The outperformers 2020

Radico continues to work its magic at 8PM, more so in these tough times

Managing director Abhishek Khaitan is betting on a quality blend and premium positioning to put investors at ease 

By any yardstick, the alcohol industry is one of the toughest places to be in. There is the maze of government regulations to navigate, large players who dominate the distribution channel to contend with and fire hoops to jump through for advertising. A new entrant is really up against a formidable challenge. Therefore, credit is due to Radico Khaitan for transforming itself from a bulk producer to brand creator. What is more, the company chose to compete in the hard-to-crack premium category, and they have aced it. Over the past five years, FY16-20, their revenue has grown from Rs.16.52 billion to Rs.24.27 billion at 10.09% CAGR, and net profit from Rs.734.5 million to Rs.2.28 billion at 32.74% CAGR.

The company did several things right. One of them was push hard on innovation, with their flavoured variants in Magic Moments vodka and ready-to-drink formats, launched in FY20. Naveen Trivedi, AVP at HDFC Securities, believes Radico Khaitan has got their portfolio expansion right. “The company has premium offerings across products and a strong presence at every price point,” he says. Radico Khaitan’s premium play is what really excites Himanshu Shah, analyst, Dolat Capital. Of the 24.3 million cases it sold last year, the premium brands formed seven million, out of which vodka and brandy were 5.5 million. “The premium whisky (~100 million cases market) is a sizeable market opportunity. Radico sold only 1.5 million cases last year and this can be a significant incremental growth driver,” he says.

The pandemic lockdown hit the industry out of nowhere. The shutting down of pubs and restaurants, and the damage it did to demand for premium brands has not gone unnoticed. In this interview, the company’s managing director Abhishek Khaitan says the toughest has been COVID-19 taxes, which can go up to 70% in some states. Otherwise, the company had managed by keeping their facilities running, by quickly assembling capacities to manufacture sanitizers and by cutting variable costs. Demand has begun to recover in Q1FY21 and the debt overhang, once a bane for Radico, is no longer there.