By Shivi Goel

A growing economy, expanding middle class and rising disposable

incomes have given the Indian spirits market significant growth potential.
India is home to 17% of the global population (close to 1.1 billion). India is
now the largest international whisky market by volume, reporting 8-10%
growth annually. This makes India one among the fastest growing whisky
markets anywhere in the world.

Diageo is the world’s largest wine, beer and spirits company. It owns the
brands like Smirnoff, Johnnie Walker, Guinness, Baileys, J&B, Captain
Morgan, José Cuervo and Tanqueray. Diageo launched its operations in
India in early 1990’s. But, the UK headquartered giant, yielded ground to
French rival Pernod Ricard in the early round of India conquest.

In the past 4-5 years, Diageo has taken a number of steps to revive its
marketing strategies in the country. The biggest growth drivers for Diageo
in India have been Johnnie Walker (Premium Scotch Segment) and
Smirnoff (Premium Vodka Segment). In 2006, Diageo claimed to control
80% and 90% of the two respective segments with these brands.

Diageo spotted two major trends in India markets – urbanization and

premiumisation (based upon the aspirational levels of the people). Thus,
they created price segmentation. There was a big gap between the prices
of IMFL and premium alcohol. Haig was launched to target aspirants. So,
there are different segments — the takers for Haig, for existing brands like
Black and White and VAT 69 and finally for Johnny Walker at the top-end.
The aspirants eventually graduate to Johnny Walker. Similarly, in vodka,
Shark Tooth which is mid-price, on a par with Fuel and Magic Moments
and Smirnoff which is slightly more premium and Smirnoff Black which is
at the top-end. So, here also three segments were created. Under its
Smirnoff brand, the company introduced an array of festive drinks with
Indian ingredients like Smirnoff Masala Marke, Smirnoff Jaljeera, and
Smirnoff Katha Pudina esp. to cater to Indian taste buds.

In 2001, Diageo had hurriedly exited Indian-Made Foreign Liquor (IMFL) to

focus on its imported international portfolio but revised the strategy with
the domestic market witnessing sustained robust growth. In 2006, Diageo
announced a joint venture with homegrown liquor company Radico
Khaitan targeting the IMFL segment. Brands of Radico Khaitan include 8
PM Whisky, Contessa Rum, Old Admiral Brandy and Whytehall Whisky.
Bollywood king Shahrukh Khan was roped in as the brand ambassador for
its first offering Masterstroke deluxe whisky. In Sep, 2006 Diageo decided
to launch the indigenously developed vodka brand called Shark Tooth
aiming to position it at prestigious vodka segment. In June, 2009 the Tamil
Nadu government had cleared the decks for Diageo to start bottling in the
state, making it the first MNC drinks company to list brands in the local
retail trade. The company had sold its most successful brand Gilbey’s
Green Label to the country’s largest spirits maker, UB Group, for Rs 60
crore in 2001. Diageo is also bringing back the Gilbey's trademark to India
through the Tamil Nadu foray. Sources said that Gilbey's is now being
readied as a brandy flavour as the drinks giant works on leveraging its
brand equity in South East Asian markets.

The company entered into the Indian beer market with its globally top-
selling premium stout beer brand Guinness. Diageo bought a strategic
stake in Nasik-based Sula Vineyards. They entered the Indian Rum
market with their brand Captain Morgan. Despite the continuous efforts,
the market share of Diageo in these other segments continues to be low.

Roland Abella, managing director of Diageo India is clear that value, and
not volumes, will drive Diageo India's growth, hence its focus on premium
products. It has reorganised its product basket and has exited the wine
business in India. It has taken off its only wine brand Nilaya (priced
between Rs 395 and Rs 500) from the market so as to focus on its iconic
brands like Johnnie Walker Scotch whisky, Vat 69, Ciroc and Smirnoff
vodka. Now, says Abella, ''For us, the centre of gravity is spirits.” Diageo
like other luxury retailers is betting on India's young demographic, rising
consumer standards and exposure to sophisticated products. Another
reason for Abella's optimism is that premium brands are less vulnerable to
the fluctuations of the global economy.

Diageo has made significant noise in India during the past two years in a
bid to boost presence across trade channels for lifestyle drinks. In
November, 2007 Diageo tied-up with retail giants Reliance Fresh and
Shoprite Hyper to distribute its wines portfolio in cities like Mumbai and
Pune. UB and Diageo initiated trade marketing activities with the alcobev
channel in early 2008. Diageo helped revamp local wine shops and re-
branded them as JW Select outlets. “From a push effect earlier, initiatives
like JW Select create the pull effect. Once the experience is created,
offtake happens,” said Santosh Kanekar, then marketing director, Diageo
India. Clubs like Johnie Walker Club & Lounge, Smirnoff Cafes were
launched as a part of the surrogate advertising. These clubs aimed at
giving the experience of drinks along with brand-associated music, art
events and Formula 1 races. ‘Johnnie Walker Bartending Academy’ was
launched aiming at introducing world-class standards of bartending.