The Hindu Business Line : High-spirited growth

I'd say that excess of anything is bad. If you eat more you get fat, if you exercise excessively your bones get crushed... that way, you have to be moderate in your drinking too.

Lalit Khaitan: One for the road... to success. PICTURE BY THE AUTHOR

He's in a business where he has to keep a hawk's eye on the number of tipplers in India, and reels off the figures from the top of his head... the Indian market at 100-110 million cases per year is growing between 10-12 per cent, adding 10-12 million cases each year. The prospective "drinking population" — between 20-59 years — is 48 per cent of the total Indian population, which by 2011 will go up to 56 per cent, adding "another 115 million people to the drinking population," says Lalit Khaitan, Chairman and Managing Director of the Radico group, the second largest IMFL manufacturer in India, after the UB group.

On how his business, with a turnover of Rs 1,300 crore, is meeting competition from UB, he says, "You can't convert somebody who is drinking one brand for 10 years, so we're going more for the younger crowd." And going by his statistics, there should be enough and more thirsty Indians for alcohol manufacturers like him. "In the 20-59 age group, 10 years ago, only one out of 300 Indians consumed alcohol; now that figure is one out of 20."

That social stigma once attached to alcohol intake is no longer there, is good news for his business. "Once upon a time eyebrows would go up at a woman with a glass in her hand; but today a woman having wine or vodka is acceptable," says Khaitan, whose company makes 12 million cases a year from 37 units, including one in the UK and one in Western Africa.

Khaitan grew up in Kolkata, completed B.Com from St Xaviers in 1962, and joined his family's steel and furniture business. But in 1973, when his family acquired the then sick Rampur Distilleries, about 200 km from Delhi, he shifted to the Capital. "In those days there was not much of a due diligence, it was a sick company and we took it over at a very cheap price," he says, refusing to divulge the amount, adding, "I was the vice-president of a junior chamber and had gone for a meeting to Kashmir and my father said: `Yeh mil rahi hai, dekh lena."

He was only 29, knew nothing about the distillery business but went by his gut feeling for the company with a share capital of Rs 20 lakh, which was making industrial alcohol, with IMFL being a very smallcomponent; about 2,000 cases a month.

In 1995-96, its turnover was only Rs 70-80 crore and "we realised we were already producing good-quality alcohol, and bottling for Shaw Wallace, and big money comes only when you have your own brand."

The brands came in 1996; the first being the highly successful 8PM, launched on 8/8/1988, "a date with many 8s in it." In the first year, Radico made one million cases of 8PM and got into the Limca Book of Records for this feat; now it makes over 4.3 million cases in a year. The name was selected "as in India people start drinking at 8 p.m. and in smaller places people can't pronounce fancy names."

It was placed in the middle segment with a price between Rs 180 and Rs 220 depending on regional levies, and the UK magazine Drinks International declared 8PM as the fastest growing whiskey brand in 2004-05.

He says the key to success is "best product at the right price." The company already had the Contessa brand, and it changed the packaging and adopted a different marketing strategy.

"Today, Contessa is the largest selling rum in the army and we have a market share of 22 per cent," he says, adding that the Indian market is 65 per cent whiskey, 17 per cent brandy, 16 per cent rum and 7-8 per cent white spirits like vodka and gin.

But while the whole industry is growing at 10-12 per cent, the white spirits segment is growing at 40 per cent, says Khaitan. "The world over demand for vodka is high; in the UK 70 per of liquor is vodka. White spirit is ideal for making cocktails and women find it comfortable because it doesn't smell."

Radico's Old Admiral brandy, which sold 1.4 million cases last year, has also been "adjudged the fastest growing brandy and we've been regularly getting awards for it."

Its vodka, called Magic Moments, packaged attractively and launched six months ago in the premium segment, is doing well too.

Does he sometimes feel uncomfortable about making a product that can result in addiction and ruin lives?

"I'd say that excess of anything is bad. If you eat more you get fat, if you exercise excessively your bones get crushed... that way, you have to be moderate in your drinking too." He claims that as a company "we're aware of the pitfalls of alcohol addiction and our people do local promotions on drinking with responsibility."

Expanding exports

On exports, Khaitan says last year's export turnover was Rs 10 crore; in 2005-06, it was Rs 40 crore and this year it'll be around Rs 150 crore. "We're already exporting to 30 countries, including West Asia, South-East Asia, Africa, the UK, the US, South America, Australia and New Zealand. "Indian liquor is very well received in the international market and we are going to substantially expand our exports."

In the UK, Radico will make 8PM, Contessa, Magic Moments and introduce some new brands, making the UK its hub for Europe.

In Africa it's putting up a bottling unit, and has plans for more overseas units for which locations are being finalised.

Radico has put up a grain alcohol plant in Rampur at Rs 85 crore, where production began this April. "With this, our total capacity from Rampur comes to 90 million cases, which makes us the largest in India at a single point." Grain-based alcohol has a twin advantage — superior quality and greater international acceptance.

The Radico international division, in partnership with the huge California winery E&J Gallo, imports wines to India.

On growth, Khaitan says that in the current year (2006-07) and next year (2007-08) he expects the topline to grow by 25 per cent in turnover, and the bottomline by 20-25 per cent. At the moment he has no active plans for manufacturing wine in India; "the wine market is not large, it is only five lakh cases or 5 per cent of the total liquor market which is 100 million cases.

His favourite drink is single malt whiskey — McAllen and Glenmorangie; but he makes it clear that he's a "social drinker... I don't drink every day, and have a drink once a week at parties."

On the global perception of India changing, Khaitan says, "Since I'm not that young, I've seen days when in the UK people would look at you in shops as those who wouldn't buy much. But today there is a drastic change in that perception and we are internationally recognised. In the world of business, everybody has realised that India is a serious player."

And yet there are two Indias — one of haves and one of have-nots. How does he look at this disparity?

"I'd look at it this way. We're very proud of our Himalayas... but if we were to share it with everybody, each of us would get only some grains of the mountain. The same way there can be only one L.N. Mittal, but he has made us proud; that as an Indian he could buy Arcelor. Similarly, there can only be a few Ambanis, Sunil Mittals or Rahul Bajajs."

A health fanatic

Coming to the man behind the liquor baron, Khaitan is "very religious; I do my pooja in the morning and evening, but these are short poojas. I don't go to temples regularly, but do have a temple in the house."

Similarly, he's a "health fanatic. I exercise every day for 90 minutes; I have a gym in the house and for 40 years have not missed exercising, whether I'm at home or travelling anywhere in the world."

A vegetarian he is very careful about what he eats, avoids fried stuff, and loves Swiss and Chinese cuisine. He likes to do "serious reading" and his current favourites are two books of Stephen Covey including Seven Habits of Highly Effective People and Robin Sharma's Monk Who Sold His Ferrari.

He doesn't surprise you when he says he loves old Hindi film songs and devotional music.

Dream for Radico?

"In 3-5 years, I want Radico to become an Indian company with a very strong global presence."

Response can be sent to rasheeda@thehindu.co.in

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