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Wednesday, December 27, 2006

With Mallaya on top, Indian liquor industry on a high in 2006

The liquor industry remained on high spirits in 2006 with the insatiable Vijay Mallya making strides on foreign shores, while foreign companies, including the formidable Diageo, went for a foothold in Indian market.

Mallya, who has gulped down rivals like Shaw Wallace, made it known that for him 'enough is not enough'. The 'King of Good Times', as he likes to be called, refused to be cowed down when his spirited Rs 3,000 crore bid for France's Champagne Taittinger failed.

Within months of the failure, the liquor baron announced that his UB Group would acquire winemaker Bouvet-Ladubay, a subsidiary of Taittinger, for 15 million dollars.

Mallya, who is also looking at foraying into China, entered into a tie-up with the Russian Standard Group for distribution of each others' products in India and Russia.

UB is also in talks with White and Mackay for a possible buyout as it intends to enter the high-profile European Scotch Whisky market, besides eyeing a wine firm in Africa and another spirit firm in New Zealand.

And just as the Indian liquor giant moved to new locales, Diageo, the global spirits major, formed a 50-50 joint venture with Radico Khaitan to roll out products in the Indian Made Foreign Liquor (IMFL) segment.

Diageo, which has a huge repertoire of brands like Johnnie Walker-Black Label, Black & White, VAT 69 and Smirnoff, is gearing up to launch a new whisky brand in India through the joint venture. It also plans to buy a domestic wine company as it intends to produce wine in India.

On its part, Radico Khaitan is also looking at expansion on a stand-alone basis and has kept aside around Rs 150 crore for organic and inorganic growth. Apart from Diageo, another premium brand maker that expanded in India was Beam Global Spirits and Wines, the fourth-largest premium spirits company in the world.

Beam Global, whose current portfolio in India includes flagship brand Teacher's, entered a new category in the country with the introduction of an 'Indian Made Foreign Liquor brand, Whisky DYC, adapted exclusively for this market.

The company, which will blend and bottle DYC in India, said India was a "focus market" for Beam Global and the launch of DYC was the first of many initiatives designed to tap the potential of the market.

Reinforcing the bullishness on the Indian market, SABMiller plc, one of the world's leading brewers, bought out Australian beer maker Foster's Indian subsidiary for 120 million dollars. SABMiller said it would extend Foster's Lager nationally through its network of ten breweries and seek significant cost benefits from brewing and distributing the brand locally.

Foster's India, the third-largest market for the Fosters brand globally, produced, distributed and supported Fosters Lager, Amberro Mild and Amberro Strong beer brands in India.

SabMiller was again in news for its interest in acquiring the beer business of Mohan Meakin and also for picking up an interest in Mount Shivalik group, makers of Thunderbolt beer. Both the deals remained confined to speculation with no official comment, but SabMiller's acquisition plans would certainly pose a risk to UB's dominating share in beer market.

The Indian beer market, which grew about 7-8 per cent over the last five years, is expected to grow by close to 20 per cent this fiscal. Industry analysts say tax and levies on beer are anticipated to fall over the next 2-3 years, driving down retail prices by 25-50 per cent. Beer will sell for Rs 15-20 per 330 ml can and Rs 20-30 per 650 ml bottle.

On the policy front, India and France initially agreed to resolve through talks a dispute over high import duties on wine and spirits. However, soon after, European Union dragged India to World Trade Organisation's dispute settlement body over import duties and taxes on wine and spirit.

The issue intensified when Indian spirit firms accused Scotch Whisky Association of Europe for blocking their entry into the high-profile liquor market by not permitting molasses-based whisky to be sold in Europe.

Notwithstanding the disputes, the liquor industry looks set for a bright future with the expected increase in alcohol consumption suggesting a robust growth of 20-25 per cent annually over the next five years.

1 comment:

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