1 radico khaitan ltd. investor presentation october 08

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Radico Khaitan Ltd.

Investor Presentation

October 08

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ContentsContents

1.The Indian Spirits Market

2.Challenges Of Indian Spirits Industry

3. Indian Spirits Industry – Growth Drivers

4.Radico - The Journey So Far

5.Future Growth Drivers for Radico

ContentsContents

6. SWOT Analysis

7. Financials

8. Core team of Radico

The Indian Spirits MarketThe Indian Spirits Market

• Grown at CAGR of 9% over the past decade with 11-12% in last 2 years

• Total market volume: 140 million cases in FY2008

• Liquor industry segmentation: Whisky 61% Brandy 19% Rum 15% White Spirits 05%

• Lowest per capita consumption: India 1.4(In litres) China 3.0

Thailand 3.5 Japan 3.8

Source: NACER

Challenges for Spirits IndustryChallenges for Spirits Industry

• Liquor in India is a state subject. Addressing each state is like addressing a country.

• High investments for production & distribution channels.

• Restrictive Liquor Advertising.

High entry barriers for new entrants

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5

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7

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4

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14Savings &Investment

Eating Out

Books &Music

Movies &Theaters

45 38

48

7 8

54

2001 2011

1012 1178Age Profile> 60

20-59

0-19

Shift from savings to

spending on lifestyle

products & services

150 million likely to be

added to target consumer

group in this decade

Source: NCAER, BW Marketing Handbook

Indian Spirits Industry Indian Spirits Industry Growth Drivers Growth Drivers

Large increase projected in emerging and regular consumers

Increasingly favourable demographics profile & increase in discretionary spends to further boost demand

Aspiration Profile Change in Urban India Spending Patterns

Growth Drivers of theGrowth Drivers of the Spirits Industry Spirits Industry

• 790 million are in the drinking age group which are increasing by 20 million annually

• Deregulation by state governments.

Strong growth opportunities in the coming years

Radico – The Journey So Far..Radico – The Journey So Far..

• Started Distillery in 1943• A Major Spirits Supplier• Supplier of Rum to Armed Forces• Bottler for others

1943-1997 - Spirit Company

• Launched its first brand 8 PM Whisky in 1998• Second fastest growing company in the world by volume from 2002-2006. (avg growth rate:29.8%)*• Creation of number of Millionaire brands - 8PM Whisky, Contessa Rum and Old Admiral Brandy.• Market leader in semi- premium vodka segment with launch of Magic Moments in 2006 –reaching millionaire club by 2008-09• Strong and dedicated sales & distribution team, covering 95% of bars, clubs and retail points• Acquisition of Whytehall whisky from Bacardi Martini India Ltd in 2004 and Brihans range of brands from Brihans, Maharashtra in 2005. • 28 bottling units : 5 own bottling units & 23 Contract bottling units in India• Diageo : Radico JV to create premium brands in the IMFL segment with its first launch of Masterstroke Deluxe Whiskey in 2007.

1998-2008– Second Largest Branded Company

*Source: JP Morgan Nov 2007

High Success Rate Of BrandsHigh Success Rate Of Brands Launches & Acquisitions Launches & Acquisitions

1972

CONTESSA RUM

(Regular Range)~2.5 million case

1998

2002

2004

2005

2006

8PM WHISKY

(Regular Range)~4 million case

OLD ADMIRAL BRANDY

(Regular Range)~2 million case

WHYTEHALL WHISKY

Acquisition(Deluxe Range)

~0.5 million case

BRIHANS BRANDS

Acquisition(Regular Range)~1.5 million case

MAGIC MOMENTS

VODKA(Semi – premium

Range)~1.1million

FY 1998

FY 2008

Radico’s Robust growth Radico’s Robust growth over last decadeover last decade

Over the last 9 years Radico Volume grown at CAGR of 23%against Industry volume CAGR at 9%

