After talks with the Vijay Mallya-owned United Spirits (USL) did not make any headway, liquor company Diageo declared it would play on its own in India. Roland Abella, managing director of Diageo India, tells Priyanka Joshi that in the last 12 months, he has done his homework and is open to exploring new joint ventures and even acquire new brands to build a robust product portfolio. Edited excerpts:
There have been reports of Diageo planning to acquire the 50 per cent stake from its joint venture partner Radico Khaitan...
It is true that we have all the necessary approvals of India's Foreign Investment Promotion Board to acquire Radico Khaitan's 50 per cent interest. We have had a good partnership with Radico Khaitan but it is only natural that we remain open to exploring the possibilities to grow in a market like India. This includes looking for newer acquisitions to expand our products — whiskey, vodka, and other spirits. We will also look for joint ventures (JVs) if there is a relevant brand or category of spirits that we want to be associated with in India.
Is this an effort to compete with United Spirits, by far the largest spirits company in India?
While competition has not really bothered us so much, I do believe that local brands and companies can be a great tool in growing the market overall. That said we have to now focus on capitalising the premium brands that we have in our portfolio – this simply means consolidate what we have achieved instead of trying to expand in all spirit categories. So, this means that Diageo India will not go back to selling wines. Instead, we intend to build our foothold in Tier-II and Tier-III cities that have the purchasing power for premium spirits.
Our luxury spirits category, which includes Ketel One Vodka, Ciroc Vodka, The Classic Malts selection among others, will be also marketed aggressively in metros and 5-star hotels. Besides, we have invested in building our brand presence through premise outlets like hotels, night clubs and restaurants so that Diageo products are visible to consumers. We will also launch newer packaging for some products. As far as domestic operations are concerned, we will soon have more bottling plants besides the four that we have in India. Local sourcing and distribution remains critical to our growth in this country.
With all the investments that you have been making, is India a serious revenue contributor for Diageo already?
I am afraid that our India revenues are not huge at the moment but as far as my personal targets are concerned, I want India to contribute up to 20 per cent to our global revenues in the next five years. This is definitely my target. With the overall Indian spirits market forecast to grow at 12 per cent volume CAGR by 2025, where premium categories expected to grow at 25-30 per cent, it should not be a struggle. This is the market we want to be a part of and lead too.
How are you targeting the young consumer in the country?
The fact that India is a demographically young nation, with growing purchasing power despite the worldwide economic downturn, makes us bullish about the market. With 19 million adults being added to the market every year, we need to make sure that our products — Johnnie Walker, Smirnoff and VAT 69 — should be easily available. With 40 per cent market in the scotch whisky segment, Diageo should be able to reach 50 per cent this year.
