M Padmakshan

Mumbai

Kishore Chhabria is the colossus now towering over the 320 million cases Indian spirit industry.
With over 30 million cases sales that account for over 10 % of the entire market, and gunning
for strategic acquisitions of brands and distilleries, the journey of Mr Chhabria,from a 3 million
cases single brand company has been an eventful one.
There was only another Indian who powered the industry in a similar fashion before him Vijay Mallya . Mr Mallya, however has ceded control of his company United Spirits to Diageo,
the worlds largest spirit manufacturer, leaving his space in the Indian spirits industry
vacant,almost.
The space left by Mallya is deep and wide, but the industry observers believe Mr Chhabria will
be the one to be watched closely,for he, with plans for strategic acquisitions of brands as
well as distilleries,and bottling plants all over India, is the one likely to emerge as the Indian
spirit tycoon who will play a critical role in shaping the industrys future.
Allied Blenders & Distillers (ABD), the company Mr Chhabria heads produces Officers Choice
whisky the flagship brand, Jolly Rogers Rum and Kyron brandy and Gorbatschow Vodka. In
three years the company expects its sales to cross 50 million cases mark !
At present, He is eyeing Tilaknagar Industries which in its portfolio has the marquee brand
Mansion House brandy. Mansion House is originally a brand owned by Netherland company
Herman Jansen and Tilaknagar Industries has been making Mansion House since 1983 under
a commercial understanding with the Dutch company but somewhere on the way both
parties ended fighting a case over the right to produce the brand in India. Mr Chhabria who has
been on an expansion mode for some time got into the fray, acquiring a 50 % stake in the
Dutch Company in a deal completed in August 2014. Analysts see it an apparent bid to
block any possible entry of another corporate entity aspiring to bid for the same,even while the
Stanford graduate Amit Dahanukar,Chairman of Tilaknagar, reiterates his company is not on
block.
Mr Chhabria is also set for a major leap with an IPO that would fetch Rs 500 cr which will be
utilised for the projects in the anvil.
Chhabrai s march to prominence has not been a smooth one. In 1983 he joined elder brother
Manu Chhabria, the takeover tycoon of the 80swho had acquired Shaw Wallace,a company
with colourful portfolio of brands, such as Royal Challenge, Directors Special and a long line of
of beer brands such as Haywards 5000. Acquisition of Shaw Wallace was jointly made by the
brothers and Vijay Mallya, but the brothers and Mallya had to part ways over business
differences,resulting into a long drawn internecine fight fought at different levels of judiciary

and enforcement agencies. In 1992 the brothers too parted ways warring over ownership of
brands and companies..
It was at this juncture Kishore Chhabria made a decisive move of his life-he joined hands with
Mr Mallya who by then had emerged the strongman of the Indian spirits industry. That was in
1994. According to the arrangement between them, BDA, now rechristened as ABD was made
subsidiary of Herbertsons Ltd, a flagship company in the UB group, while Chhabria was made
the Vice Chairman of Herbertsons. Mr Chhabria continued to manage BDA and its sole brand
Officers Choice,independently. It was then agreed between themselves that neither of them
would attempt to raise their respective stake in Herbertsons. But then again the friendship and
understanding did not last as it was discovered in the course of time that one of them was
raising the stake, without informing the other.
The relationship soured inevitably, resulting into a bitter, noisy and costly litigation fought at all
layers of judiciary, including the apex court and after blowing mountains of money on solicitors
and lawyers, both agreed for a detente. Mr Mallya bought peace with Chhabria in 2005, by
giving the ownership of BDA and Rs 130 cr cash in return for Chhabria ceding his stake in
Herbertsons. It was a moment of freedom, Chhabria reminisces,as it released the humungous
energy locked up in litigation.
Soon Mr Chhabria did his master stroke-appointed Deepak Roy, the one-time blue eyed boy of
Vijay Mallya , who had famously helped the latter shape UBs successful marketing strategy, as
ABDs Managing Director. The rest is history.
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Following is an excerpt from an interview conducted at his residence

on the 10th floor of Casa Grande,Malabar Hill, near Hanging Garden, which also
houses a part of his office.

*You are already No-3, after the Diageo_USL combine and the French
spirit major Pernod Ricard. How soon you will become no-2 ? And what are your vision for
your companys future?.
We are already the largest Indian company. Let us be clear about it now. Diageo and Pernod
Ricard are international majors. They are ahead of us in volume and valuation, indeed. We are
the largest among the Indian companies but are not interested in the number game. Bottomline
is the driving force. Otherwise we will be making a serious mistake. The entire industry got a
shock when Pernod Ricard, the one that makes Royal Stag in India declared a profit which was
higher than the Vijay Mallya led United Spirits. When this happened, USLs Bagpiper was
declared by the International analysts as the largest selling whisky in the world. USL has long
been controlling between 50 to 60 % of the market while Pernod Ricard was hardly 7 to 8 %.

*How the industry reacted after the revelation?

