Spirits industry veteran Sanjeev Banga leads the efforts of Indian distiller Radico Khaitan to expand its business outside its domestic market.
The Rampur whisky and Magic Moments vodka owner generates a little more than 10% of its annual sales outside India but is looking to build its presence overseas.
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Just Drinks sat down with Banga to discuss Radico Khaitan’s plans, how Indian whisky can compete with those of other origins and why premiumisation will continue to drive the overall spirits sector.
Dean Best (DB): Let’s survey the international business for Rampur. What are the brand’s annual sales and biggest markets? Which markets are the priority at the moment?
Sanjeev Banga (SB): We’ve not really tested the entire market for Rampur because it’s still on allocation. All my other brands are available in over 100 countries. Rampur is only available in about 49/50 countries at the moment on an allocation basis. I have only one expression of Rampur available in the Indian domestic market – Rampur Double Cask. We’ve soft launched one more expression, Rampur Asava, in about four or five cities in India because, the moment I open up the floodgates in India, I won’t be able to cater to rest of them.
SB: We tripled our malt capacity a couple of years ago. A lot of malt is under aging, which will start coming out and ready for bottling early next year onwards. We will be able to expand not only the global footprint for Rampur but also release more quantities for the Indian domestic market. Having said that our priority markets at the moment are the US, Europe, travel retail and the Middle East.
DB: Internationally, are there specific markets in Europe you could highlight as ones you think might have the most potential for Rampur?
SB: Obviously, the UK is a very significant market because it’s a showcase market. With the amount of Indians that are traveling all over, for us, the UK is like a second home. They’re all familiar with the brands over here and they’re very proud, passionate to see Indian brands being served in not only fine-dining Indian restaurants but other Michelin-star restaurants and bars also. The UK is a very important market for us. We all know the UK is a little difficult to crack but we’ve made very good headway so far into the UK market. Germany is important for us. France is important,
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By GlobalDataDB: Will Radico Khaitan look to target the on-premise first before potential moves in the off-trade?
SB: In fact, it’s a mix of both. Essentially, yes, on-trade becomes very important because that’s where the visibility is and people get to try the product but we all know the on-trade is the most difficult nut to crack and it’s a slow burn. While we focus on expanding our footprint in the on-trade, you can’t forget the off-trade and online. We’re on Amazon, Whisky Exchange, Master of Malt, DrinkSupermarket – all the essential online platforms we’re already there. We’re also into bespoke off-licences, like Hedonism, Berry Bros. and so on.
DB: With more capacity coming online, it sounds as though the next couple of years could be quite an important phase in the development of Radico Khaitan’s international business. Is that fair to say?
SB: Yes absolutely. Beginning early next year itself, we’ll have more liquid available for bottling. We’re participating in the Tax Free show in Cannes next week. The whole idea is to increase our global footprint in travel retail as well because that’s one channel that gives you access to any number of travellers across countries. We are in about 40 airports worldwide.
DB: What’s your strategy for global travel retail? Which brands will be your focus in that channel?
SB: It’s our luxury portfolio. It’s Rampur, Jaisalmer, Kohninoor at the moment and then, as we go along, coming up with more luxury portfolios. That will continue to be a focus for GTR. I’d love to be in 100 [airports]. It’s very much possible but we don’t want to jump into that, put products in an airport and then suddenly run out of stock. We’re going to take the key steps as more and more liquid becomes available and keep expanding.
DB: If we look at Radico Khaitan’s group annual net sales, what percentage is generated outside India?
SB: In terms of the volume, we would be close to about 6-7% but, in terms of value, we will be about 11, 12%.
DB: Is there a vision for what those percentages could become in the next five to ten years?
SB: In terms of our overall corporate strategy, since 2006 our prime focus has been premiumisation. The focus has been to get into more premium brands where the profitability and revenue are more. I think, today, about 60% of our revenue is coming from ‘prestige and above’, as they call it. Our stated objective is to take it up to about 70, 75%. India is a huge market but, then at the same time, we’re not forgetting the international market as well. We want to take India to the world, so as our premium portfolio and luxury portfolio grow overall, both international markets and the Indian domestic market will play a very significant role. The fact is we held back supplies in India to cater to the international market so that priority still remains. We will never deprive the international market of the rightful share of our brands.
