?

Here’s a breakdown of the key factors:

1. Increased Central Rights Income: A significant contributor to RCB’s financial success is the rise in central rights income received from the Board of Control for Cricket in India (BCCI). This guaranteed income provides a stable financial base for all IPL franchises, regardless of their on-field performance.

Recognizing the growing popularity of the IPL, the BCCI negotiated a significant increase in broadcast rights deals, leading to a larger pool of money distributed among the teams. This translates to a direct financial benefit for RCB, even if they don’t win the trophy.

2. Enhanced Brand Value and Sponsorship Deals: While central rights income provides a solid foundation, RCB’s recent success on the field has further boosted its appeal. Strong performances have attracted lucrative sponsorship deals with a variety of brands. These sponsorships involve displaying their logos on jerseys, team websites, and during match broadcasts, generating significant revenue for RCB.

3. Effective Commercialization: RCB has also become adept at exploiting other commercialization avenues. Royal Challengers Sports Pvt Ltd, which owns RCB, generates revenue through royalties and licensing fees. This income stream comes from using the RCB brand name, logo, and player images on merchandise, video games, or other commercially exploited products.

A Look at the United Spirits Quarter Breakdown

USL’s financial statements offer a closer look at RCB’s performance in the crucial March quarter. Here are some key takeaways:

USL Expenses Rise, But Sales Remain Strong:

• USL’s total expenses for the March quarter increased by 10.9%, reaching ₹6,279 crore.
• Despite this rise, USL’s consolidated net sales value (NSV) grew by 11.2% to  ₹2,783 crore in the same period. This indicates continued growth for USL’s core business, even with increased expenses.

Royal Challengers Bangalore’s Revenue Contribution

• Importantly, RCB’s performance didn’t go unnoticed financially.
• Their sports business arm, Royal Challengers Sports Pvt Ltd (RCSPL), which owns both the IPL and Women’s Premier League (WPL) teams, generated a significant revenue of  ₹120 crore in the March quarter alone.
• This highlights RCB’s growing financial impact on USL.

The Winning Formula: Profits Over Pedigrees

RCB’s contribution to USL’s net profit has skyrocketed – from a mere 8% two years ago to a staggering 16% in 2023-24.  It is particularly impressive, considering USL divested some mass-market liquor brands during the same period, leading to a 7% dip in overall sales.

Interestingly, experts believe their profit contribution could potentially surpass most of the 63 liquor brands currently owned by USL. This highlights the power of strong brand identity and strategic marketing in today’s business landscape. 

Royal Challengers Bangalore: A Brand Powerhouse Beyond Numbers

The numbers clearly show that RCB’s financial contribution to USL is undeniable. However, the true impact goes deeper, transforming RCB into a brand powerhouse for USL, particularly for its Royal Challenge whiskey.

Here’s how:

• Brand Association and Shared Values: Royal Challenge whiskey has historically struggled to connect with younger consumers. The team on the other hand, boasts a vibrant image, a passionate young fan base, and some of cricket’s biggest stars. This association allows Royal Challenge to piggyback on the team’s cool factor.
• Emotional Connection: Cricket is more than just a sport in India; it’s a cultural phenomenon. Royal Challenge taps into this emotional connection by associating with the cricket team. Fans may subconsciously develop a positive association with Royal Challenge, fostering brand loyalty.
• Increased Visibility: The jerseys, stadium branding, and televised matches provide high visibility for the Royal Challenge throughout the IPL season. This constant exposure keeps the brand at the forefront of consumers’ minds.
• Targeted Marketing: With a strong youth following, USL can leverage this data to launch targeted marketing campaigns for Royal Challenge. Social media promotions featuring the players or merchandise giveaways can effectively reach this demographic.

The turnaround of Royal Challenge is a testament to the power of this brand association. It’s not just about logos on jerseys; it’s about creating a lasting positive impression in the minds of consumers. While the exact numbers are difficult to quantify, the increased brand awareness, emotional connection, and targeted marketing opportunities generated by RCB undoubtedly contribute significantly to Royal Challenge’s revival.

The Future of RCB and the IPL

As the IPL enters a more mature phase, franchise owners are likely to become even more focused on return on investment.  For USL, RCB stands out as a core property, not just for its profitability but also for its brand-building capabilities.  With the addition of a successful Women’s Premier League (WPL) team, RCB’s future looks bright, promising to continue its winning streak both on and off the field.

Looking ahead, RCB is poised to be a double win for USL. Firstly, RCB has established itself as a significant and potentially sustainable profit generator. With the IPL’s growth and evolving commercialization, RCB’s profit potential is only expected to rise. Secondly, RCB’s brand association is a powerful marketing tool for Royal Challenge whiskey. The team’s image and passionate fan base have helped elevate Royal Challenge’s brand and attract a younger demographic. 

Owning RCB isn’t just about short-term gains; it’s a strategic investment for USL’s long-term brand positioning. RCB’s immense popularity creates a valuable platform to build brand loyalty and explore future marketing opportunities.

Conclusion

RCB has become an integral part of USL’s winning formula. Their financial contributions are substantial, and their brand association offers a powerful platform for future growth. This strategic partnership positions USL for continued success in the ever-evolving Indian market.

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