Radicos High Ambition

When this year comes to an end and the liquor industry takes stock of its sales figures, Lalit Khaitan, chairman and managing director of Delhi-based Radico Khaitan, expects to be raising a toast _ to himself.

Khaitan thinks he'll be celebrating a swift rise up the industry ranks from his current fourth rank to number three, that is, just behind Vijay Mallya's UB group and Manu Chhabria's Shaw Wallace. "People are talking of only three names in the business _ Mallya, Chhabria and me," says Khaitan with unabashed pride.

Sure, the two will still be head and shoulders above Khaitan, but he says he'll have outgrown such established players as Ladli Prasad Jaiswal of Jagatjit Industries and Kapil Mohan of Mohan Meakins.

 

And in case you think Khaitan is intoxicated by ambition, he'll give you the numbers to show otherwise. During this year, he has plans to up his liquor sale from 3.2 million cases (of a dozen 750 ml bottles each) to five million cases.

According to Khaitan, the sales volumes of Jagatjit Industries and Mohan Meakins have stagnated at 4.2 million cases over the last couple of years; If the trend continues this year, Khaitan will nudge them off the third spot.

Khaitan is on a high because he has certainly grown rapidly. Two years ago, he had set himself a target of five years to reach the 5 million mark. "He'll reach that figure before that," admits a rival.

Life started looking up for the 50-something Khaitan, a Marwari with roots in Calcutta, three years ago when he split from his two brothers, Gangesh and Shailesh. The assets of the family flagship, Rampur Distillery, were divided into three. Lalit got the crown jewel _ the distillery at Rampur in Uttar Pradesh. This is the country's largest distillery with an annual capacity of 40 million litres and the 49:51 joint venture with American Brands Inc, Whyte & Mackay (India).

Traditionally, Rampur Distillery had a good presence in the canteen stores department of the armed forces with its Contessa rum. While it had 19 per cent share of the market, Old Monk's share was 23 per cent.

The brand equity of the rum had spilled over to the civil market too. At the same time, the realisation stuck Khaitan that because of their internal problems, Jagatjit Industries and Mohan Meakins were vulnerable targets. He decided to take the plunge.

First, Contessa was launched in the civil market. Then, in late 1998, Khaitan launched 8pm, a whiskey in the regular segment. And this altered Khaitan's fortunes. "No other whiskey has touched one million cases so quickly," claims Khaitan. Indeed, 8pm crossed the one million mark in less than an year, fact acknowledged by its rivals _ including Shaw Wallace.

Apart from other things, Radico Khaitan president (sales & marketing) Amar Sinha attributes the success to an innovative advertisement developed by the advertising agency Enterprise Nexus. "It was shortlisted by the Bombay Ad Club as one of the four best advertisements of the century," he says.

But his rivals say the large volumes came in from some aggressive pricing by the company. In most markets, 8pm is avialable at a 4-5 per cent discount over its rivals like Mallya's Bagpiper or Jagatjit `s Aristocrat Premium.

Khaitan now plans to build on these volumes. This year he plans to double the sale of 8pm whiskey to two million cases, improve Contessa volumes from 1.5 million cases to 2 million cases, sell half-a-million cases of Whyte & Mackay's Whytehall whiskey and another half-a million cases of its other brands like Genesis, Findlaters and Royal Peg.

He also plans to launch a whiskey in the semi-premium segment under the brand Special Appointment. Later in the year, he plans to get into beer. He already has tie-ups with three breweries to bottle for him. Talks are also on to become a distributor for some overseas companies which have a strong portfolios of wines.

Rivals suggest that he'll probably have to scale down his ambitions a peg or two. For one, the industry is awash with rumours that American Brands has offered to buy out Khaitan's 49 per cent stake in Whyte & Mackay _ a fact Khaitan does not deny.

There is a reason for it. With the duty on imported liquor slated to come down in two years from 225 per cent to 75 per cent under India's commitment to the WTO, liquor multinationals have renewed their interest in their Indian subsidiaries.

If Khaitan is out of Whyte & Mackay, his plans to surge ahead of Jagatjit Industries could dry up. His projected figure of five million cases for the year will be cut short by a million cases, and, in that case, his four million cases will still be less than Jagatjit Industries' as well as Mohan Meakins' 4.2 million cases.

There are other grounds for scepticism. Says a rival, "His forte is the armed forces where brand building doesn't work." To be sure, about 25 per cent of Contessa rum is sold through the canteen stores department, though the figure for 8pm is negligible.

Abhishek, Khaitan's 27-year-old Harvard-educated son who is the executive director of Radico Khaitan, sounds confident. "Getting market leadership in the armed forces is more difficult as the only selling point there is quality. And we have proved ourselves by getting a definite five per cent lead over Old Monk there," he says.

One factor could pour cold water over Khaitan's grandiose plans: Jagatjit Industies getting its act together. The rumour has been doing the rounds that the octagenarian London-based Jaiswal has found a partner to restore the sagging fortunes of his company. And some months back, it sold its health drinks business to Smithkline Beecham. This could well be the first step towards getting a partner in the company who wants to focus on liquor.

In addition, another player finished the last year with volumes similar to Khaitan's: United Distillers & Vinters sold three million cases each as against Khaitan's 3.2 million. Does Khaitan assume that it won't sell more this year? No, but he hopes to sell more than it.