Even as Diageo, the world’s largest liquor company, explores purchase of a stake in Vijay Mallya’s United Spirits, it is set to consolidate its operations in India by introducing brands from its global portfolio and focusing on innovation.
It will soon launch Ketel One Vodka, sold primarily in North America in the super-premium segment, and complement Diageo’s premium Smirnoff and its ultra-premium Ciroc brands in the vodka category. Ketel One Vodka came to Diageo last year as part of a 50:50 company with The Nolet Group. In 2007, Ketel One Vodka and Ketel One Citroen had a combined annual volume of 1.9 million cases.
This will be followed by the launch of Zacapa Rum and Don Julio tequila. The company will invest around 10 per cent of its sales to launch the new brands and strengthen its business in India.
The expansion of the luxury spirits portfolio is in line with Diageo’s strategy to achieve sales worth £500 million (around Rs 3,560 crore at today’s exchange rates) in India by 2011. “We are looking at both organic and inorganic growth to meet the target,” Santosh Kanekar, director-marketing, Diageo India, told Business Standard. Diageo’s luxury portfolio now contributes around 20 per cent to total sales, against 10-12 per cent last year.
While Diageo will continue to push its core brands — Johnnie Walker, Smirnoff and Baileys — this year as well, the thrust will be on its new growth drivers, Captain Morgan rum and Shark Tooth vodka. “These brands are our distribution warriors,” Kanekar said. Further, it plans to aggressively push its premium whisky brand, Masterstroke, which it markets under a joint venture with Radico Khaitan. While the brand managed to sell 100,000 cases within a year of its launch, it faced a slowdown of sorts thereafter. “We realised the product experience was missing and hence we are aggressive on sampling, which will help strengthen the brand,” he said.
Diageo will also continue to market its cream liqueur brand, Baileys, for women. “The target is that one out of every three drinks consumed is Baileys,” Kanekar added. Shark Tooth, Diageo’s prestige vodka brand, on the other hand, is distilled and bottled in India and is aimed at the mature and aspiring consumer. The company has already expanded the brand with flavours such as golden apple and orange. “We plan to expand the distribution for Shark Tooth to tier II and tier III cities and take it to more states from five at present,” Kanekar said.
In terms of innovation, Diageo will launch limited edition blends for its Captain Morgan rum, VAT 69 and Blue Label. “To mark 125 years of VAT 69, we will introduce 2.5 lakh cases of a limited edition blend which will be available only in India. A similar limited edition blend for Blue Label is also being test-marketed,” Kanekar added.
Three years earlier, 60-70 per cent of Diageo’s sales came from the travel retail channel (duty-free). This contribution has now come down to 30 per cent, as the domestic business is gaining ground. Diageo India recorded a 42 per cent rise in net sales during the second half of 2008. Its Johnnie Walker Black Label and Red Label reported around 45 per cent growth, while the locally-bottled Scotch whiskies, such as VAT 69 and Black & White, grew by 35-40 per cent. Smirnoff grew slightly less than 40 per cent, owing to a larger base.
On the marketing front, the company is betting big on the digital medium. Diageo already has a mobile site, Smirnoff.mobi, reated to promote Smirnoff, and includes a ‘Vokapedia’, a nightlife guide and a pocket bartender. The site is featured in a mobile advertising campaign which will run across mobile portals and other sites.