The industry as a whole has put in place initiatives to change gear from volume to bottomline. A
new word was created, premiumisation.They upgraded many brands to premium level,
enhancing the profit margin.
*What did ABD do ?
ABD has come out with premium brands, Officers Choice Blue and Officers Choice Black both
in premium segments. This is in fact a serious diversiification. We entered other segments too.
Jolly Rogers Rum, Kyron brandy etc. They are a notch above regular segments.

*What was the major breakthrough for Officers Choice? How it transformed from a small brand
To worlds no-1 ?.
The end of litigation in 2005 was the real breakthrough, when I and Mr Mallya decided to end
litigation through an out of court settlement. It was in 2005. ABDs executive time till then was
spent mostly on litigation. With this the lull phase in the brand too ended..The journey from a
brand that sells five million cases a year to the largest selling whisky began with that. We will
become 50 million cases in three years. By then the market will expand to 400 million cases,
presumably.

*When do you think you will be able to become the no-2. I am mentioning the no-2 because No1 is too far ahead of you?
Before two years we will be crossing Pernod Ricard.in volumes then may be later in valuation.
That is a long way to go. We will do It with backward integration.Since we do not have
distilleries of our own we buy alcohol now We want to start a new phase where manufacture
from Our own distilleries..We are looking for distilleries, one in each of the four zones ie North
South East and west. And we already have sufficient no of bottling plants.And we will be
introducing new brands soon besides giving a boost to the the existing brands.

*How often brands succeed in liquor business?

Very often they fail. One in 10 brands succeed. Even if you put all your might behind one brand,
it may fail. To establish a brand , a premium one, you may well have to spend about 50 cr. Still
it may fail. I say it is luck. Luck. When a brand becomes a success, all that analysis, the brand
and advertisement and the managerial jargons are brought in to explain away the logic of a
brand success. But I say brand success hinges upon pure luck.I will explain this to you this

way. A director makes a movie and it becomes a success. Then his second movie flops at
box office. You cannot explain away both. Luck is a factor.

*Vijay Mallyas UB has many millionaire brands. Bagpiper, McDowell No-1, Signature, Black
Dog to say a few. They all succeeded because of luck? Mallyas and his teams understanding
of the market do not count at all?
Mallya did not make these brands. He bought the companies which owned these brands. He
improved upon them after acquiring these companies.
*How do you plan to finance your projects ?. An IPO is in the offing?
An IPO is being planned. This will be issued in two years.
*It was reported in the media that you were planning an IPO in an years time.Why did You
postpone it.?
We postponed it by an year because we thought it would be ideal if we reach a certain bench
mark before we head for an IPO.
*How many distilleries USL own?
May be 14-16, I do not know exactly.
*Are you the new liquor baron, after Vijay Mallya exited the space?
I do not know, seriously. And I do not know the word baron has a positive or negative
connotation. But ABD is there, already. We have established our presence and as I told you we
are the largest Indian spirit company.
*What you think caused the fall of Mr Mallya ?
Do not write off Mallya. He failed in one business, the airline
business. That does not mean that he is a failure. He is active in
his other businesses.
*Are you still friends, Mallya and You?
Yes, we have always been friends, though in business we are rivals and
have fought well in the market as well as in the courts.
*When did you meet Mallya first time ?
In 1984. At Hyver Hall, at an outskirt of London,with brother Manu Chhabria. Mallya was young

and talked business. I then understood he knew his business very well.
*That was for buying Shaw Wallace?
Yes.
*What was the reason for Mr Mallya parting ways with your elder brother?
Complications arose in the deal, but I do not want to narrate it here, they were too
complicated. But Mallyas stand was that he had never been involved in buying Shaw Wallace
as he was not a non-resident at that time. The laws that prevailed then were different. My
brother was a non-resident.
*When did you join hands with Mallya ?.
When I parted ways with my brother.
*Who called first, You or Mallya?
I called Mallya first and he was receptive..
*Was he receptive?
Very.
*And when did both of you begin fighting?
When the Income-tax raid took place at my office and residence. . The I-T officials found that I
had bought shares of Herbertsons. There was an agreement that nobody would attempt to
raise the stake in Herbertsons.
*Was it an agreement in writing or just verbal ?
Mostly verbal.
*Therefore Mallya thought you had breached the agreement, from there the differences
started?
Mallya too had raised the stake, to 44 %. Mine became 51 % from 26%.
*You have been mainly in the news for the last couple of years because of a reported attempt to
take overTilkanagar Industries.
That is not correct.We are interested only in Mansionhouse. And do not

say that I am trying to

take over. I already own the brand.We have registered our brand here..In August 2014 ABD
and Herman Jansen had signed an agreement under which ABD will market and produce
Mansionhouse in India. However there is a case going on in the Bombay High Court involving
all the three parties.I hope this will end soon.

*How soon you think the dispute will end ?

Very soon.
*What is the valuation of your company?
ABD is not for sale.
*Have you ever felt uncomfortable for being in the business of spirits, ever thought of exiting
this business and start another ?
Never.