Before he finally gave in a fortnight ago by entering into an out-of-court settlement with Kishore Chhabria over the ownership of Officer's Choice (OC) brand of whisky, Vijay Mallya had fought hard. The agreement, under which Chhabria's Allied Blenders & Distillers (ABD) paid United Spirits Rs 8 crore in return for the latter withdrawing all court cases claiming rights over the brand, thus, came as a big surprise.
For, OC is not only the world's largest selling whisky brand, it is the eighth-largest spirits brand in the world as well. Observers say Mallya's decision may have been prompted by the mess he finds himself in over Kingfisher Airlines.
It must have been a tough decision considering the ground OC has covered in the past few years. Even as the protracted battle with Mallya went on, Chhabria quietly built OC as a brand to reckon with. The real push, observers say, started around five years ago, when Chhabria took on board liquor industry veteran Deepak Roy as executive vice-chairman & CEO and gave him full freedom in operations.
"I came on board with a clear intent to take the company to the next level. I think Chhabria with more than 25 years of in-depth experience in the liquor industry has better knowledge than many. Despite that, I got the freedom to chart the course of growth. OC had good potential but had to be tweaked and had to be made relevant to the times," Roy says.
After an in-depth market research, ABD tweaked the positioning of OC on three fronts. "The earlier positioning of the brand was that of associating with sports such as rock climbing or yatching, but that was not the audience we were targeting with OC. The brand is targeted at Sec B&C and we had to make it relevant to that segment. So we created a positioning towards that where a common man aspires to be an officer and created a line – 'Bring out the officer in you'. This worked wonders," Roy explains. In addition to tweaking the positioning, the packaging was enhanced with a modern feel and was spruced up to give a big-brand feel.
"As a result of these efforts and beefing up the marketing, sales and distribution network, the brand took off. We have been growing at close to 30 per cent CAGR during the past four years," Roy says.
When OC overtook United Spirits' Bagpiper as the largest selling whisky in India in 2011, Mallya moved the Calcutta High Court seeking a stay on Chhabria raising money from external sources to fuel OC's growth. This, Mallya obviously thought, would kill two birds with one stone: One, OC's growth would be stymied helping Bagpiper regain its top position and, two, it could convince Chhabria to hand over the brand to Mallya.
The legal battle started after Mallya claimed that OC belonged to him as it was part of the package when he acquired Shaw Wallace from the Chhabria family for Rs 1,200 crore when Kishore's brother, Manu Chhabria, was at the helm. Mallya had claimed that Kishore has caused the assets of Shaw Wallace and its subsidiaries to be dealt with in a manner prejudicial to the interests of Shaw Wallace and its subsidiaries to make personal gain – in particular, the valuable ownership and control of BDA Limited, the manufacturer of Officer's Choice whisky.
In the end, however, Chhabria had the last laugh.
With the legal issues behind him, Chhabria and Roy are now focusing on raising resources of around Rs 250 crore to expand the business into many more states in India and also to fund a distillery in the west of India. ABD is expected to sell 21 million cases of spirits during FY13, 90 per cent of which will come from its flagship brand.
With a top line of Rs 1,800 crore, ABD is now opening up the semi-premium segment with Officer's Choice – Blue which will compete with United Spirits' McDowell's range of whisky. ABD has taken a lot of pain to create this product and one of the key persons in distilling Royal Stag was roped in to create the blend for this product. "We are closing in on a million cases through this. We are present only in a few cities with this brand. Expansion into other cities during this year should help in ramping up our presence in this segment as well," Roy says.
The battle with Mallya, however, will continue in the market place. The UB Group still has five of the top 20 spirits brand in the world with Bagpiper, Celebration rum, McDowell's brandy and the Old Tavern whisky.