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10

1

5

<1

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34Brands

BottlingUnits

Cases inMln

MarketShare in %

Liquor Segment

Indian Spirits SegmentationIndian Spirits Segmentation

Industry estimates

Category %Share of Price Price Our presence

IMFL

Industry Rs./ Per 750ML USD/ Per 750ML

Scotch 0.22% Rs.800-Rs.1600 17.78-35.56

Whisky

SUPER PREMIUM 0.20% Rs.500-Rs.700 11.11-15.55

PREMIUM/ PRESTIGE 1.41% Rs.300-Rs.500 6.67-11.11 Masterstroke

DELUXE 11.91% Rs.220-Rs.300 4.89-6.67 8 PM Royale, Whytehall

REGULAR 23.59% Rs.150-Rs.220 3.33-4.89 8PM Whisky, Whitefield

ECONOMY 19.88% Rs.100-Rs.150 2.22-3.33Radico Gold Supreme, Contessa Deluxe

Liquor Segment


Industry estimates


IMFL Industry Rs./ Per 750ML USD/ Per 750ML

Rum

DELUXE 0.38% Rs.220-Rs.330 4.89-7.33 8 pm Bermuda White Rum

REGULAR 13.65% Rs.140- Rs.200 3.11-4.448pm Bermuda, Contessa,Old Admiral

ECONOMY 7.89% Rs.100- Rs.120 2.22-2.67 Black Cat

Brandy

PREMIUM 1.90% Rs.275- Rs.300 6.11-6.67

DELUXE 4.26% Rs.225- Rs.275 5.00-6.11

REGULAR 6.06% Rs.180- Rs.225 4.00-5.00

Old Admiral, Whitefield,

Radico Gold, 8 pm Excellency

ECONOMY 4.04% Rs.130- Rs.160 2.89-3.56

Liquor Segment


Industry estimates


IMFL Industry Rs./ Per 750ML USD/ Per 750ML

Vodka

PREMIUM 0.27% Rs.375- Rs.425 8.33-9.44

DELUXE 0.56% Rs.250- Rs.280 5.56-6.22 Magic Moments

REGULAR 1.78% Rs.220- Rs.250 4.89-5.56

ECONOMY 0.06% Rs.160- Rs.200 3.56-4.44

Gin

REGULAR 1.10% Rs.180- Rs.225 4.00-5.00

ECONOMY 0.84% Rs.130- Rs.160 2.89-3.56 Contessa, Big Hit

Total 100%

Radico Marketing Radico Marketing Success Stories Success Stories

• 8 PM Whisky

• Launched in 1998, it was the first Indian whisky (blended with scotch) offered to Indian consumers

• First Spirits brand to enter Limca book of Records for selling one million cases in the first year of launch

• The launch TV campaign was adjudged among the best ads of the century at Cannes

• Recently famous Bollywood actress Mallika Sherawat endorsed the brand.

Radico Marketing Radico Marketing Success StoriesSuccess Stories

8 PM Whisky

• The new packaging launched in FY 09 is the first Grain blended whisky launched in operating segment.

• Grain proposition is considered to be smooth, mellow & a superior whisky.

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Old Admiral Brandy

• Launched in 2002

• Adjudged fastest growing brandy brand in the world by Drinks International for two consecutive years 2003 and 2004

• Sold one million cases in the second year of its launch

• Katrina Kaif had endorsed the brand in 2004.

*Source – Drinks International,U.K,May 2006

Contessa Rum

• Largest selling rum brand in the defense segment in FY08

20% of the defense market share

• Sold 2.35 million case in FY08


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Magic Moments Vodka

• The only successful Brand launch in the industry across all flavors in last 5 years

• Innovation in Packaging

• Created new price point in the segment

• Fastest growing brand in the category

• The youth icon of Indian Bollywood industry- Hrithik Roshan has endorsed the brand

• Rewarded with Gold Medal at Monde selection in 2008


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Magic Moments Vodka


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Magic Moments Remix Vodka- launched in Six New

Flavors in FY 09.

– Chocolate

– Green Apple

– Raspberry

– Lemon Grass & Ginger

– Lemon

– Orange

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M2- Remix

Largest Alcohol Manufacturer in the Country

• The company has its largest distillery in the country based in Rampur, UP

• The distillery has a capacity of manufacturing 104 million litres annually

• 100% capacity utilization• Molasses Based : 75 million litres • Grain Based : 28 million litres• Malt Based : 720 thousand litres

• The grain based facility was added in FY07

Distillery

• The company has entered into joint venture to set up another distillery in Maharashtra with an annual capacity of 36 million litres

• It is expected to be operational by Dec 2008

New Greenfield project

Radico’s Radico’s Sustained Competitive EdgeSustained Competitive Edge

•Radico market share is 29% of the CSD volume.•High Entry Barriers for getting brands approved.

Canteen Stores Department (CSD)

Diageo – Radico Diageo – Radico Joint VentureJoint Venture

The Blue Blood Marriage•The company has entered into a 50:50 JV with Diageo which is the largest Premium liquor player globally to set up a brand marketing company

•The JV has launched its first brand “ Master Stroke” in the deluxe whiskey segment. It has registered sale of around 230000 cases in 1st year

•Both the companies have contributed Rs.75 million as the equity capital

•Shahrukh Khan had endorsed the brand Masterstroke

Diageo Radico Pvt. Ltd.

