Does liquor executive-turned-entrepreneur Deepak Roy have a penchant for acquisitions? Eighteen months ago, he bought out whisky brand Gilbey's from Diageo Plc's UDV India. And the key question in liquor circles was whether Roy would be able to swallow all that he had gulped.
Now Roy, president and chief executive officer of the Rs 185-crore Triumph Distilleries & Vintners (TDV) is back doing what he's good at. A month ago, he acquired three liquor brands from the Kilachand-promoted Polychem "" Alcazar Vodka, Men's Club range (whisky, rum, brandy) and Louis XI brandy for Rs 4.5 crore.
Now, with all these brands in the crate, Roy is looking at extensions, new launches and also getting into Gilbey's range of snack foods, all reaching out to newer geographies and customers.
Roy's familiarity with all these brands began with his days as managing director of UDV India, where the Kilachands had a five per cent stake. UDV used to manufacture, distribute and market Polychem's liquor brands.
In December 2002, UDV decided to exit the mid-market segment. That's when Roy walked away with Gilbey's to set up Triumph Distilleries & Vintners (TDV).
While Roy holds a 15 per cent stake, the main promoter was his one-time employer Vijay Mallya who he worked with in the early '90s. The latter's UB group pumped in 85 per cent equity. That's when Polychem also transferred it brands from UDV to TDV.
Roy or Mallya, have now bought out what they were earlier managing. Together, they want to add more fizz to their brand buffet. "The focus initially was to consolidate the business, now we're looking at growing not only inorganically but through new launches as well," says Roy, who is all set to take on his earlier company head on.
There will be a premium vodka brand under the Alcazar to take on UDV's Smirnoff as well as a premium rum brand. He plans to gain share in the south "" a predominantly brandy and rum market) with two new launches in the next couple of months. These include Triumph Matured Grape Brandy and Triumph Vatted Triple X Rum.
Then, by the year end, Roy will launch a cocktail snack range under the Gilbey's Green Label brand. Roy has already signed a memorandum of understanding with Delhi-based Speedway Food & Beverages to manufacture peanut-based snacks.
"This will take the Gilbey's brand out of the liquor store. Snacks makes sense, because traditionally alcohol is served with them," he says.
How's that? In the past few years, with a ban on liquor advertising, liquor manufacturers have found ways and means to get around it. From eponymous water brands to bar lounges, they've used every opportunity to highlight the brand names.
Roy denies that he's trying to circumvent the ban, and says, "This is a serious business for me."
It isn't as easy as it appears. UDV still controls the Gilbey's trademark and will continue to do so till 2007. Roy is now awaiting approval from UDV to leverage the brand name.
Clearly, Roy is aiming for a broader appeal. That's why he's also looking at the ready-mixed and energy drink markets. Last year, he tied up with Australia's South State Food & Beverages to market the ready-to-drink brands Tequila Slamma, DNA Alcoholic spring water, Q Vodka Orange and Q Vodka Wildberry in Delhi. Roy now wants to roll them out in Mumbai and Goa by December.
He is also hoping to make inroads into the 45,000-case energy drink market which is growing at 30 per cent. He has tied up with Cult Export, a Danish company to market the Cult Energy brand.
The only player here is the Austrian brand Red Bull which has a marketing and distribution arrangement with Narang Hospitality Services.
Today, while Red Bull retails at Rs 75 for a 250 ml can, Cult costs Rs 95. Why is Roy exploring new businesses? For one, Gilbey's whisky accounts for 75 per cent of his revenue. Getting into newer categories would help him spread the risk.
Also, whisky which constitutes 65 per cent of the 105 million case Indian liquor industry is growing at an annual clip of 8 per cent to 9 per cent.
By comparison, vodka, which is barely 10 per cent of the market, is galloping at 35 per cent. "There's tremendous opportunity there because a lot of young people and first timers prefer vodka," says Roy.
Then, the whisky market is already crowded. TDV's parent "" the UB group, Shaw Wallace and BDA's brands are jostling for shelf space.
UB itself has three key whisky brands at different price segments ranging from Bagpiper (Rs 120 for 750 ml in Maharashtra) at the popular end to the premium Signature (Rs 510 for 750 ml).
Says an industry source, "With so much competition, the niche market is where potential for growth lies."
Currently the largest selling brands are Bagpiper (6.5 million cases), McDowell No 1 (4.6 million cases), Shaw Wallace's Director's Special which sells 3.5 million cases and BDA's brand Officer's Choice which sells 3.2 million cases annually.
Gilbey is fifth in queue today, compared to fourth place during the UDV days. Says Roy, "We will be like a boutique player in the liquor industry."
He also wants to appeal to a wider audience in different regions. He wants to crack the southern market with the new brandy and rum brands.
Then there are different price segments to tackle. Currently, Alcazar vodka retails for Rs 185 for a 750 ml bottle. By launching a premium vodka priced at the same level as Smirnoff (Rs 435 in Maharashtra), Roy will also be able to notch up value.
All this comes at a time when Roy is re-focusing the geographical reach of his brands. Roy says he realised that he needs to focus on key markets to grow the business. So the focus from unprofitable whisky markets like Punjab, Haryana, Andhra Pradesh, Kerala and the north-east has now shifted to the more lucrative Rajasthan and Maharashtra.
Even the sales team has been rejigged. Today, it has replaced its 35 salesmen in the southern market with sales agents. While the team in Maharashtra has been ramped up from six to 16 people.
The result? A 16 per cent volume growth last year. Gilbey's which sold barely two million cases when acquired, today sells up to 2.65 million cases. Roy hopes it will touch 3.3 million by the end of this fiscal.
To contain manufacturing costs (40 per cent to 50 per cent higher than competition), he sold off the Nira plant in Maharashtra last year, to Jubilant Organosys for Rs 2.75 crore. Now manufacturing is outsourced entirely. And the 60 member team that came along with the brands has been increased to 185.
But the road ahead isn't easy. For one, he's looking at taking on UDV's Smirnoff. But he needn't worry. Nine months down the line, the UB group may buy him out completely.
"If I get the right price, I may just end up being part of the UB group as an employee rather than a partner," he says. He will then be back to square one.
