Diageo, Radico uncork JV

Diageo India, the wholly owned subsidiary of the world's largest premium spirit company Diageo, has signed a 50:50 joint venture agreement with Radico Khaitan, the country's second largest spirit company, to explore the large and developing Indian Made Foreign Liquor (IMFL) segment in the country.

The world drinks major Diageo had recently chalked out its plan to re-enter the IMFL segment in India after exiting from the same a couple of years ago. Diageo's most popular global brands include Johnnie Walker premium whisky and Smirnoff vodka.

The proposed venture will bring together the strengths of the two companies in brand marketing and distribution to create innovative international quality IMFL products.

Radico Khaitan has informed the Bombay Stock Exchange that the companies have entered into a 50:50 JV agreement, which is subject to obtaining the requisite regulatory and other approvals.

Sources from Radico said that the two companies will however, continue to operate in their own independent businesses outside of the JV and will maintain their respective brand portfolios.

Asif Adil, managing director of Diageo India, had earlier told Business Standard that the company would tie up with leading local players for bottling and distribution to explore the IMFL market.

"The company is also toying with the idea of getting into the fast growing beer and wine markets in India to tap the emerging opportunities and we will explore all these new segments with our own products from the international portfolio using the bottling and distribution networks of local partners with whom we are in talks," Adil added.

These manufacturing, distribution and marketing arrangements will be with leading local players in the respective segments through joint ventures and strategic alliances, he said.

Diageo has already tied up with a large bottling unit in Chennai for its IMFL foray and few marketing and distribution tieups are likely to be signed soon.

However, he had mentioned that since the company's main focus would remain in the premium whisky and vodka segment, the current India specific strategy also includes substantial investments for the market expansion in these segments.

Diageo India, which exited from its IMFL business some time ago, is focused on building its portfolio of international brands in India.

However, the plan for re-entering the IMFL and also to the wine and beer market is at a time when the market for the international spirits brands in the country is expanding faster with whisky consumption pegged at 7-8 lakh cases annually reporting between 10 and 12 per cent growth and the other two segments are poised to grow multifold with the proposed market opening policy of state governmets.

Diageo is currently enjoying about 90 per cent of the country's 2 million cases premium vodka market and about 80 per cent of the scotch whisky market in India.

IN HIGH SPIRITS

The world drinks major Diageo had recently chalked out its plan to re-enter the IMFL segment

The JV will gain strength from Diageo's most popular global brands like Johnnie Walker and Smirnoff vodka

The company will tie up with leading local players for bottling and distribution