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Playing the scale game in the Indian Made Foreign Liquor (IMFL) market can be tricky, with rivals such as United Spirits (USL) to contend with. But Allied Blenders & Distillers (ABD), the number three player by volume, has identified a different route to do so.
"Though we are second to USL’s Bagpiper in the popular whisky segment with Officer’s Choice, we realise it is better to identify niche segments which are not crowded. This way, we can command a price premium without having to discount heavily to achieve volumes," Deepak Roy, executive vice-chairman and chief executive officer, ABD, said.
USL’s total volumes per annum are close to 100 million cases, while Pernod Ricard and ABD, the number two and three players, have figures of 16 million cases and 12.4 million cases per annum, according to him. One case carries nine litres or 12 bottles of 750 ml.
ABD is putting this strategy to work by launching a premium variant of its Class Vodka brand next month. The latter plays in the regular vodka segment and competes with White Mischief from USL. The premium variant, Class 21 Vodka, will play in the prestige segment and will compete with Magic Moments from arch-rival Radico Khaitan, the number four player by volume in the over 200-million-case-strong IMFL market.
"Class 21 will be priced 15 per cent more than a Class Vodka," said Roy. "We don’t expect to get huge volumes, but at least our gross margins will improve."
A 750-ml Class 21 bottle is priced Rs 250-280. The new variant would be over Rs 300 in price, said a source in the know.
ABD will not stop at vodka alone. The process of upscaling its portfolio would be taken to other categories, informed Roy. "In the next 24 months, there will be at least four new brands in various categories," Roy said. "All of them will be in vacant niches, where we can get quick gains. This way, we do not have to fight a protracted battle with USL, which is not easy."
Most second and third-rung IMFL players agree. "Premiumising one’s product portfolio" is becoming the preferred route to improve margins.
In an earlier conversation with Business Standard, for instance, Radico Chief Financial Officer, Dilip Banthiya, had said the company would launch two premium whiskies in 2010-11. It has done so with the launch of premium whiskies After Dark and Eagles Dare in select markets in June this year. Its two other premium products – Morpheus, a premium brandy, and Magic Moments, a prestige vodka – are said to be doing well.
According to analysts, Radico’s gross margins per case across its portfolio are on par with ABD’s, thanks to the success of Morpheus and Magic Moments in recent months. "It is close to Rs 150 per case, which is also what ABD derives," said an executive with a rival liquor company.