Abhishek KhaitanMD

Asif AdilMD

Raju VaziraneyCEO

Dr. Lalit KhaitanDirector

Organization Structure of JV

Diageo is the No.1 premium alcohol

Beverage company in the world

It has 10 brands among the top 20

brands in the impact’s hot

brands survey ( impact –UK based

trading magazine)

Diageo has a strong presence in

premium scotch segment with

leading brands in India such as-

Johnnie Walker, Black & White and

VAT 69

M2 with Flavors M2 with Flavors Spreading the Magic..Spreading the Magic..

At Present

Global Vodka Industry ~ 22.5%*Indian Vodka Industry ~ 3% (4.4 million) (2007-08)

Indian Vodka Industry growing 36% CAGR

In 5 yearsBy 2013

M2 Vodka aims to become a millionaire brand in 2008-09M2 CAGR~96% (2006 onwards)

Industry Market Share ~15%Semi –premium segment market share~ 70%

Indian Vodka Industry ~ 15 million (estimated)Indian Vodka Growth seen at ~ 27% CAGR

Magic moments aiming at becoming market leader in the vodka category

M2 Driving the semi-premiumVodka segment

*Source JP Morgan 2007

• Magic Moments • Expanding M2 brand portfolio through 6 new flavors introduced in the

country• Test marketing of M2 vodka initiated in international markets in FY09• Increasing width of distribution through CSD in FY09

• 8PM growth track • Launch of new packaging in the country with strong new communication

backed by Malika Shehrawat’s endorsement• Launch of grain blended whisky

• New Brand Launches• Exploring possibilities of tapping premium spirits market segment through

launch of premium brands in the country.

• Open to Strategic tie ups with global players

• Old Admiral Brandy and Contessa Rum to witness the volume growth

• Due to upgradation of the consumer from cheap to regular

Future Growth DriversFuture Growth Drivers

SWOT AnalysisSWOT Analysis

•Strengths • Second largest player in the Indian

spirits market• 3 millionaire brands • Innovation in brand creation.• Established distribution network • Largest distillery in UP and

Maharashtra• Large Presence In CSD

•Opportunities • Launching new premium brands• Making inroads in the untapped

markets• Uniform Federal Excise Policy• Strategic tie up with global players

•Weakness • Surrogate

advertisement• Not present in all

price points

•Threats • Volatility in raw

material prices• Change in regulatory

environment.

Financial SummaryFinancial Summary

Key Financials

Particulars (in cr)2005-

06 2006-07 2007-08

Gross Sales 1135.39 1335.9 1603.75

Net Sales 690.06 816.32 1041.23

EBIDTA 87.32 86.07 95.3

EBDT 63.58 59.53 58.12

PAT 45.16 32.54 33.07

Net Worth 123.64 154.39 224.87

EPS 4.68 3.09 3.4

Dividend (%) 25% 25% 25%

Shareholding PatternShareholding Pattern

FIIs14.73%

MUTUAL FUNDS & UTI

14.51%

INDIAN PUBLIC17.91%

BANKS0.07%

STATE GOVT.0.03%

PROMOTERS48.68%

BODIES CORPORATE3.74%

INSURANCE CO0.33%

As on 28.09.2008

Radico Core TeamRadico Core Team

Lalit Khaitan(CMD)

Abhishek Khaitan(MD)

Dilip BanthiyaCFO

K.P SinghDirector,

Mfg Operations

Raju VaziraneyCOO,

Domestic Business

Sanjeev BangaHead

International Business

Vice Presidents /Asst Vice Presidents

Management Committees , Regional Profit Center Committees.

Certain statements in this presentation concerning our future growth prospects are forward- looking statements, which involve a number of risks, and uncertainties that could cause actual results to differ materially from those in such forward-looking statements. The risks and uncertainties relating to these statements include, but are not limited to, risks and uncertainties regarding fluctuations in earnings, our ability to manage growth, including those factors which may affect our cost advantage, wage increases, our ability to attract and retain highly skilled professionals, time and cost overruns on fixed- price, fixed-time frame contracts, client concentration, restrictions on immigration, our ability to manage our international operations, reduced demand for technology in our key focus areas, disruptions in telecommunication networks, our ability to successfully complete and integrate potential acquisitions, withdrawal of governmental fiscal incentives, political instability, legal restrictions on raising capital or acquiring companies outside India.

Radico Khaitan may, from time to time, make additional written and oral forward-looking statements, including our reports to shareholders. The Company does not undertake to update any forward-looking statement that may be made from time to time by or on behalf of the company.

DisclaimerDisclaimer

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Thank You!

Q&A

1 radico khaitan ltd. investor presentation october 08

Documents

nacer slide

premium range

pm whisky regular range

core team of radico

brihans range of brands

contessa rum regular

years radico volume

premium brands