The just-drinks interview – Vijay Mallya, Part I

By | 13 November 2008

Vijay Mallya's UB Group is becoming an increasingly important player in the international drinks business, and the airlines to whisky billionaire is no stranger to being a big player.  In the first instalment of this special two-part just-drinks interview, Olly Wehring asks Mallya about travel retail and his plans for Scotch whisky firm Whyte & Mackay which UB acquired last year.

It's been a busy day for the both of us. I've been trawling the halls of the TWFA World Exhibition, quizzing drinks companies about their travel retail plans for the coming year, while Dr Mallya gave the keynote speech at the opening conference of the week-long event.

Tonight, Mallya is hosting a herd of guests at his villa on an island just off the coast of Cannes. But, before the festivities begin, we sit down (by the pool, naturally) so I can give the man a proper grilling.

As the owner not only of Kingfisher Airlines but also UB Group, the largest beer and spirits business in India, Mallya is more than happy to be at this year's travel retail exhibition. "I truly believe travel retail is a very important segment of the business which I think is under-developed," he says. "I think a lot more could be done to develop the travel retail segment. So, we decided to have a strong participation at the TWFA this year."

The UB Group's presence in the travel retail channel has - until recently - been rather limited. Last year, however, the group acquired a stake in a US company called Liquidity, which owns the Swedish vodka brand Pinky. Since then, the brand appears to have surpassed Mallya's expectations in travel retail. "We're already the second largest-selling luxury vodka in all the British airports, behind Grey Goose," he boasts. "That was a pleasant surprise to me and maybe not so pleasant a surprise to others."

The company is now keen to up its presence on the travel retail scene, especially following its purchase of Scotch whisky company Whyte & Mackay early last year. "If you pass through Heathrow or Glasgow airport now, you will see dedicated stalls for Whyte & Mackay products," Mallya says. "There is a lot activity that we're undertaking to make sure we get share of mind. We're not afraid to use whatever resources it takes to get there."

Turning more specifically to Whyte & Mackay, the acquisition, which cost UB some US$1.18bn, grabbed plenty of headlines and elevated Mallya and UB Group's spirits unit, United Spirits, to nearer the top of the drinks agenda. The Indian company has since embarked on a premiumisation drive for Whyte & Mackay's brands, which include The Dalmore, Isle of Jura, and its eponymous blended Scotch.

Vijay Mallya, chairman of The UB Group

"Whyte & Mackay used to be more commodity-oriented," he says. "Today, it's clearly a luxury brand-oriented company. There's a very strong brand focus, at the luxury end of the market. I virtually doubled the price of The Dalmore in the US." Mallya also points to the acquisition of The Dalmore's distribution rights in the US from Beam Global last December as a clear statement of intent. "The fact that I paid additional money [to the tune of $58m] to Beam to get Dalmore back was a reflection that I wanted to completely revamp and reposition the product, which we did very successfully," he says.

One side-effect of the Whyte & Mackay transaction which has caused some discomfort for UB has been a string of disagreements with trade body the Scotch Whisky Association (SWA). While the organisation is designed to protect the interests of Scotch whisky companies around the world, the SWA has become something of a thorn in the side for Mallya.

"Whyte & Mackay was a member of the SWA before I bought it," he says. "After the purchase, I was asked if Whyte & Mackay would continue to be a member of the SWA. I said absolutely, yes. Then, when the papers showed up, United Spirits needed to also submit itself before the SWA and its rules and regulations. I said absolutely not. United Spirits is an Indian company; it's not a British company. It just happens to own Whyte & Mackay, and I see no reason why it should subject itself and all of its worldwide brands to the rules and regulations of the SWA. So Whyte & Mackay's own membership of the SWA is hanging fire."

While Mallya is keen to take United Spirits' Indian-made brands abroad, again, he feels the SWA isn't on his side. "I've had this constant battle with the SWA on the definition of whisky. They won't let me export my Indian whisky out of India and into the European Union. My last offer to them was that I said I was quite happy to label it 'Indian whisky' the same way that Suntory makes Japanese whisky. Why should there be any sort of discrimination? But for reasons best known to them, which is why we have our little disagreements every so often, they just won't allow it.

"I would dearly love UB Group's Indian products - which I feel have a growing relevance in international markets - to be piggy-backed on Whyte & Mackay's range of products in whatever distribution channel they may sell in," he adds.

In its defence, the SWA has always maintained that the entry of the UB Group into the Scotch whisky arena has been nothing but good for the sector. "We look forward to working closely with Whyte & Mackay's new owners on matters of mutual interest to protect and promote Scotch whisky in India and other international markets to the benefit of all Scotch whisky distillers," a spokesperson for the organisation said last year.

It would appear, however, that there is still some way to go before the two sides are as friendly with each other as both would clearly like to be.

Sectors: Beer & cider, Spirits, Wine

Companies: Whyte & Mackay, UB Group, SWA, Beam Global, Suntory

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