DB: Have international markets been a priority for the group because margins are better?
SB: Both in terms of margins are better and also we’ve been one of the largest exporters of beverage alcohol from India. International markets have always been our priority. It’s not that it was a kind of a side business for us at all. It was a very significant part of our overall growth strategy that remains even now.
DB: How should distillers of Indian whiskey try to compete in international markets with Scotch, Irish, Bourbon and Japanese whiskies?
SB: I’ll answer that in two parts. There were the traditional whisk(e)y origins then the Japanese came on the scene. Everyone started talking about Japanese whisky and they became the flavour of the decade or whatever. Now, Japanese is also mainstream, so that new world whisk(e)y position is vacant and, thankfully, now Indian malts have started making inroads into that category.
SB: I would say I’d be very happy if Indian single malt as a category creates an identity of its own. There are reasons for that: the growing popularity of Indian cuisine, the growing number of Indian travellers and the growing interest of international companies to come into India because, let’s face it, we are the only economy that’s growing. So, you want to have Indian food but what do you pair it with? There were only a few beers that were available but, today, you have a range of premium and luxury Indian beverage-alcohol brands that are available. That’s something which is very important as well.
DB: Competition’s always there but it has intensified in recent quarters amid the pressure on disposable incomes. Radico Khaitan has international but you’re facing stiff competition for perhaps a more cautious consumer.
SB: The key factor is the liquid. I can have a fantastic brand or packaging and all that but eventually the consumer will buy my product again only if they like the liquid. As a distiller, we are one of the largest distillers in the world, producing about 320 million litres of alcohol annually and the quality is par excellence.
In vodka, we control close to 60% of the market in India. Depending which publication you pick up, we are either the fourth or the fifth largest vodka in the world. In India, I’m competing with all the global players and still we’ve been able to withstand and hold on to our market leadership position.
The same thing applies in terms of single malts or gin in international markets. My brands retail at a much premium pricing than a lot of Scotches or the local brand leaders. As I said, the consumer eventually will fall in love with the liquid. None of my brands have any age statement on them. Still, we command a premium because of the quality of the spirit that’s inside the bottle. I don’t worry about competition because I’m not competing with anyone. The whole idea is to create a niche category of your own.
DB: Is Radico Khaitan prepared to make significant investment, boots on the ground, distribution partnerships, to get that liquid in front of consumers then? That’s key, isn’t it?
SB: Absolutely, that’s the whole thing and our focus is more on getting the foot soldiers put on the ground, strengthening our distribution infrastructure and looking at doing events, where you’re interacting with the consumer. We spend a lot on ground-level activities so that the brands get the right exposure with the right audience.
DB: Away from whisky, what are Radico Khaitan’s priorities for its other categories internationally?
SB: Our Jaisalmer Indian craft gin doing fantastically well, along with Rampur. A lot of brands [in Europe] were using Indian botanicals, Indian names but there was no authentic craft gin from India. We’ve recently unveiled our Kohinoor Indian dark rum, triple aged over here. We’ve also launched as a first in the world a world-malt whiskey, where we’ve taken the malt from the traditional origins and the new world, including Rampur, and brought them together.
Our whole idea is to take India to the world. You have a lot of these regional drinks in India, or drinks that are localised to a very small geographic area, which are being either forgotten or lost. We’re reviving all those and soon we will be showcasing them with the world as well.
DB: Ten, 15 years ago, gin was a hot category in spirits. It really gathered momentum again in markets including the UK. It has become a more mature category and growth has slowed. How confident are you that you can carve out a foothold in international markets for your gin?
SB: It’s the authenticity. In my Jaisalmer classic, we use 11 botanicals, of which seven are from India itself. In the Gold Edition, we have 18 botanicals, seven of which are there in the classic, plus seven more, again from India itself, including saffron rose petal, darjeeling green tea leaves. You get the taste of India in our gins over here, and we’ve been fairly successful in creating a niche for ourselves.
