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Liquor firms go on a buyout spree

Reghu Balakrishnan  |  Mumbai 

For India’s leading alcohol makers, acquisition is a synonym for expansion. The top players in the industry, including and Radico Khaitan Ltd, are going on a buyout spree to build a pan-Indian presence and exploit the high growth of the sector.

Officials at big liquor say it’s easier to acquire small with production licences than getting new manufacturing licences.

“Getting new manufacturing licences in the alcohol industry is difficult nowadays due to the lengthy bureaucratic procedures. Acquiring with all permissions is the easier route to penetrate into newer markets,” said Amit Dahanukar, chairman and managing director, Tilaknagar.

Companies are always looking for ways to enter new markets as the country’s liquor industry is growing at 30 per cent annually.

Good time ahead for liquor companies, as the industry is projected to grow three fold by 2015
19,000 million litres 
Alcohol consumption projected in India by 2015 from the level of 6,700 million litres in 2011, a growth of 30% annually
Rs  1.4 lakh cr 
Size of alcoholic beverage market by 2015 from the present Rs 50,700 crore
80% Accounts for whisky, about 
Rs 40,500 cr. Expected to cross Rs 54,000 cr in 2 years
10% India’s contribution in global alcohol beverage imports in the region
Leading liquor consuming states: 
Kerala (16%) and Punjab (14%)
Source: Assocham

Radico Khaitan, maker of popular brands such as 8 PM whisky, and Magic Moments vodka, this week acquired two whiskey brands — Royal Lancer and Elkays —from the Mysore-based Yezdi group, the onetime makers of the famous Yezdi bikes. The buyout is expected to strengthen Radico’s presence in South Indian whisky markets.

Raju Vaziraney, chief operating officer of Radico Khaitan, said: “Cultivating a brand is not an easy task and if the brands with sale of half a million cases is up for sale, buyout would be the best option for fast expansion.”

Similarly, Tilaknagar acquired seven brands in 2010 in Punjab. Through the acquisition of Alcobrew Distillieries India Pvt Ltd in Punjab, the company added brands such as White House whisky, White House brandy, Golden Chariot whisky, Bachelor Deluxe whisky and Bonking rum to its portfolio. Punjab is the second largest liquor consuming state with 14 per cent of all the liquor consumed in India after Kerala, with a consumption of 16 per cent.

Last year, Tilaknagar acquired the Punjab-based bottling unit, Punjab Expo, which has a bottling capacity of 50,000 cases per month. The deal is likely to give the company a foothold in the north Indian market. In March, Tilaknagar announced buyouts of four companies — P.P. Caps, Srirampur Grains, Shivprabha Sugars and Mykingdom Ventures, an infrastructure developer.

Buyout of Srirampur Grains and Shivprabha Sugars will help Tilaknagar strengthen its raw material supply chain, while Mykingdom Ventures will help it strengthen its in-house expertise in new projects.

The high growth in the alcohol market fuels the buyouts in India. According to a recent report by the industry body Associated Chambers of Commerce and Industry of India (Assocham), the country’s alcoholic beverage market, comprising beer, wine and spirits, will reach over Rs 1.4 lakh crore in 2015 from the current size of around Rs 50,700 crore. Alcohol consumption in India will cross 19,000 million litres by 2015 from the current level of 6,700 million litres, the report added.

The market of Indian made foreign liquor (IMFL) is $2 billion (125 million cases) and that of country liquor is $ 2.5 billion (225 million cases). The IMFL market share is expected to grow to 56 per cent from the current 37 per cent by 2015. Sales of whiskey, which accounts for 80 per cent of Indian liquor market, is expected to cross Rs 54,000 crore in two years from the current sales of Rs 40,500 crore.

Last year, Seamus McBride, chief executive officer of leading spirit company Bacardi Ltd, reportedly talked of plans for India expansion through acquisition route.

Mahesh Madhavan, Bacardi's managing director, Southeast Asia, told Business Standard: “Clearly India and China are the markets of the future, especially given the favourable demographics of these countries. If any new company has to come into the country and does not have distribution strength, brand or company buyout is the easiest way to get that headstart. Also, possibility of new brand succeeding is low and high on investment. Thus the hunger to buy brands that are established."

He, however, refused to comment on the company's buyout plans in India.

Last year, Bacardi had strengthened its presence in India by purchasing the 24 per cent stake of its partner Gemini Distilleries Pvt. Ltd in its joint venture with Bacardi Martini India.

First Published: Thu, May 17 2012. 00:30 IST