Last year, around the same time when the maker of Magic Moments vodka, Radico Khaitan, topped the Fortune India Next 500 list—jumping up 27 ranks from the previous year—it was evidently clear that the alcoholic beverage (alcobev) manufacturer was all set to make its debut in our flagship 500 list. And the reason behind this? Radico Khaitan has been on a double-digit growth trajectory, and was expected to end FY20 on a high. Eventually, it did so, clocking a 15.7% year-on-year revenue growth, which gave the company a five-year CAGR (compound annual growth rate) of 10.1%.

Its FY20 growth also came at a time when the overall spirits industry in India clocked less than 2% sales growth due to a slowing economy and fall in discretionary spending among consumers. “We have completely outsmarted industry growth for the last three years,” says Amar Sinha, chief operating officer, Radico Khaitan.

The Indian premium branded liquor market has a disproportionate presence of multinational corporations such as Pernod Ricard (makers of Blenders Pride whisky and Chivas), Diageo India (or United Spirits Limited, makers of McDowell’s No.1 whisky), and Beam Suntory (Teacher’s whisky). “Radico [Khaitan] is increasing its premium products to join this gang,” says Sanjay Jain, a financial adviser to the Indian spirits industry.

Premiumisation of the product portfolio has been at the heart of the company’s revenue and profit growth (which recorded a 33% five-year CAGR). It has introduced brands like Rampur Indian Single Malt whisky, Jaisalmer Indian Craft gin, 8PM Premium Black whisky, 1965 The Spirit of Victory rum, besides adding premium offerings to its core spirit categories of vodka and brandy. Today, the company’s premium product portfolio contributes to more than 30% of the business in volume and 50% in terms of value. Five years ago, it was 24% in volume and 41% in value.

So, in December 2020, it was no surprise when Radico Khaitan made its debut on the Fortune India 500 list at No. 433. “With the launch of Rampur Indian Single Malt and also the extraordinary growth they are getting on the Morpheus XO brandy, they can finally claim that they occupy a sweet spot in the premium deluxe category which was eluding them all these years,” says R.L. Rajah, chairman, Geoscope, a boutique alcobev manufacturer that has a focus on the brandy market. “The company is a strong locally-owned spirits player with a panIndia scale and route to market across segments. It is also the most integrated with significant manufacturing capacity of its own,” adds Jain. And the Indian stock market seems to love it all—the company’s share price has vaulted from ₹121 in January 2017 to ₹522 in early February 2021.

Given that over 60% of India’s spirits market comprises whisky sales, Radico Khaitan has taken the non-conventional route of building its presence in the smaller spirit categories such as vodka, brandy, and rum. It entered the vodka space with Magic Moments in 2006 and now commands a 56% market share in the same category. In other words, for every two bottles of vodka sold in this country, including Indian and foreign brands, one of them is Magic Moments.

“Besides, we are a major player in the rum category with a 40% share in the defence business, and if you analyse the brandy market, which is in the south, we hold close to 60% share in the premium segment,” says Sinha, who is an alcobev industry veteran. “The non-conventional route was to first dominate the vodka, gin, and rum market. Now, having become a strong player in this, our target was all set on the red-hot whisky space,” adds Sinha, who first joined the company as president in 1998 when it launched its first brand, 8PM whisky. He later moved out and then rejoined the company in February 2017. With Sinha’s re-entry, the company believes that it has significantly strengthened its sales and marketing vertical. But Jain adds that Lalit Khaitan [the company’s chairman and managing director] and Abhishek Khaitan [managing director] have been the “most consistent” and “top performing management” in this industry.

Image : Graphics by Rahul Sharma

From being a mass producer of bulk spirits to now a well-known branded alcobev manufacturer, Radico Khaitan’s strength has been its research and blend capabilities, in addition to its production capacities. Its largest distillery, which is in Rampur, Uttar Pradesh, can produce over 100 million litres of spirit per annum. “I think we have one of the best master blenders in the country, who has always made brands that have excelled in the market,” says Abhishek Khaitan.

Take for instance, its Jaisalmer Indian Craft gin. “What I loved about Jaisalmer was its clean flavours, rather than being the predictable juniper forward gin,” says Manu Chandra, chef-partner of the Olive Group of restaurants that runs Monkey Bar, The Fatty Bao, Toast & Tonic, Olive Beach, and Cantan, among others.

Jaisalmer Indian Craft gin, he explains, has balanced citrus and floral notes remarkably well with the underlying juniper flavour. Presently, the product is sold only across five cities in India, with plans afoot to expand its reach. In Bengaluru, where Chandra is based, the product retails at about ₹3,800 for a 750 ml bottle.

“There’s a tendency in the Indian gin space [among gin manufacturers] to make gins that seem to be bartenders’ gins—with a more cocktail bent. But for someone like me, who likes a straight up G&T [gin and tonic], this [Jaisalmer Indian Craft gin] works beautifully,” adds Chandra. “Definitely on the expensive side, but well worth supporting local endeavours.”

8PM Premium Black whisky, which was launched last year, is slated to become a millionaire brand—selling over a million cases annually—this year. Similarly, the demand for Rampur Indian Single Malt, which is retailed only in select outlets in Delhi, but sold across 45 countries, has swelled. Sinha points out that the company has tripled its capacity to produce the product, in order for it to be retailed in India, particularly to the defence sector. Furthermore, on the drawing board are two premium whiskies, as well as upgrades to Magic Moments vodka and Morpheus brandy. “I think they have some aces up their sleeves on the premiumisation front,” says Rajah. “This strategy is currently helping them, but they should not get distracted with the volume game which they have been playing for ages now,” he adds.

Premiumisation apart, there is another integral aspect to Radico Khaitan’s growth story and that is the state of U.P., where it commands a 33% share of the Indian-made foreign liquor (IMFL) market and 24% market share in the economy segment. The state’s revised excise policy has favoured both the trade and consumers. “It’s a free trade policy, where the wholesale business, manufacturing, and the retail business are all independent, and at the same time the consumer gets a choice of brands that they want,” says Sinha. The result is that U.P. has emerged as the largest excise revenue earner in the country, with excise collections of about ₹32,000 crore in FY20. Now, many other states are believed to be emulating the U.P. model. “U.P. is our strength because it’s our home state where we have the Rampur distillery,” adds Sinha.

(The story originally appeared in Fortune India's March 2021 issue).

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