The Hindu Business Line : An issue of premium

Getting volumes in the premium end of the Scotch whisky market in India may be tough, but Asif Adil, the new Managing Director of Diageo India, intends breaking that myth. With intentions of straddling every segment of the premium market, the world's largest spirits company is revamping its strategy once again in the Indian market.

Having sold off its IMFL (Indian-made foreign liquor) brands through a management sell-out in 2001, it now intends returning to the `premium mass' market (the lowest end of the premium market) with a slew of launches. Not restricting its business to its iconic liquor brands such as Johnnie Walker, Diageo is also exploring new categories such as wines and gins, which could be brought in from its international portfolio.

Having served on the board of Shaw Wallace and McKinsey earlier, Asif Adil has fresh ideas for Diageo. According to him, his job will be to innovate across consumer channels in the premium spirits segment, imparting an `entertainment' aspect to them. Says Adil: "The spirits business is about being premium and entertaining. It is not about consumption of alcohol but about celebration. In the next two years, we want to be the most celebrated FMCG company in India. We want to redefine our business strategy and put together products and services to grow our presence in the premium market."

With plans of adding to its portfolio of premium brands, Diageo is bringing in single malts such as Talisker, Oban and Glenkinchie at prices higher than its existing brands. Besides, its iconic Johnnie Walker brand is expected to have additions in variants such as Blue, Green and Gold apart from its Black and Red. Premium gin brands such as Tanqueray and Don Julio, the tequila brand, are also lined up. It will add the premium Ciroc vodka to its Smirnoff. The action is not all restricted to the top end of the premium spirits market. The premium mass market is the new market which the spirits major is exploring simultaneously. The plan is to innovate and go down the price strata within the premium segment in both brown and white spirits. Diageo is looking at a price between that of IMFL, where prices begin at Rs 500-600, and Scotches, which retail above Rs 1,000 per bottle.

"We would be launching two new premium brands specifically for the Indian market but these would not be in the IMFL category. These brands would get bottled at our facilities in India," states Adil. The idea is to bottle some of Diageo's brands from its international portfolio and not necessarily create India-specific brands for the premium mass segment.

Observes Adil, "Aspiration levels are going up and people are trading up with their brands. We feel that in the case of spirits, consumers are willing to scale up by 30-40 per cent in prices and there is a wide space existing in the premium segment in that price gap." Diageo expects to bring in some international quality liquor with attractive packaging and easy-to-reach price points to compete with Seagram's host of IMFL brands.

Along with the brands, there are schemes to bring in experiential marketing to go with them. Emulating the McDowell's Indian Derby, Diageo will bring in Indian 2000 Guineas, one of the top five horse races in the countries. At the same time it would be launching Johnnie Walker Clubs, an arts foundation to promote musical talent and is even contemplating opening a bartending school under the brand in the metros. For Smirnoff, it is planning cafes to educate customers of the various mixes possible using vodka.

Diageo also intends adding new categories such as wines and beers to its portfolio. "We will explore all these new segments with our own products from the international portfolio using the bottling and distribution networks of local partners with whom we are in talks," says Adil.

Exploring and innovating new distributing formats, Diageo is tapping into new segments such as corporate gifting and even the wedding market as an added distribution channel for its brands.

Modern trade is also being considered a viable distribution channel. Diageo is in talks with the Future Group (formerly Pantaloon Retail) to sell its brands. As Karnataka is now the only State where the laws allow retailing through organised retail, the liquor major has decided to launch its offerings there.

Says Adil, "We expect to be available at Food Bazaar in Bangalore within the next few months and would be innovating our products to cater to the modern trade." In future, Diageo will consider forging more relationships with retailers. At present, the company is eyeing access to exclusive shelf space at the Food Bazaar outlets in Bangalore. "We are still lobbying with the Government to make changes in the law pertaining to liquor retailing in the rest of the country. However, Bangalore is the only city where our brands will be available."

Trying to make a difference to liquor retailing in the country, Diageo India has taken on the onus of `redefining the liquor retailing environment' and has also created teams to cater to the modern trade. It will now create merchandising space within Food Bazaar. It will also create special packs to cater to this segment, such as party and celebration packs. Apart from liquor, the shelves would also stock bar accessories and soft drinks to go as mixers for the drinks being sold.

Adds Adil, "We would give a new look and feel to our modern liquor formats. The existing liquor shops do not allow for attractive merchandising and one cannot touch or feel the products. Customers make purchases based on recall value and impulse purchases are not exactly happening. We will try and make a difference to liquor retailing through the modern format stores." Apart from Food Bazaar, Diageo is also engaging in wholesale retailing by tying up with the Metro chain in Bangalore.

There are also plans of partnering with duty-free shops as and when privatisation is allowed in this sector. "The arrivals duty-free segment is a big business opportunity. At the moment, we do supply our merchandise to such stores but we are waiting for privatisation in this sector," says Adil.

However, industry observers are not too enthusiastic about Diageo's new strategy for the Indian market. Claims an industry veteran, "It is not a strategic move for Diageo to straddle so many segments in the spirits business. It should not have exited the premium mass segment in the past and to get back to it once again is a wrong move. It should have clear focus and not make half-hearted attempts to be present in all segments of the premium spirits business."

But Adil is clear on his present objectives. "It all depends on what is strategic at a particular point of time. Strategy is a continuous and dynamic process and it depends on the needs of the market. The company did what was right at that point of time," says he. With claims of making profits in the Indian market, Diageo will be relying on innovations in products and channels to drive growth in the Indian market. By entering the premium mass market once again, Diageo is betting on India to be one of the fastest growing spirits markets.

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