INDIA: Diageo pushes Radico Khaitan JV for distribution presence
Diageo has clarified its plans for the Indian spirits market, following news it was taking greater control of the marketing for its IMFL joint venture in the country.
Late last month, the drinks giant said it was set to take "a more active role" in the marketing activities of the JV with Radico Khaitan for the Masterstroke whisky brand. "The JV will draw on the best of both partners, including sales and distribution strengths, in order to derive maximum synergies from both operations," Diageo said.
Speaking exclusively to just-drinks last week, John Pollaers, president of Asia Pacific Diageo, said the company intends to add greater support to the JV. "I think the whole basis of the JV with Radico Khaitan was to leverage our innovation capability with their distribution and route-to-market," Pollaers said. "We've always had someone in there looking after marketing, what we're saying now is that the intention is to start to support the joint venture more from our individual companies - it's more of a refinement."
Pollaers said the JV was part of a triple-pronged attack on India's spirits market. "The focus (in India) is on the super deluxe part of our portfolio, so our reserve brand business has been growing very successfully there," he said. "It's the second biggest market for (vodka brand) Ciroc outside of the US, for example. So, we're building our imported business strongly.
"At the same time we have a 'bottled in India' business, where we've had fantastic growth, with Smirnoff for particular.
"So, we've got our super deluxe imported business and domestic international business growing. Then we've been looking for the way to profitably enter IMFL territory, given that we're up against some fairly scale players. That's the purpose of the Radico Khaitan JV."
Diageo will continue to make its spirits import business top priority in India, followed by the international spirits that are bottled locally. "Then we'll continue to look and learn and expand our interest in that premium mass territory," Pollaers said. "The underlying strategy is that there are entry points to trade people up over time. Once the duty rates in India normalise, we would expect our international business to become much bigger. But we do need to build our scale for distribution right now. We're a bit sub-scale from a distribution point of view."
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