DB: Given your experience in the spirits industry, how would you describe the current trading environment? Some of the major names in the industry are seeing sales come under pressure.
SB: You know, one of the biggest advantages that we have is we have a very robust Indian domestic business, which is growing, so, I don’t have pressure to export or make huge volumes coming out of the international market. And I’m talking of luxury [spirits], which is a slow burn, which is a very patient thing. I have that luxury to be patient, to build my brands internationally and the volumes follow. We’ve seen it with Rampur. There’s no pressure per se on us because my domestic market is very robust and that gives me enough leeway to keep on experimenting, innovating and be on a brand-building spree in terms of my global markets.
DB: Nevertheless, what plans do you have to perhaps drive your more ‘mainstream’ brands internationally, those that are sold at a slightly lower price?
SB: Well, before we started our luxury portfolio, we had all those kind of mid-segment [products] and still continue to be an exporter of those into, say, the Middle East, Africa and South American markets over there. That still continues. What we’ve done is we’ve added the luxury portfolio on top of that into all those existing markets. I would love hopefully the [proposed] UK-India FTA would allow Indian whiskies to come into the UK and the rest of Europe.
DB: Will Radico Khaitan put more investment behind its mid-tier brands internationally?
SB: We do. In fact, I have a whisky called 8pm Whisky and Magic Moment [vodka] itself in lot of markets internationally. Within the imported spirits, these are the market leaders over there and we do invest behind the brands in all these markets as well.
DB: And those markets are more in the Middle East, Africa, South America?
SB: Yes. I’d love to be in Europe as well but the current regulations don’t permit us.
DB: As an engine propelling the spirits industry, premiumisation has lost some momentum. Looking ahead, what are your thoughts on premiumisation as a trend shaping the sector?
SB: See, if you look at the global players at the moment, they’re all focusing on their mainstream, premium brands. They’re letting go of the more value or less-contributing brands globally. As I mentioned, from 2006, our focus has also been on premiumisation. Yes, everyone loves to be in the premium market but, at the same time, it’s an economic requirement as well. Input costs have been going up, a lot of markets are regulated markets, where you don’t get price increases that frequently, unlike some of the Western markets. You have to premiumise by virtue if you want to continue to make certain minimum threshold margins on your brand. Premiumisation gives you that leeway. Even when the cost push is there, you still have leeway to continue to do a profitable business.
I don’t seem to think it’s going to slow down. The other thing that’s happened is one of the positives of the pandemic was people started drinking less but drinking better, so that holds well for the premiumisation.
Another factor that’s also fuelling premiumisation is GTR because more and more people are traveling now. I think out of India we’ve surpassed the pre-pandemic levels over here. Globally, also it’s going up. More and more people are traveling, so GTR becomes another showcase market and, in GTR, we all know they don’t sell value products. They’re only focusing on premium products.
DB: What’s Radico Khaitan’s approach to the small but growing market for low-and-no products?
SB: We don’t have a non-alcoholic product at the moment. We’re looking at that. It will be an interesting category in the future. Let’s face it, if I talk about the Indian market at the moment, per capita consumption is still very, very low on alcoholic products, so we still have a long way to go before more and more consumers switch over to non-alcoholic products. A case in point – though we are not in that trade – for beer in India, about 70% of the beer that’s sold in India is strong beer, which is about 8% and above, whereas globally, it’s lager and 4-5% that sells the most. India is a little different but habits are changing. Non-alcoholic is on our radar but we’d first like to focus on the alcoholic ones.
DB: We’ve spoken a lot about Radico Khaitan’s organic strategy. What role can M&A play?
SB: In fact, we are the only company that has grown all these brands. If my memory serves me right, about 16 brands organically. Today, we have seven brands in the millionaire [case] club. Two more will hopefully join by early next year as well. It’s all organic.
DB: There isn’t any interest or appetite to buy brands?
SB: Not at the moment.
