Radico Khaitan Grows With Premiumisation Focus

Consuming liquor may be injurious to health, but investing in liquor stocks is ordinarily not. In fact, liquor stocks are steadily profitable, even during recession when consumer demand for alcoholic beverages tends to be relatively inelastic.  A number of liquor stocks on the Bombay Stock Exchange has appreciated 35-44 per cent over the past five years. Also, strong investor interest was evident during the recent initial public offering (IPO) of Allied Blenders & Distillers, one of the largest exporters of Indian-made foreign liquor (IMFL), which was subscribed 51 per cent on the first day of bidding. The company raised Rs 449.10 crore from both foreign and domestic anchor investors just before the issue opened.

A longstanding favourite of investors, Radico Khaitan, the fourth-largest Indian liquor company, stands out with its stock appreciating more than 44 per cent in the past five years. For the fiscal year 2024, Radico Khaitan reported revenues of Rs 15,483.88 crore, a notable increase from Rs 12,743.91 crore in FY23. The company’s total IMFL volume for the year was 28.73 million cases, reflecting a 1.7 per cent increase.

Growth and Innovation
Founded in 1943 as a distiller and bottler, Radico Khaitan is today one of India's largest IMFL manufacturers. The company’s international footprint extends to more than 100 countries across six continents, including Global Travel Retail, showcasing its capability to penetrate diverse markets. Radico Khaitan entered the IMFL market in 1998 with the introduction of 8PM Whisky, the first whisky in the regular category to include blended scotch. This launch marked the beginning of the company’s focus on premiumisation.

In its first decade of IMFL operations (1998-2006), Radico Khaitan developed strong manufacturing capabilities and established a pan-India presence, achieving sales volumes of more than 10 million cases. The company then embarked on its premiumisation journey, launching Magic Moments Vodka, which became India’s best-selling vodka and one of the largest globally. In 2016, the launch of Rampur Indian Single Malt Whisky elevated the company’s premiumisation efforts to a new level. Jaisalmer Indian Craft Gin, which now holds about 50 per cent of the luxury gin market in India, is another testament to Radico Khaitan’s ability to resonate with consumers internationally.

Strategic Focus
In FY24, Radico Khaitan delivered strong operational performance despite a challenging macroeconomic environment. The company reported robust growth in its Prestige & Above brand volumes, highlighting the strength of its brand portfolio and excellent execution capabilities. 

Commenting on the results and performance, Lalit Khaitan, Chairman and Managing Director said: “FY24 has been one of consolidation for Radico Khaitan. During the year, we delivered strong operational performance despite a difficult macroeconomic environment. Radico Khaitan has been strengthening its core brands through focused marketing investments and launching select new brands in the super-premium and luxury segments.” The senior Khaitan added that his company will remain focused on implementing its strategic plan by driving operational efficiency, introducing innovative products, and expanding its presence both on-trade and off-trade to sustain long-term profitable growth. 

“During the year, we completed the commissioning of our 350 KLPD distillery at Sitapur. The commissioning of this facility not only secures long-term ENA supplies but also positions us strongly to capitalise on future growth opportunities in the branded business with enhanced bottling capacities,” he said. 

With rising affluence, low per-capita consumption levels, and a strong premiumisation trend, the company is confident about the mid- to long-term potential of the Indian alcoholic beverage sector, the senior Khaitan said.

Premiumisation in Key
Since 2019, Radico Khaitan’s premium brands have grown 180 per cent, with a sustainable improvement in realisation per case. In FY24, Prestige & Above brands accounted for 45.6 per cent of total IMFL volumes, compared to 28.3 per cent in FY19. 

Says Abhishek Khaitan, Managing Director, Radico Khaitan, “Given our premiumisation focus, our Prestige and other higher category brands today account for 46 per cent of our IMFL sales volume and 69 per cent of IMFL sales value. In this context, it is heartening to note that the Magic Moments brand family has achieved 6.3 million case sales and crossed the milestone of Rs 1,000 crore in sales value, growing at 25 per cent over last year.”

He says the pipeline of new launches of the company remains very strong having launched a number of new brands in the super-premium and the luxury space over the last few years. “The dynamics of the global alcohol industry have changed significantly over the last few years. New entrants among the consumers are driving a novel consumption pattern, with alcohol intake becoming a lifestyle and societal norm. Global consumers, especially the Gen Z and the millennials, are more open to experimenting with their drinks. They like to try out new things and are not tied down by conventions when it comes to alcohol, especially best-in-class spirits. They are more inclined to spend on premium brands that offer quality and innovation,” says Khaitan.

In the overseas market as well, the company presents itself as a leading player riding on superior quality, innovation, and world-class packaging. The company’s international footprint spans over 100 countries across six continents. Understanding regional consumer preferences and a commitment to sharing the mysticism and flavors of India drives Radico Khaitan’s global innovation efforts, claims Khaitan. 

Future Outlook
Radico Khaitan plans to continue expanding its global footprint with its premium and luxury brands through more distribution tie-ups and an expanded on-trade presence. The company remains focused on innovation, research and development, and consumer centricity, all backed by integrated manufacturing facilities and a strong distribution platform. “We will continue to focus on expanding our footprint on the global scale with our premium and luxury brands through more distribution tie-up and expanding on-trade presence,” said Khaitan as parting thoughts. 

Radico Khaitan exemplifies the potential of investing in India’s robust and recession-proof liquor sector. Investors and stakeholders can look forward to the continued success and strategic advancements of most listed liquor companies in the coming years including Radico. For the government, particularly the state governments, the liquor companies are extremely crucial, serving as significant tax revenue sources. Taxes on alcohol sales fund essential public services, infrastructure projects, and social programmes. 

The industry's robust demand ensures consistent revenue streams, thus generating consistent tax revenues for the state governments. Effective regulation and taxation of liquor businesses and its healthy growth, ironically, is a boon in strictly economic terms, a dilemma that will continue to baffle the citizens.